Monday, November 05, 2007

Evaluate a study loan

Dear Mr Tan,

I wish to sign for a part-time one year degree course. I have to borrow 50% of the course fee of $15,000.

Here are the terms offered by three organisations. Which is better?

Loan 1:

Rates of Interest per Annum: 4.50%
Maximum repayment period: 12 or 24 months
Loan 2:

Interest Rates: 5.350% p.a. on monthly rest.
Monthly instalment is computed based on loan amount and is fixed throughout the loan period.
Loan 3:

Interest rate: 5.58% p.a. (3.88% for Postgraduate Education Financing)
Enjoy easy repayment period of up to 6 years

REPLY

You should ask each of the body to quote to you the amount that you have to pay each month on the same basis, i.e.

Amount of loan $7,500
Repayment to start from (specify the date)
Number of repayments, 12, 18 or 24 months
Amount of repayment
Other charges, if any:

It is difficult to compare the interest rate alone, as there are many ways of calculating them. It is best that you ask them to give you the specific monthly installments, so that you can make a simple and direct comparison.

You can also decide on the repayment period, based on your personal budget.

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