Singaporeans put a high value on their children’s education. But sending your kids to good schools can be quite expensive. You may take out educational loans, but it’s possible to find yourself unable to pay money lender. In some cases, this can even put your children’s education at risk. You definitely don’t want that.
Thankfully, there are measures you can take to avoid this situation. Before deciding on an educational loan, consider these five important factors first.
Coverage
Before deciding on an educational loan, find out what costs are covered. Is it tuition only, or does it include other costs associated with studying? Most educational loans in Singapore cover tuition fees, but some also include related expenses like textbooks, accommodation, and living expenses.
It helps to first calculate the total cost of your children’s education – not just the tuition, but including the costs of transportation, accommodation, learning materials, and other related expenses.
Once you have a definite figure, borrow only that amount. Avoid borrowing in excess to avoid stressing your budget later on.
Interest rate
Interest rates vary across different lenders. The higher the interest rate, the more the loan will cost overall. If you have a high credit score, you may be qualified for lower interest rates on education loans.
Lenders and banks may also use either fixed-rate or variable interest. Fixed-rate interest does not change over time, giving you an advantage to beat inflation. Whatever interest rate is stated in the loan contract stays constant until the loan is fully repaid.
Variable rate interest, on the other hand, can change according to market conditions. It can go higher or lower at different times of the year. This can work to your advantage if inflation is low, but it will work against you when inflation is high.
Compare interest rates from different lenders before making a decision. Also, consider whether you would want to use a fixed interest loan or a variable interest loan.
Tenure and repayment terms
The loan tenure is the amount of time you have to fully repay the loan. Longer tenures may lead to smaller monthly payments but higher overall interest payments. Shorter tenures, on the other hand, reduce interest payments but may require higher monthly payments.
Also, it helps to find out the repayment terms of the loan. Some educational loans let you defer payment until after your children’s graduation. This way, you will have some time to prepare, and your children may also help repay the loan. Other loans also allow you to pay off the loan early without charges. Some lenders even let you negotiate tenure and repayment terms to fit your circumstances.
Consider your capacity to pay, and seek out a loan with the best tenure and repayment terms for your financial situation.
Hidden Costs
It’s wise to watch out for processing fees, late payment penalties, prepayment penalties, and other hidden charges. Carefully read the terms and conditions of the loan contract to find out all associated fees.
Lender Reputation
Choose a trustworthy lender that operates with transparency, honesty, and genuine concern for their clients. You may search for reviews online before visiting a certain lender. Also, you can get recommendations from colleagues, schools, or professional financial advisors.
Conclusion
To choose the right educational loan in Singapore, do your research first and consider your capacity to pay back the loan. Carefully consider the loan amount, repayment terms, tenure, interest rates, and other loan terms before signing any loan contract.
If you find anything you do not agree with, you have the right to refuse the loan and find another lender. Shop around until you find a lender with the best terms that fit your financial situation.