When to Use a Personal Loan for Education

Furthering your education and improving your skills are vital for advancing your career in highly competitive Singapore. However, professional certifications can cost thousands of dollars.

For example, a 10-week part-time digital marketing course can cost S$5,000, while learning to code in iOS or Android can set you back around S$15,000. Even traditional courses such as Office Administration can cost around S$1,000 for a 2-day course.

If you don't have the cash for these programmes, and a study loan is out of reach, you can use a personal loan instead to fund your education.

Should Singaporeans get a personal loan over an education loan?

Singaporeans looking to upgrade their skills will need a way to finance their efforts. Before turning to personal loans, look towards an education loan to fulfil your needs. Education loans have lower interest rates (around 4% per annum) compared to personal loans (around 5% to 8%) meaning you’ll save more money with the former.

Education loans, once approved, are disbursed to your educational institution. This saves you the trouble of paying your school fees every time.

However, you may encounter certain scenarios that could prevent you from getting an education loan. In such a case, a personal loan may be useful. Consider using a personal loan for education when:

• You don’t qualify for an education loan
• Your chosen course is not eligible for an education loan
• You’ve exhausted the limit on your education loan
• You don’t have enough SkillsFuture Credit

You can also read this guide to the best education loans in Singapore.

1. You don't qualify for an education loan

Education loans come with certain eligibility requirements.

For a start, most education loans require you to be at least 21 years of age (with the exception of OCBC – minimum age for an education loan is 17). You should also not be studying full-time, and should have an annual income of between S$24,000 to S$30,000.

You can bypass these requirements by getting an immediate family member to act as your guarantor. However, your guarantor must fulfil these minimum requirements themselves.

If you’re unable to qualify for an education loan in person or through a guarantor, you would need to take up a personal loan to pay for your studies, but you’ll still need to be at least 21 years of age for most of these loans.

2. Your course doesn't qualify for the education loan

As the name suggests, an education loan can only be used for education purposes. This is why when approved, the loan amount will be disbursed to your educational institution’s account (via an escrow account, or similar protective arrangement), and not directly to your personal bank account.

This also means that your education loan can only be used to pay for courses run by an approved institution. If the provider of the course you are seeking to join falls outside of the approved list, your loan application will not be successful.

In this case, a personal loan would be necessary to pay for your chosen study programme.

3. You’ve exhausted the limit on your education loan

Before taking up an education loan, we strongly recommend that you work out exactly how much you’ll need. And once you arrive at the final figure, strive to stick to that budget.

This is because education loans come with a limit, which can range from around S$80,000 to S$200,000. Once this amount is used up, you’ll need to seek alternative financing.

However, there may be certain instances – say, a summer internship at the leading firm in your industry, for example – that could be worthwhile pursuing.

Should you find an opportunity like this, consider supplementing your education loan with a personal loan to gain maximum benefit from your studies.

4. You don't have enough SkillsFuture credits

Singaporeans aged 25 and above received S$500 to spend on over 10,000 eligible SkillsFuture courses and workshops. The government has promised to periodically top up this account, but details for 2019 have not yet been announced.

Given the relatively modest starting amount, there’s a good chance that your SkillsFuture Credit alone isn’t enough to pay for all the courses you want to take. In such a case, taking up a personal loan can help you top up your workshop fees, or pay for the courses still remaining on your list.