Parent as Guarantor for Tution Fee Loan form local bank

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Parent as Guarantor for Tution Fee Loan form local bank

Postby DadOfGirl » Thu Jun 05, 2014 5:18 pm

Hi Parents,

What is general norm for Paying back tution fee loan for your child.

1: You transfer money to your childs account(Local bank) & he/she pays local bank upon graduation.In this case , there is no record that you paid for his/her uni education. If in dispute between siblings later on , there is no proof.
2: You are Guarantor & you pay full amont against loan account. In this case, will child's credit score suffer? It will dent his /her ability to borrow housing loan later in life.

Confused , Which option better to pay amount in full. Want to avoid interest ?

Thanks

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby zbear » Thu Jun 05, 2014 8:45 pm

I don't know anything about bank loans but I thot most parents will use CPF to pay?

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby DadOfGirl » Fri Jun 06, 2014 10:24 am

zbear wrote:I don't know anything about bank loans but I thot most parents will use CPF to pay?



Yes, you can use Parent's Oridinary account, if balance is available. If not for local uni, 80% of tution fee can be paid from Bank loan ( 0 % interest). Upon graduation pay back loan. If you decide to pay by installment , it is 4% interest rate.

Student , if start working , cannot use CPF contribution to pay installament.

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby havok_ex » Fri Jun 06, 2014 3:43 pm

To be honest, as a university student myself, I am against the belief that parents should pay for university tuition fees. Yes, parents do have an obligation to support a child's needs in terms of living allowance while the child is studying. I myself get about $280 a month from my parents. This amount is inclusive of food, bus fares and clothes. Some people ask if a mere 280 is enough but to me its just nice.

Tuition fees should be borne by the student. If you want to avoid interest, you should have opted for the CPF loan. That way, even if there is interest accrued, it goes back into your CPF account instead of the bank.

If you have loaned from the bank already, I think the better way would be to pay it in full for your child. But at the same time, take some measures to prove that you have paid the amount for your child, lawyers etc. In case you need the money in the future, you will still have the right to demand it from your child. And like you said, in case of your death, the inheritance will be split such that it will consider the fact that you have already bequeathed a large sum to your child in the form of the university fees.

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby DadOfGirl » Fri Jun 06, 2014 3:59 pm

havok_ex wrote:To be honest, as a university student myself, I am against the belief that parents should pay for university tuition fees. Yes, parents do have an obligation to support a child's needs in terms of living allowance while the child is studying. I myself get about $280 a month from my parents. This amount is inclusive of food, bus fares and clothes. Some people ask if a mere 280 is enough but to me its just nice.

Tuition fees should be borne by the student. If you want to avoid interest, you should have opted for the CPF loan. That way, even if there is interest accrued, it goes back into your CPF account instead of the bank.

If you have loaned from the bank already, I think the better way would be to pay it in full for your child. But at the same time, take some measures to prove that you have paid the amount for your child, lawyers etc. In case you need the money in the future, you will still have the right to demand it from your child. And like you said, in case of your death, the inheritance will be split such that it will consider the fact that you have already bequeathed a large sum to your child in the form of the university fees.


I :salute: you for having such a forthright attitute. :udaman:

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby zbear » Fri Jun 06, 2014 9:21 pm

My understanding of CPF loan is that child can take his/her time to repay loan. If cannot, the parent can apply to CPF to write off loan so child doesn't need to pay.

This is what my ex colleague told me.

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby havok_ex » Sat Jun 07, 2014 12:37 am

zbear wrote:My understanding of CPF loan is that child can take his/her time to repay loan. If cannot, the parent can apply to CPF to write off loan so child doesn't need to pay.

This is what my ex colleague told me.


Even if the loan repayment is delayed, interest would still be accrued or at least pegged to inflation rates. So its not always a good idea to wait. Best is too just clear your debts ASAP before moving on to your next stage in life(marriage etc). Fresh local grads can usually take in about 3-4k/mth. If you live on about 800-1k a month(since you would still be living with your parents right after graduation), a graduate can clear the tuition fees in about 15 months. That's saving 2k/month. 30k tuition fees.

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby dimsum » Sat Jun 07, 2014 12:55 am

zbear wrote:My understanding of CPF loan is that child can take his/her time to repay loan. If cannot, the parent can apply to CPF to write off loan so child doesn't need to pay.

This is what my ex colleague told me.


Cannot write off loan. If parent does not want child to repay, then he must repay the loan himself with cash.

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby dimsum » Sat Jun 07, 2014 1:08 am

havok_ex wrote:
zbear wrote:My understanding of CPF loan is that child can take his/her time to repay loan. If cannot, the parent can apply to CPF to write off loan so child doesn't need to pay.

This is what my ex colleague told me.


Even if the loan repayment is delayed, interest would still be accrued or at least pegged to inflation rates. So its not always a good idea to wait. Best is too just clear your debts ASAP before moving on to your next stage in life(marriage etc). Fresh local grads can usually take in about 3-4k/mth. If you live on about 800-1k a month(since you would still be living with your parents right after graduation), a graduate can clear the tuition fees in about 15 months. That's saving 2k/month. 30k tuition fees.


Interest accrued is based on OA interest rate of 2.5%.
My dad was pretty upset with me years ago when I told him I would repay the CPF loan asap instead of stretching over 10 years because I got a shock when I saw the accrued interest amount. Interest started to accrue from the very first year of my uni education. He said the so called interest was given to him, and not to bank, how could I be so calculative.
Haiz.... but he couldn't see it from my point of view. It was a debt to me and I just wanted to clear it asap before other loan commitments come in.
Furthermore, this loan repayment was on top of monthly allowance that I gave to mum.

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Re: Parent as Guarantor for Tution Fee Loan form local bank

Postby DadOfGirl » Sat Jun 07, 2014 7:12 am

dimsum wrote:
zbear wrote:My understanding of CPF loan is that child can take his/her time to repay loan. If cannot, the parent can apply to CPF to write off loan so child doesn't need to pay.

This is what my ex colleague told me.


Cannot write off loan. If parent does not want child to repay, then he must repay the loan himself with cash.


If so, then CPF loan is not better than Bank Loans. You get 0 % till you study and when you finish , Parent can get 25K personal loan at 2.5 % from market in today's time & Pay Student loan of Child's.

Any thoughts? For my second DD we have to arrange fund for local uni admission in 1 year time :?

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