What Should I Check Before Taking An Education Loan In Singapore?

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Written By Loanbuddy Singapore
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What Should I Check Before Taking An Education Loan In Singapore?

An education loan is a form of financial assistance that individuals borrow to fund their post secondary education or expenses related to higher education. Singapore as a society has been paying a high premium on the significance of having a good education. The economic health of any country depends on its people in absence of natural resources.

Tuition fees for a year at public and private institutions can be worth more than $10,000 a year depending upon the university. And if you are thinking of studying abroad, the expenses may be hefty. Studying outside Singapore can even demand double of what you can expect here. In addition, you will have to spend money on accommodation, and daily living expenses in a foreign country.

In this situation, an education loan can help you out. There are no industry-wide or per-financial institution borrowing limits on an education loan. The MAS (Monetary Authority of Singapore) has exempted the education loan to qualify on such parameters considering it as a needs-based and purposeful loan.

Here’s everything you should check before applying for an education loan in Singapore.

How are education loans working in Singapore?

Also known as a student loan, an education loan is a way to finance post-secondary education in Singapore. Education loans here also cover the additional cost related to education such as accommodation and paying for textbooks. After your loan application is approved, you will be required to pay the installments along with interest charges and any other fees, if applicable.

You should check the loan’s terms and conditions before getting one to see whether or not the installments begin from the next month of approval. Some of the banks here set the loan terms to receive repayments only after you have graduated.

Just like other loans, you should be consistent and disciplined in making repayments to avoid any penalties and bad impressions on your credit score.

Click Here to read How do credit scores affect loan approval

What kind of options do you have for an education loan in Singapore?

The banks and financial lenders offer three types of education loans in Singapore as follows:

  • CPF Education loan scheme allows you to use your own CPF savings as well as your parents’ to fund your 100% tuition fees. Be noted that this applies to full-time subsidized courses available at locally authorized educational institutions. But, you can only use 40% of the CPF ordinary account (OA) under this scheme. You also don’t have to repay the loan during your studies because repayments start only one year of your graduation or at the time of leaving the course.

 The amount of CPF savings along with interest accrued on it has to be paid by the student. This scheme is currently the most popular scheme offering loans at only 2.5% per annum interest which is way lower than other options. Note that a CPF education loan is only available for a permanent resident or a citizen who is opting for a full-time degree or a diploma. Also, this is not available for those taking a second UG degree.

  • Ministry of Education (MOE) tuition fees loan-The Students who are studying in polytechnics and public universities can get funding from MOE tuition to cover a fixed percentage of their tuition fees.

This loan is repayable for up to a period of 10 years for polytechnics students and of 20 years for public university students, MOE tuition loan can fund up to 75% of subsidized fees of polytechnic students and up to 90% of subsidized fees payable by students of public universities. The interest under this loan is not payable during the course of study but after completing graduation. The rate of interest is just 4.75%.

  • Bank loans– Mainstream banks like POSB and DBS also offer education loans to Singaporeans who are looking for further studies. The interest rates under a bank education loan fall within the range of the MOE education loan along with a processing charge. But there are a few requirements you need to fulfill before applying for an education loan from banks: You must be at least 21 years of age to apply for a student loan. If you are below 21 years, there should be a guarantor, co-applicant, or a sponsor who is 21 years old or more

The loan repayment schedules are of two types

Interest-only loans and monthly rest loans: Under an interest-only loan, you are required to pay only the interest component during your study and once you graduate, you can commence principal repayments. Whereas under a monthly rest loan, you are required to pay installments along with interest monthly.

Why is it important to check before taking an education loan in Singapore?

Since repayments are likely to start after your graduation, it might be possible to miss the fine details. Any loan you can take significantly impacts your finances hence it is important to check the terms and conditions before you sign one. You might end up paying huge penalties if you wrongly approach a student loan in Singapore. Here are the important things you should understand before you apply for a student loan in Singapore:

  • Interest rates– The interest rate under education is the only cost of credit. This is the amount charged on the principal you borrow and is a component of the amount payable each month or after graduation as the case may be. You must understand that the best education loan is the one that has a low-interest rate. How to check if your loan has a lower interest rate? Follow APR (Annual Percentage Rate) rule instead of the printed rate of the loan to get the true picture of the interest cost.
  • Loan duration– The time to clear a loan is known as loan tenure. In Singapore, the maximum loan tenure to pay loans is 10 years usually. However, it can vary from bank to bank. The loan duration is an important factor while determining the amount payable. When you are applying for an education loan in Singapore, it is advised to opt for the shortest tenure. Why? Because the total repayment amount will be under a shorter loan duration than that of a long-tenured loan.
  • What is your payment capacity– The repayments last till you clear the entire loan. Before you apply for a student loan in Singapore, assess your ability to repay. Depending upon your payment ability only, you must decide whether you want to opt for a monthly rest loan or an interest-only loan.

How to prepare for your education loan?

If you want to accelerate your ability, consider building new channels for income as a student such as contract basis work or freelancing. Once you have clarity on your income sources, apply for the loan.

  • Early payment fees, if any– Some banks in Singapore ask the borrower to pay charges on early repayment. Why? That’s because banks want to protect their anticipated profits by charging a fee if you pay earlier than your loan term ends. Most students prefer to pay off their loans as quickly as possible once their graduation is complete and jobs are commenced. Thus, early repayment charges become important while applying for a student loan. You can compare different loan options and find the ones that have no or nominal early repayment fees.
  • Other expenses– You may also require additional funding to cover the expenses of textbooks, accommodation, registration for student workshops, and many others. Ensure the education loan you are applying for covers all expenses inclusively for financing educational purposes. However, the interest rate offered by banks may differ according to expenses. Please make sure you’re eligible to apply for these loans and cover all your additional expenses related to the course. Compare the Best Student & Education Loans in Singapore (January 2024)


Getting an education loan should not be a difficult task on the borrower’s
end. To make the application process seamless, you must be ready with the
documentation requirements such as an admission letter from the university
where you are joining. Either of the options you choose to repay the loan, make
sure you are consistent and disciplined while making payments to avoid any late
payment fee and adverse effects on your credit report. Are you struggling with
your education loan application? Contact us to check if it’s perfect for the
bank’s approval. LoanBuddy offers a free assessment of your loan application
and gives you suggestions on any changes it may require. It also compares
different loan options and gives advice on whichever option is most suitable
for you.

Read the full article on What are the Advantages and Disadvantages of an Education Loan in Singapore?

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