For some, if not most, Singaporeans, student loans can be as certain as death and taxes. Thankfully, most student loans from banks are interest-free during the course of your studies, and offer flexible payments after you graduate or find a job.
Once you graduate, the sensible thing to do is to pay off your loan as soon as you can. Unfortunately, too many of us splurge on clothes, travelling and entertainment during our university years, and have hardly any savings.
Unless you’re one of those lucky people that start off with a high-paying job, chances are, you’re going to struggle to make ends meet in your first job. Paying off your student loan is going to add to the strain.
What do we do then? Aside from a mindset shift, check out the other tips below to make sure you start with a fresh, clean financial slate after you toss your graduation cap in the air.
1. Put yourself in the correct mindset.
When you take on a student loan, remember that your relationship with the bank is give and take. They lend you money that you need to return. Your decision also means that you have prioritized your education and career.
In keeping with your priorities, read the fine print before signing the agreement so that your focus stays on the fact that there are important terms and conditions that should be clear to you. Also, have a separate calendar to monitor your payments or when interest rates rise.
Understand that prioritizing school and work means you accept the sacrifices (such as shopping and splurging on entertainment) you’ve exchanged in order to meet your financial goals. If you stick to what’s important to you, then the distractions may become less so.
2. Make sure to keep your contact information updated.
This may seem too simple, but it is precisely the reason not to neglect it. You would save yourself a lot of trouble by ensuring that your phone number and address are up-to-date to make sure that you receive all important loan information.
Again, making little actions towards staying focused help you to maintain the good habit of clearing yourself of your student loans.
3. Pay off your loan as much as you can, as often as you can.
In line with maintaining your proper perspective, always try to put away any additional money you make to paying off your loan.
Interest is like a mold on bread, the longer you leave it, the stronger it gets and spreads. So every chance that you get, try to make more than the minimum payment stated on your statement. The longer you put off making complete payments, the more the interest accrues on a daily basis.
Interest rates can really slow you down in your goal so one of the ways to get ahead of your loan is to pay it off right away.
4. If you must use your credit card, make sure you have enough money in the bank to pay for the purchase.
Try not to rely on your credit card all the time. The ideal is to think of using it only for emergencies. There are some really tempting deals out there though that, when you take the time to study, actually come out cheaper than paying in cash.
The next best thing to do is to always keep in mind how much funds you actually have. Then, if you need to charge to your credit card, you will only do so when you are certain you have the actual amount in the bank with more to spare.
5. Ask your bank about deductions and pre-payment
So that you don’t have to worry about the monthly payments, inquire about whether the bank can automatically pay the due amount for you. You will still have to keep track that the deduction was made properly and correctly.
Make sure you ask about the prepayment policies when you take out the loan. Some banks may allow full payment right after the interest-free period, meaning that you can save on the costly interest payments.
If you take a CPF loan from your parents or siblings, bear in mind that should you be required to pay back the amount, it will include the accrued interest as well.
6. It’s okay to ask for help.
There are so many topics that seem taboo to ask about in Singapore, and money matters are still one of them. If you are serious and determined about becoming debt-free as soon as you can though, it would be worth your while to ask for advice.
You don’t have to go professional. You can start off with the financially successful people for you, be they your parents, teachers, or colleagues. Personal finance blogs in Singapore will also offer a lot of advice which can be very helpful in your pursuit of financial freedom.
So keep your chin up, know that you will be free from debt, and follow these tips to help you live the financially free life you want now.
Need more help? Check out Achieving Financial Goals: A Simple 7-Step Guide.