What’s Your Purpose for Getting an Education Loan?Before you look for the right kind of education loan, Singapore has certain requirements that you need to meet when applying for financing. You also need to think about the purpose of the loan. Are you planning to study here or overseas? Does your income fall within the low-income status set by banks and licensed money lenders? These are some of the questions that you need to answer when planning to secure a study loan. Singapore’s money-lending requirements for students, however, tend to be clearer than applicants who wish to use the money for further studies or work-related education.
Choosing the Right Study Loan in SingaporeThe Ministry of Education’s (MOE) tuition fee loan program is one of the most common ways to borrow money for education in Singapore. The ministry conducts the program through DBS Bank and OCBC Bank. Citizens, permanent residents and even international students can apply for the subsidy. You need to apply in person at any branch of either bank. The program allows you to receive up to 90% of the payable tuition fee as the maximum loan amount. For example, the average cost of tertiary tuition in Singapore is approximately $30,000. If you gain approval for a study loan, Singapore will effectively shoulder up to $27,000 of the tuition expenses. Singaporean citizens pay a different amount than permanent residents and international students, although it’s safe to assume that the latter two only receive a smaller subsidy. While there are no minimum income and age requirements, applicants must have guarantors for their student loans. The guarantor must be between 21 and 60 years old and have a clean financial record. Singaporeans must only have fellow Singaporeans as their guarantors, while permanent residents can either have a Singaporean or a permanent resident as guarantors. International students can have guarantors of any nationality. Interest rates are another thing to consider when choosing the right education loan. The MOE’s tuition fee subsidy carries a payable interest of less than 5% per annum, which is based on the average prime rate of DBS and OCBC. Student borrowers can repay the principal and interest for up to 20 years. Only DBS administers student loans for students of the following major universities:
- Nanyang Technological University
- National University of Singapore
- Singapore Institute of Technology
- Singapore Management University
- Singapore University of Social Sciences
- Singapore University of Technology and Design
- Students who receive any kind of scholarships for tuition expenses
- Recipients of MENDAKI’s full tuition subsidy
- Applicants who use CPF savings to cover the full cost of subsidized tuition fees
MaybankMaybank charges an interest rate of as low as 4.45% for student loans. Keep in mind that the bank advertises this rate as a promotional offer that runs for a limited time. The bank’s student loan promo normally has a processing fee of 2% for a maximum principal amount of $200,000, which is payable for up to eight years. Your guarantor must also have a minimum income of $30,000 per year. Part-time students who need financing should consider Maybank’s loan for low-income applicants. The loan tenure and maximum principal amount are the same as the bank’s promotional offer, but the differences lie in the interest rate and processing fee. Maybank charges between 1.5% and 2% as the processing fee for the low-income student loan, while interest rates range from 4.5% and 4.78%.
OCBCThose who plan to borrow money for local studies should consider the OCBC’s FRANK Education Loan. It’s one of the best offers given the 4.5% interest rate and 2.5% processing fee. The guarantor’s required income is also lower at $24,000. The bank may approve a loan amount of up to $150,000 or 10 times the guarantor’s monthly income. OCBC also happens to be one of the cheapest options for a student who plans to study overseas. The bank is also among the best choices for an interest-only study loan. Borrowers only need to pay the interest over the course of their university education and focus on paying the principal after their graduation. Take note that this means a longer repayment in exchange for not worrying about hefty monthly payments during your studies. As an example, a person who borrows $25,000 payable over six years can expect to pay almost $400 in monthly installments while attending school, while they will also pay the same amount post-graduation if they apply for a standard OCBC loan. The OCBC FRANK Graduated loan only requires a monthly payment of $94 for a $25,000 principal with a six-year term. The monthly payments after school will cost around $1,091.
RHBIf you’re keen on just focusing on your university education, then RHB’s Deferred Repayment loan is a good choice. Based on a principal loan amount of $25,000 over a six-year term, you don’t pay anything while you attend school. The monthly payments after you graduate, however, may cost almost $1,400 every month.
POSBThe bank’s Further Study Assist loan is a bit more affordable than OCBC. The average interest rate of POSB’s student loan is just 4.38% with a more common processing fee of 2%. Applicants can repay their loans from 12 months to 10 years, although it has a lower principal amount of up to $80,000. Your guarantor’s annual income should be at least $24,000. Consider this option if you want to avoid paying penalties on late payments or wish to pay before the monthly due date. Don’t make it a habit of repaying your loan, though, even with POSB’s flexible terms. Your credit score will take a negative hit once you purposely pay beyond the due date. Payments that are one or two days may seem fine since that’s the feature of this loan, but you should remember that paying after several weeks can affect your cash flow since the payable amount would snowball into the next scheduled monthly payment. On the other hand, POSB’s Further Study Assist loan is a good option for people who want to diminish their outstanding balance as soon as possible. The bank doesn’t charge a fee for early repayment, unlike other banks that require an additional 1% fee for each premature payment. Based on the information above, it seems that POSB has the cheapest cost of applying for an education loan in Singapore. It may only cost roughly $3,980 to get a $25,000 loan over six years. Maybank’s promotional offer, if the bank still offers it, ranks next at a total cost of $4,032. OCBC’s standard loan costs almost $4,200, while RHB’s standard loan costs $4,306. On average, it costs $5,250 in Singapore to apply for education loans.
What Would Most Education Loans Cover?The loan coverage depends on the type of financial instrument. If you get an MOE tuition subsidy, you will still have to pay for the remaining tuition amount since the subsidy only covers up to 90% of the cost. You will also need to cover miscellaneous expenses such as books and other recurring costs. Students who successfully borrow money from the bank may not have to pay for anything more, as the maximum loanable amount could be enough to cover all expenses. In case you choose a CPF education scheme, your options for a university become narrow because CPF has a list of approved schools. Even if you find an accredited institution, you will still need to check if the course also falls under the CPF’s approved list. Banks seem like the best option at this point when it comes to loan coverage, but it can be challenging to gain approval because of a strict credit check. This begs the question of whether there is another option when you aren’t eligible for a student loan from the bank, CPF or MOE. The short answer is yes.