Personal Finance

How Does A Study Loan Work In Singapore?

February 27, 2023

Going to university is a step closer to your dream career.

However, whether you want to study in a local university or overseas, you need at least a five-figure sum to complete your education. You can ease this financial burden with loans for students in Singapore.

So, how does a student loan work? Understanding how this loan works before you apply helps you make the right decision.

Read on to find out what a study loan is, how it works, what to consider when borrowing one, and the eligibility criteria.

What Is A Study Loan?

Education loans in Singapore are a form of financial assistance given to students to make their education dreams come true. This loan is issued for tertiary education, which is quite expensive.

With this loan, you can pay your school fees, daily expenses, hostel charges, transport, or any other costs involving your education.

The good thing about a study loan is that it has a lower interest rate than other loans, such as personal loans.

What To Consider When Taking Out A Study Loan

As you ask, “how does a student loan work?” it is crucial to know what to consider when looking for this loan.

Here are some factors to consider:

Interest Rate

Before signing a loan contract, one of the critical things to look into is the study loan interest rate. For example, you can compare the rate while you are studying vs after you graduate.

Remember, the lower the student loan interest rates, the lower the amount you will repay.

Loan Amount

How much can you get to fund your studies? You need to know the maximum and the minimum amount you can borrow. You can budget to see how much you need.

Loan Tenure

The loan tenure for a CPF student loan can be from eight to 10 years. The minimum repayment period can be one year.

If you can pay your loan while studying, choose a short loan tenure, but if you can’t, select an extended period.

Repayment Plan

If you borrow a monthly rest loan, you will start repaying the loan or the interest while you are still in school. For the interest-only loans, you will start paying back after completing your studies. Which plan is more comfortable for you?

Fees And Other Charges

Loans for students come with a processing fee of about 2%. Also, if you get a well-paying job and want to clear your loan early, you can incur an early payment penalty. On the other hand, a late payment fee can be imposed if you fail to repay your loan on time.

Eligibility Criteria For CPF Education Scheme

CPF Education Scheme is a perfect option for students looking for a Singapore study loan.

It allows you to use your parent’s CPF to cater for up to 100% of your education fees. However, there are eligibility criteria for you to qualify for it.

First, you should be a full-time student pursuing a diploma or a degree course. Those under the part-time program do not qualify.

Also, if you are studying for your second undergraduate degree and you already did a first degree with subsidised fees, you will not get this loan.

Other cases that may not allow you to qualify for a CPF loan include the following:

  • Your parent’s CPF account doesn’t have enough savings or has reached the withdrawal limit.
  • You are in an art college. In this case, you can only take out 50% of your education fee.
  • You are in a university or foreign specialised institution under the Polytechnic-Foreign Specialised Institution framework. You can only withdraw 10% of your course fee.

How Does The CPF Education Loan Repayment Work?

If you have been wondering, ‘how does a study loan work when repaying it?’ here is how it goes:

The CPF education loan repayment plan allows you to start paying your loan one year after graduating or terminating your studies.

The CPF Board will send you the payment details three months before the time you should begin to repay. However, if you want to repay earlier, you can contact the CPF board via My.Mailbox using your Singpass.

You have two repayment plan options. You can pay the loan in one lump sum or monthly installments for a maximum period of 12 years. You cannot use your CPF savings to repay the education loan to the CPF member’s CPF Account.

You can use the CPF Education Loan Repayment Period Calculator to know how long it will take you to repay the loan. Also, a monthly installment rate calculator can help you develop a suitable repayment plan.

Most students in Singapore prefer the CPF Education Scheme loan. However, not everyone can qualify for it. If you don’t qualify, you can get the following:

  • MOE Tuition Fee Loan
  • Education Loans from Banks/ Financial Institutions (FIs)

What Is The MOE Tuition Fee Loan?

It is a Singapore study loan that allows you to borrow up to 90% of your education fee. Besides, lenders only charge an interest fee once you complete your education. The loan is available for local public universities except for Lasalle and NAFA.

You will start repaying the loan within two years of your graduation. You can take advantage of the no-interest period and repay the loan. This will lower your total loan amount and the interest you will pay.

Education Loan From Banks Or FIs

If you do not qualify for the CPF Education Scheme and MOE Tuition Fee loans in Singapore, you can borrow from banks or other financial institutions.

It is important to note that student loans in Singapore that are not government-sponsored are more expensive. Besides, you need to be at least 21 years old. If you aren’t, you will require a guarantor.

Some of the best education loans in Singapore from banks include:

  • OCBC Frank  Education Loan
  • Maybank Monthly Rest Education Loan
  • CMB Monthly Rest Education Loan

How Loans For Students Work In Singapore

If you are planning to take out a study loan, you may ask, ‘how does a study loan work?’.

This loan allows you to pay for your education fees and other study costs. You can get a CPF Education Scheme loan to cover 100% of your study fee. If you do not meet the eligibility criteria, you can apply for a MOE Tuition Fee loan or Education Loan from banks. After getting a loan, you can choose to start repaying while studying or after graduating, depending on which loan you borrow. Remember, the earlier you repay, the lower the interest and total sum.

For students who may not qualify for the CPF Education Scheme or MOE loan, you can get a loan from GS Credit.

We are one of the best licensed money lenders in Singapore, providing affordable education loans.

You can apply for a loan through our official website, and we will respond as soon as we receive your application.

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