Are you a Singaporean or permanent resident and wondering how to finance higher education? Well, there are a number of student loan options, but it is important to appreciate that the money has to be paid in full within the agreed time. So, only go for the student loan in Singapore that comes with low-interest rates.

To help you get the best education loan in Singapore, here is our comprehensive guide. Keep reading to understand the different types of student loans and the best way to apply. We will also provide answers to common questions about student loans in Singapore.

What is a Student Loan?

A student loan, also referred to as an education loan, is a type of financing taken by students to fund post-secondary education. Note that the loan also includes funding for additional education-related costs, such as textbooks and the cost of accommodation. Once the loan is approved, you are required to repay together with interest plus any other fee, where applicable.

It is important to appreciate that most payments are done through regular instalments. Therefore, you should go through the loan’s terms and conditions because payment might be commencing the month following the approval. However, some banks defer the payment to the period after graduation.

Like other loans in Singapore, it is prudent to plan about payment and strictly follow the agreed schedule. If you default, there is a risk of incurring high penalties and hurting your credit score.

Student Loan in Singapore: What Options Do You Have?

In Singapore, there are a number of student loans that you can use to fund tertiary education, including the following:

1. CPF Education Scheme

This is one of the common financing methods in Singapore. This method allows students to use their parent’s Central Provident Fund (CPF) to meet 100% of their tuition fees when undertaking undergraduate studies. When using the CPF Education Scheme, only a few colleges, such as the National University of Singapore and Singapore Institute of Technology, accept the financing.

The good thing about CPF Education Scheme is that the interest rate is low, about 2.5%. Besides, the loan payment starts about one year after the student graduates from university. This period is considered significant because the student is likely to have secured employment.

2. Ministry of Education Fee Loan

You might also want to go for the Ministry of Education Fee Loan, which covers 90% of the university fee. Unlike other loans that charge interest rates even before a student graduates, the MOE Tuition Fee Loan is different. The interest is charged after the student graduates from university.

The MOE Tuition Fee Loan is repayable for a maximum period of ten years. As a government loan, it is advanced to students pursuing higher education in Singapore public universities.

3. Personal Loans

If you or your student does not qualify for the MOE tuition fee loan and CPF Education Scheme, one of the next best options is a personal loan. Unlike other types of student loans, such as the CPF Education Scheme, the personal loan provides you with a free hand on how to use the funds. This means that once you get the money, you are free to use it the way you want, but it is advisable to direct it to education.

Here are other things that you need to know about using personal loans in Singapore:

  • In Singapore, there are many loan providers that offer personal loans. You can opt to borrow from banks, online-based financial institutions, virtual banks, and peer-to-peer companies, among others.

  • When you take a personal loan from a loan provider, it does not require collateral. Therefore, no one will come to seize your personal assets if you default. However, you should avoid defaulting because it can worsen your credit score.

  • Most banks offering personal loans check the borrower’s credit score to determine the interest rate and personal repayment ability before approval or rejection. If your credit score is high, the interest rate will be lower compared to when the score would have been poor.

  • If you opt to use a personal loan for education, the loan payment is likely to start the month after the approval. Therefore, you better be prepared to start paying the loan and stick to the agreed schedule for the entire loan term.

Things to Understand Before Applying for a Student Loan in Singapore

When applying for a student loan in Singapore, it might be easy to ignore the fine details because the payment is likely to start several years down the line. However, this is the wrong approach because the loan is likely to greatly impact your finances. If you fail to strictly follow the agreed payment schedule, there is a risk of getting slapped with huge penalties.

Here are the main things that you need to understand before applying for a student loan in Singapore.

  • Interest Rate

The interest rate of the student loan is the cost of the credit. It is the amount charged on the principal and is part of the total amount payable. The best student loan is the one that comes with a low-interest rate.

When checking the interest rate, it is important to follow the APR (annual percentage rate) instead of the monthly rate to get a better picture of the cost of a student loan.

  • Loan Tenure

This is the amount of time that you need to clear the loan. The maximum loan limit in Singapore is about 10 years, but this depends on the bank. The loan tenure is very important because it also determines the amount payable.

When applying for a student loan in Singapore, it is advisable to go for the shortest term because it implies the total amount repayable will be lower compared to when the term is longer.

  • Early Payment Fee

Some banks require borrowers to pay a fee for early repayment. At this point, you might ask, “Why?” The fee is attached to the loan because paying early means the bank will be losing some of the anticipated profits.

Most students prefer to clear loans as fast as possible after graduating and getting jobs. Therefore, it is important to think about the early repayment fee. Once you apply for a student loan via Lendela and get offers, ensure to only work with the one having no or low early payment fee.

  • Payment Ability

Once you get a loan approved, everything shifts to monthly payments until it gets cleared. Therefore, you need to factor in personal repayment ability before making your application.

To boost your payment ability, it will be a great idea to consider building new channels of income. For example, you might consider taking a part-time job or rent part of your house. Then, direct the additional funds into paying the loan.

Lendela: The Most Convenient Way to Apply for Education Loan in Singapore

Now that you know the definition of a student loan, it is time to make the application. Notably, the process of applying for a student loan in Singapore can be tedious and lengthy. However, you can now use Lendela, a loan comparison site that makes applications easy and fast.

Here are the three main steps to use when applying for education loans in Singapore:

  • Visit Lendela’s website to apply for the education loan. They have simplified the process to make it easy and more convenient for you.
  • Lendela submits your application and documents to different banks who provide the offers they have for you. Receive the offers and compare them to see the best one for your situation, and choose.
  • Sign the agreement and receive the money. From here, you have to start paying the loan and follow the agreed schedule until it is cleared.

Answers to Common Questions about Student Loans in Singapore

1. Can You Get a Student Loan Before College Admission in Singapore?

No. When applying for a student loan, one of the documents that banks require is the admission letter from the college you are joining. This is the proof that you have been accepted and the money will go into paying for your education.

The only time when it is possible to get a loan for education before admission is if you decide to use a personal loan. Most banks only check your ability to repay and your credit score before approving your personal loan.

2. How Long Does a Student Loan Take to Get Processed?

If you apply for a student loan correctly and with all the required documents, including the letter of admission, it will take about one week to process. However, it might take longer if additional documents are required by the bank. To get the application completed faster, consider using Lendela.

3. Can You Take Two Student Loans in Singapore?

Well, there is no direct answer to this question. Some banks will not allow you to take two student loans, but there are others that do not mind. However, it is important to rethink your payment capabilities before applying for a second student loan.

The best thing is to only borrow the amount you can comfortably pay.