Choosing Best Education Loans | Education Loans for Students
Education Loans | Loans
by Priyadarshini
13 April 2023
Which educational loan should you take out?
In Singapore, there are many different types of school loans, and they differ in more ways than just interest rates. Here are some things to keep an eye out for when comparing loans. In this blog, we tell you about choosing best education loans in Singapore.
Loan quantum
Make sure that the lowest and maximum amounts of money you can borrow allow you to borrow the amount you require.
Interest rate while studying versus. after graduation
Obviously, the lower the interest rate, the less expensive the loan. If you choose an interest-only loan, the interest rate charged by the bank while you are still studying may change from the interest rate charged after you graduate.
Loan tenure
The maximum loan length is from 8 to 10 years, with a one-year minimum.
Repaying the Loan
One of the most crucial considerations is when you must repay your loan. Monthly rest loans (which are also the most affordable) will compel you to begin making loans or at least interest repayments while you are still in school. Interest-only loans (which are significantly more expensive) require you to repay the loan once you have completed your course. As a result, the monthly payments you must make while you are still enrolled may change from those you must make after you graduate.
Prepayment Penalty
If you get a good job, you’ll undoubtedly want to pay off your student loans as quickly as feasible. Most loans may charge you a prepayment penalty if you pay off the loan early, so compare these.
Other charges
A processing fee of roughly 2% is normally levied. It never hurts to compare.
Choosing Best Education Loans in Singapore
Before you agree to an education loan, you should compare them and choose the one with the lowest interest rate. Choose monthly rest loans over interest-only loans whenever possible (unless you have absolutely no way to pay back a few hundred dollars a month).
Monthly rest loans require you to begin repaying your loans with interest while you are still in school. But they will cost you far less in the long run than interest-only loans, which allow you to repay only interest while you are in school and defer the majority of your loan repayments until graduation.
What exactly are interest-only educational loans?
The loans indicated above are the cheapest options for those who do not use the CPF Education Scheme or the MOE Tuition Fee Loan. Some students, though, continue to opt for interest-only education loans.
The main advantage of interest-only loans is that you are only expected to pay the interest on your loan while you are still studying. As opposed to a complete loan payback of principal + interest. When you graduate, you begin repaying your principle.
Are Loans Expensive?
The caveat is that these loans are significantly more expensive over time. It also means that when you graduate, your debt repayments will be very high—typically in the four figures. If you do not find work shortly after college, you may be in difficulty. As a result, it is best to choose interest-only loans only if you have no other way of repaying your debts while you are studying.
For example, if you have no income or resources to repay your loans while studying, do not intend to work part-time, and your parents will not assist you with your loan repayments, you may have little alternative but to choose an interest-only loan.
What if you are unable to repay your student loan?
In the best-case scenario, you will graduate from your course with honors, have a good job waiting for you, and begin earning large cash. As a result, you’ll have no trouble repaying your monthly loan payments.
However, things do not always go as planned, and in some unfortunate circumstances, you may be unable to repay the loan, such as if you drop out of your school or do not find a quality job for a long period after graduation.
Repaying the Education Loan
Assuming you took out your loan for an undergraduate degree and have never worked before, the bank is already aware that you are in debt. However, they are aware that your guarantor is not. If you fail to repay your loan, the bank would most likely go after your guarantor and try to collect the money from them.
In case the loan repayments are still not made, the bank has the right to pursue legal action against both you and your guarantor. Because school loans are often unsecured, you will not be required to provide any collateral to the bank.
Keep these points in mind while choosing best education loans in Singapore.
