How to use a personal loan to pay for post-secondary education

They can fill in the gaps, but be smart about rates and repayment terms before signing on.

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If your education bursaries or study loans fall short, you may be able to take out a personal loan to help cover the extra costs of paying for school. However, not all personal loan providers allow you to use these funds for tuition and other school expenses, so you’ll need to do your homework first.

And watch out for high interest rates and short repayment terms that can make these loans difficult to repay on a student’s budget.

Apply for grants and scholarships

Before you take up loans to finance your education, make sure to check for all the grants that you may be eligible for. To help support both Singaporean and foreign students further their studies, our government allocates a substantial budget on scholarships and tuition grants.

All eligible Singaporean citizen students are automatically enrolled in the Edusave scheme and receive annual top-ups in their Edusave account until the end of their secondary school education. Any surplus funds will be transferred to the PSEA (Post-Secondary Education Account), which you can utilise it to pay part of your tuition fees. You may also tap into your siblings’ PSEA funds with their consent, up to a maximum of three siblings.

In addition, individual institutions, as well as public and private sector organisations also offer a wide range of scholarships and bursaries which typically cover at least 50% on the tuition fees. Like most financial aids or loans, you should always check if they come with conditions you’d need to fulfil. For example, some grants may require you to be contractually bonded to the organisation (which typically require you to pay a hefty monetary penalty if you decide to break your bond), while others have no conditions attached.

Why use a personal loan for post-secondary education?

While there are many other alternatives to taking up personal loans for education purposes, some miscellaneous expenses may not be covered by scholarships and bursaries. In this case, you may need to seek extra financing.

Personal loans allow students and parents to apply for amounts ranging from 2 to 4 times their monthly income. You repay what you borrow plus interest and fees over a period of time both you and the lender agree to. Lenders typically express the cost of a personal loan as an EIR, the effective interest rate. EIRs can range from 6% to up to 12%, but you might have a hard time qualifying for a low EIR as a student.

Repayment terms can range from one to seven years through monthly instalments that begin shortly after you receive your funds.

DBS Personal Loan

DBS Personal Loan

From

3.88 % p.a.

rate

  • Borrow from S$500
  • Repayment flexibility, subject to lending criteria
  • Instant approval

DBS Personal Loan

Apply today to get approved for up to 10X your monthly salary over 5 years.

  • Max. loan amount: Up to 10x fixed monthly income
  • Loan tenure: 1 - 5 years
  • Approval duration: Instant approval
  • Effective Interest Rate: 7.56% - Apply today and you could get an interest rate as low as 3.88% p.a.
  • Fees: 1% processing fee
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Am I eligible for a personal loan?

Many students haven’t yet built a strong credit history, which often comes with steadier footing after graduation. Because they require steady employment, a minimum income and more, post-secondary students might want to bring on a parent or guardian as a cosigner. Or, parents might prefer taking out a personal loan in their name.

You’ll need to meet common eligibility requirements that include:

  • Steady income
  • Good or excellent credit
  • A strong credit history
  • At least 18 years old
  • Singapore citizen or permanent resident

Compare personal loans for 2020

Name Product Interest Rate From Minimum Loan Amount Maximum Loan Amount Loan Tenure Turnaround Time
DBS Personal Loan
3.88% 

EIR: 7.56%

S$500
Up to 10x your monthly salary
1 - 5 years
Instant approval
Apply today and you could get an interest rate as low as 3.88% p.a. (EIR 7.56% p.a), plus a 1% processing fee. Loans of up to 10x your salary may be available.
POSB Personal Loan
3.88% 

EIR: 7.56%

S$500
Up to 10x your monthly salary
1 - 5 years
Instant approval
Enjoy a fast approvals service and an interest rate starting at 3.88% p.a. (EIR 7.56% p.a), plus a 1% processing fee.
HSBC Personal Loan
3.7% 

EIR: 7%

S$5,000
S$200,000
Up to 7 years
1 minute approval in principle. "Next Day" approval available for loans up to S$100,000
Get S$108 cashback plus an S$88 processing fee waiver if you apply by 12 June 2020. T&Cs apply.
Standard Chartered CashOne Personal Loan
3.88% 

EIR: 7.67%

S$1,000
Up to 4x your monthly salary, subject to a cap of S$250,000
1 - 5 years
Next working/banking day. T&C's apply
Take advantage of 50% cashback on your first month’s loan instalment, resulting in a S$199 refund on your loan account. Offer ends 30 June 2020.
Citi Quick Cash Loan
4.55% 

EIR: 8.5%

S$1,000
S$100,000
Up to 5 years
1 hour loan approval. T&C's apply
Get cash starting at 4.55% p.a. (EIR 8.5% p.a.) on a 36-month loan tenure. The interest you pay will vary depending on factors such as your credit score.
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Compare up to 4 providers

4 types of personal loans available to pay for post-secondary education

Your options for personal loans may be limited if you’re still hitting the books. But many banks and lenders accept cosigners, which can help you qualify for stronger rates and better terms than you’d find on your own.

The best option for you will depend on your situation, budget and goals.

1. Unsecured personal loan in the student’s name

  • Best for graduate and part-time students with steady jobs and established credit history.

If you’re steadily paying off student loans or credit cards while supporting your studies, you might qualify for an unsecured personal loan on your own.

2. Unsecured personal loan in the parent’s name

  • Best for undergrads who rely on their parents financially.

If you’re not financially independent, you might have trouble qualifying for a personal loan even with a cosigner. Instead, you and your parents may want to consider taking out a personal loan in their name.

If one of your parents has a stable income and long history of repaying debt on time, you’ll find more competitive rates and terms than for someone who’s still in school.

To show that you’re committed to repaying your loved ones, consider drawing up an informal agreement or legally binding contract that includes how much you’ll pay monthly and by when.

3. Unsecured personal loan with a cosigner

  • Best for students with expenses outside of tuition and other school costs.

For expenses that aren’t directly related to school — like paying your off-campus rent, living costs and personal purchases — a cosigner might help you qualify for competitive rates.

Review your lender’s requirements for cosigners to make sure you can meet minimum income, credit scores and more.

4. Home equity loan

  • Best for parents who own equity in a private home.

Home equity loans — sometimes called second mortgages — allow your parents to borrow against the equity of their home. Because their property acts as collateral for the loan, you’ll see more competitive rates than for unsecured loans. However, this is an uncommon option as home equity loans in Singapore are only available for private properties, which also means that your family is considerably affluent.

But if this is an option for your situation, you can typically borrow up to 80% of your home’s equity, paying it off over a longer period than a traditional personal loan.

Personal loans vs. private student loans

That providers limit borrowers from using personal loans for educational expenses isn’t surprising: Students just don’t have the same needs and ability to repay as your average borrower.

Key differences between personal loans and private student loans include:

  • Interest rates. Student loans often offer lower interest rates than personal loans — typically a nominal percentage (0.5% to 0.8%) above the government’s Education Loan Board Rate, which is currently 4% at the time of writing, 27 September 2019.
  • Fees. Private student loans don’t often come with processing fees. Yet these fees are common with personal loans.
  • Terms. Student loan repayment terms can range from five for interest-free loans to 20 years for interest-bearing loans. Personal loans come with much shorter terms of one to seven years.
  • Repayment. Student loans offer perks like waiting up to six months after graduation before you start repayments. Personal loan repayments start right away and typically won’t allow you to pause payments if you hit a financial snag.
  • Loan amounts. Student loans often start at $3,000 (for Polytechnic course fees). Personal loans come in as low as $1,000 in some cases but rarely go above $20,000, depending on your monthly income.
  • Cosigners. Almost all student loan providers allow you to apply with a cosigner, which may not be available with a personal loan.
  • Eligibility. The rigid requirements of personal loans could prevent many students from finding financing. Also, you’d need to be a Singapore citizen or permanent resident in order to quality for the majority of the education loans offered by local banks.

How personal loans and student loans compare

Should I take out a personal loan for post-secondary education?

It depends on your circumstances and finances. Ask yourself the following questions to help you decide if a personal loan is right for you.

When to consider a personal loan

  • You’re employed and have good to excellent credit.
  • You can afford immediate repayments.
  • You have limited educational expenses and a creditworthy cosigner.
  • You aren’t eligible for grants or education loans.

When to look elsewhere

  • You’re eligible for an education loan.
  • You’re eligible for scholarships, grants or work-study.
  • You’re not employed, have poor credit and don’t have a cosigner.
  • You’re looking to borrow $10,000 or more.

Personal loan alternatives to pay for post-secondary education

Personal loans aren’t the only option for students needing help with extra expenses before they graduate.

  • Crowdfunding. Got a particular project or goal you need to fund — like paying for study abroad? Consider setting up a campaign GoFundMe to raise money from your peers and social network.
  • Get a side gig. Making a little extra money on the side might be easier than you think. It can be as simple as teaching tuition, getting a part-time job at a cafe or offering services you’re already proficient at, like editing or furniture assembly.

Bottom line

Personal loans aren’t designed for students. You generally need a job, strong credit and the ability to repay what you owe right away. Parents typically have an easier time qualifying if they have a steady job and strong credit. They can either apply on their own or cosign their children’s loans.

But both options may not be ideal: you just might find other sources of financing by talking with your school’s financial aid office. Learn more about how it all works with our comprehensive guide to student loans.

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