What to do with $10k

[twinbaby]

Hi there,

I currently have a study loan to my parent CPF account about $10k~ Each month I am paying about $179. The interest is about 2.1% per annum

I was thinking of the following:

1) Buy Singapore Savings Bond
2) Buy Structured Deposit from UOB or Maybank
3) Just pay off the study loan from my parents CPF
4) Just let it be, status quo.

Pls advise.

 

[wahkao3]

whats the interest rate cost for 3)

 

[twinbaby]

whats the interest rate cost for 3)

it is 2.1% for CPF education loan. monthly compound.

 

[disavowed]

Why dont just pay off loan fully?

 

[joshua182]

Dude. You can't beat the compounded monthly interest. Your real cost will be very high. Pay off the loan. There is no way you can achieve returns that cover this type of loan unless dabbling in riskier instruments. No way at all if you don't have the knowledge to do so.

Either you learn quickly and do it well, or just pay off the loan. Resolving debt should take pirority.

 

[Perisher]

Hi there,

I currently have a study loan to my parent CPF account about $10k~ Each month I am paying about $179. The interest is about 2.1% per annum

I was thinking of the following:

1) Buy Singapore Savings Bond
2) Buy Structured Deposit from UOB or Maybank
3) Just pay off the study loan from my parents CPF
4) Just let it be, status quo.

Pls advise.

Do not buy structured deposit. It's expensive and doesn't really help you at all.
SSB would easily match and surpass that 2.1% assuming you hold for 10 years. Currently at 2.63%.
And like others have said, pay down the loan asap.

 

[Mr.Canberra]

Most people keep forgetting about the real rate.

Using Singapore's inflation rate of 1.0% for 2014 as an example.
The real interest rate of your study loan is 2.1% + 1.0% = 3.1%.

Unless you can get investment returns of 3.1% p.a. to offset if not your purchasing power is compromised.
Returns from Singapore Savings Bond also can't offset it.

In Singapore investments with returns above 2.0% p.a. carry certain risks.
The higher the returns the riskier it is.

If you ask for my unsolicited advice it will be to pay off the study loan asap.
Regardless of your educational level work hard to accumulate savings and manage your money wisely to achieve financial freedom before retirement age.

Higher educational level does not necessary make you richer but it helps to get there a bit faster.
Seriously learn how to sah ka aka por lanpa aka curry favour your boss.
It'll go a long way with career advancement.

I worked smartly to what I have now not by not curry favouring bosses but wealth would be twice as much if I did.
Welcome to the real world!
Just like a piece of currency it's cold and hard.

Side note: DBS's Singapore inflation rate forecast is -0.2% (2015) and 1.3% (2016). Most people are saying 2015 sucks but this year your net worth will get a big boost due to deflation if you manage your money wisely.

 

[wahkao3]

it is 2.1% for CPF education loan. monthly compound.

2.1% monthly
or 2.1% compounded monthly, on annual basis its 2.1% ???

if only 2.1% on annual basis, ok lah, can keep

 

[dork32]

Most people keep forgetting about the real rate.

Using Singapore's inflation rate of 1.0% for 2014 as an example.
The real interest rate of your study loan is 2.1% + 1.0% = 3.1%.

Unless you can get investment returns of 3.1% p.a. to offset if not your purchasing power is compromised.
Returns from Singapore Savings Bond also can't offset it.

In Singapore investments with returns above 2.0% p.a. carry certain risks.
The higher the returns the riskier it is.

If you ask for my unsolicited advice it will be to pay off the study loan asap.
Regardless of your educational level work hard to accumulate savings and manage your money wisely to achieve financial freedom before retirement age.

Higher educational level does not necessary make you richer but it helps to get there a bit faster.
Seriously learn how to sah ka aka por lanpa aka curry favour your boss.
It'll go a long way with career advancement.

I worked smartly to what I have now not by not curry favouring bosses but wealth would be twice as much if I did.
Welcome to the real world!
Just like a piece of currency it's cold and hard.

Side note: DBS's Singapore inflation rate forecast is -0.2% (2015) and 1.3% (2016). Most people are saying 2015 sucks but this year your net worth will get a big boost due to deflation if you manage your money wisely.

it should be 2.1% - 1% = 1.1% if you factor in inflation

if you are just fighting interest rates of the loans, you do not have to factor in inflation. you just need to beat the 2.1%

 

[dork32]

eg bank loan me at 1.6% for housing loan.

i put the money bank loan me into cpf to earn 2.5%. i earn money as a result. i do not have to beat 2.6% to earn money. i just need to beat 1.6%

 

[AhPek_Lion]

For ssb it is not compounded. However for the loan, it is compounded which makes it expensive

 

[Bedokian]

Hi there,

I currently have a study loan to my parent CPF account about $10k~ Each month I am paying about $179. The interest is about 2.1% per annum

I was thinking of the following:

1) Buy Singapore Savings Bond
2) Buy Structured Deposit from UOB or Maybank
3) Just pay off the study loan from my parents CPF
4) Just let it be, status quo.

Pls advise.

I would like to know more about your current situation, if you do not mind.

Do you have the $10K lump sum with you now? It would be easier to decide if you have the cash on hand.

Is the $179 per month factored in the interest component? If so, it means you are paying off a steady stream of $179 over $10,000 / $179 = 4.6 years.

Are you currently working? If I am not wrong, the study loan return to CPF is effective a few months after your graduation. As you go along your career, your pay will bound to increase, and with it you could vary the amount to pay off the loan and set aside a sum for savings and investments.

1 more point which I think some tax experts may help to answer - is the study loan payment back to CPF considered a form of contribution to CPF? If it is, then this payment can be treated as tax relief.

 

[dork32]

For ssb it is not compounded. However for the loan, it is compounded which makes it expensive

though not compounded, you receive the interest payout annually. you can use it to buy some more ssb. that is compounding.

 

[dork32]

I would like to know more about your current situation, if you do not mind.

Do you have the $10K lump sum with you now? It would be easier to decide if you have the cash on hand.

Is the $179 per month factored in the interest component? If so, it means you are paying off a steady stream of $179 over $10,000 / $179 = 4.6 years.

Are you currently working? If I am not wrong, the study loan return to CPF is effective a few months after your graduation. As you go along your career, your pay will bound to increase, and with it you could vary the amount to pay off the loan and set aside a sum for savings and investments.

1 more point which I think some tax experts may help to answer - is the study loan payment back to CPF considered a form of contribution to CPF? If it is, then this payment can be treated as tax relief.

cannot 10000/179= 4.6 years because of monthly compound interest at 2.1%. it should be 4.9 years instead.

 

[Bedokian]

cannot 10000/179= 4.6 years because of monthly compound interest at 2.1%. it should be 4.9 years instead.

Noted, but like HDB loans through CPF, they will inform you of the monthly repayment after factoring in the interest component.

Maybe wait for TS to clarify.

 

[Dividends Warrior]

Pay off the loan asap.

 

[snakey256]

just pay off early. don't think about investing since there is risk.

 

[deathman91]

You sure the interest for the education loan from CPF is 2.1%?

I believe is the prevailing interest rate for CPF OA which is 2.5%.

Wondering why are you guys telling him to pay off the loan. If he can beat the 2.5% PA loan isn't it better for him to slowly repay?

 

[twinbaby]

The loan has been fully paid off.

 

[Wood41]

This is the love of many in this forum.

Returns from Singapore Savings Bond also can't offset it.