What You Need to Know Before Applying for Student Loan in Singapore

What You Need to Know Before Applying for Student Loan in Singapore
Study Loan

Singapore is one of the world’s best examples of a fully-globalized country while preserving its core culture. Globalization brings many pros and cons; education costs being one of the latter. Truthfully, Singapore has one of the highest-quality education sectors worldwide, but it doesn’t mean it’s always affordable.

Nowadays, Singaporean families pay nothing for primary school thanks to the Singaporean government’s subsidization but have to contend with S $320- S $380 monthly payments for secondary school.

Next, two-year pre-university schools cost S $6 per month per student. Plus, Singaporean families will spend about S $8,700 in total for polytechnic university education.

In this short guide, we’ll focus mostly on polytechnic/college education financing, and everything students and student sponsors need to know before applying for a study loan in Singapore.

 

What Is an Education Loan?

Each kind of loan that licensed moneylenders or banks offer focuses on different situations. An education loan exclusively tackles the school fees of an average Singaporean family. In most cases, education loans prioritize time-over-savings, meaning students and their families or guardians need to supply a significant amount for regular monthly educational fee payments to avoid possible penalties.

Interest Rates

Both banks and licensed moneylenders determine your study loan’s interest rates. A tuition fee loan will usually have a 4-6% interest rate for most financial institutions, including DBS, POSB, and OCBC. On the other hand, licensed moneylenders limit their tuition fee loan interest rates to 4% per the Ministry of Law’s mandated terms.

Repayment Terms

Most banks and financial institutions require you to pay your study loan monthly. Usually, these are fixed amounts, allowing you to make your budget safely around them. However, anticipate that you’ll have to contend with high-interest rates in the following years after your first year of repaying your study loan.

Loan Tenure

As you’ll see in a table of bank-financed study loan options available in the country, you have a fixed number of years to pay everything back. For example, DBS’ Study Loan allows you to enroll in local educational institutions and pay everything, including the interest rate, by ten years. Most tuition fee loan deadlines reach from 8-10 years, giving you ample time to pay them monthly.

 

Different Types of Education Loan Services in Singapore

While banks will likely be your first option for education loans in Singapore, you can also use the CPF or MOE’s tuition fee loan programs. We’ve listed them below.

1. CPF Education Scheme

Any Singaporean who owns a CPF Ordinary Account can use it to finance their own, their children, or spouse’s education fees. The CPF education scheme allows CPF account owners to pay for the fees after the sponsored student has graduated. The loan terms and interest rates depend on the CPF’s member evaluation results. Additionally, the CPF education scheme covers up to 100% of the tuition fees and often has a loan tenure of 12 years.

2. MOE Tuition Fee Loan

This loan is government-subsidized with banks and financial institutions. Students who are enrolling in universities aside from Lasalle and NAFA can use these tuition fee loans. It can cover up to 90% of all school fees, and payments only start two years after graduation. One of its relatively favorable terms is having a loan tenure of up to 20 years repayment.

3. Bank Educational Loans

The conventional bank-offered loan with interest rates going from 4-6%, loan tenure of 8-10 years, and monthly loan payments. Bank education loans are the go-to service for most Singapore students, with licensed moneylenders being an alternative option. Student borrowers who use credit cards with high-interest rates can consider their financing as bank educational loans.

 

The Best Bank Educational Loans in Singapore in 2021

Here is a convenient table of the best educational loans you can find in Singapore.

School Location Per Annum Interest Rate Processing Fee Estimated Monthly Payment Loan Tenure Loan Amount
DBS Study Loan Local 4.38% 2.5% S $372 10 Years Up to 10 times borrower’s salary or S $160,000
OCBC Frank  Education Loan Local 4.5% 2.5% S $373 8 Years Up to 10 times borrower’s salary or S $150,000
POSB Further Study Assist Local 4.38% 2.5% S $372 10 years Up to 10 times borrower’s salary or S $160,000
CIMB Monthly Rest Education Loan Overseas Overseas 5.39% 2% S $382 10 years Up to 8 times your salary or S $200,000
Maybank Monthly Rest Education Loan Local Local 4.45% 2% S $372 8 years Up to 8 times your monthly salary
CIMB Monthly Rest Education Loan Local Local 5.39% 2% S $381 10 years Up to 8 times your monthly salary or S $200,000
Maybank Monthly Rest Educational Loan Overseas Overseas 4.45% 1.5% S $372 8 years Up to 8 times your monthly salary

On average, Singaporean borrowers will contend with 4.5-5.5% per annum interest rates and 8-10 years loan tenures. The most expensive option for local and overseas education is CIMB’s offers, which have the highest yearly interest rates. On the other hand, CIMB provides the highest loan amount limits. 

Across the board, Singaporean sponsors and working students can expect to pay S $372-S $382 monthly to address their education loans.

 

What Should You Consider Before Applying for a Student Loan?

Truthfully, student loan financing is a tremendous commitment. It’s always wise to take a few precautions and exhaust all your options before deciding on any available financing. Here are a few things to research to compare and decide on the best student loan option available in the market.

1. Interest Rate

Most banks offer the same interest rates for education loans. In most cases, borrowers often go for certain bank offers because they have an existing account, quickly facilitating the application process. However, other banks might have promotions for new members. On the other hand, be sure to look into the long-term costs of having multiple accounts for a single loan.

2. Processing Fee

As the table we listed above indicates, processing fees can take up to 2.5% of your total tuition fee financing amount. If your total tuition fee costs for college is S $24,000, you’ll need to pay an enormous S $600 processing fee, which your bank might penalize you if you pay on time. However, some banks might have promotions cutting down your overall processing costs, so watch out for them.

3. Loan Tenure

On average, education loans have 8-10 years to pay. CPF education schemes allow you to pay up to 12 years. Alternatively, the MOE’s Tuition Fee loan allows borrowers to pay for 20 years. Both CPF and MOE tuition fee loans allow borrowers to pay after graduation, with MOE allowing them to pay two years after.

4. Maximum Loan Amount

Banks can cover 100% of your tuition fee loans like the CPF scheme. On the other hand, MOE’s education loan can only cover 90% of the complete amount.

5. Early Repayment Fee

Most banks will charge you a possible penalty for paying your complete financing early. However, CPF and MOE have relaxed terms for early repayment, allowing you to pay back everything if you already have cash on hand.

 

Student Loan Eligibility and Requirements

Educational loans require students to work with sponsors, which can be their parents or guardians. On the other hand, working students financing themselves through part-time work and present documentation, allowing them to qualify for the following:

  • 21-62 years old
  • You or sponsors earn a minimum income of S$12,000 and above per year 
  • You have two sponsors
  • You have a guarantor that earns a minimum income of S$30,000 per year or higher

Here are the documents most Singaporean banks and licensed moneylenders accept as proof for both sponsors/working students:

  • Identity card / NRIC
  • Proof of residence (utility bill, a letter addressed to you, or tenancy agreement)
  • Proof of employment (certificate of employment or three months recent payslip)

 

Find the Best Education Loans and More From Moneylender Review!

Moneylender Review is a loan comparison site that allows you to compare the best educations loans from bank and licensed moneylender in Singapore. With our advanced algorithm, you can find the best loans available to get your education started immediately. Contact us soon to learn more about everything that we can do for you.