Hi, I just graduated. I am using the cpf education load and need to repay it. I owe cpf $24k . the interest rates is 2.5%. I am thinking of repaying it slowly at
$500/mth. I did not do any investment as i do not know how to so i
intend to use the remaining money to earn interest in bank under
certain higher interest rates account. Do you think I should repay as
much of the education loan as soon as possible so that I will not need
to pay much interest rates or should I do it slowly while putting the
rest of the money i have in bank to earn interest?
I calculated that the money earn for interest rate 1%+ is much much
lesser than the interest accumulated for my loan. I see that I have pay
like every month $50 interest for my education loan.
Haiz...
Originally posted by askxyz:Hi, I just graduated. I am using the cpf education load and need to repay it. I owe cpf $24k . the interest rates is 2.5%. I am thinking of repaying it slowly at $500/mth. I did not do any investment as i do not know how to so i intend to use the remaining money to earn interest in bank under certain higher interest rates account. Do you think I should repay as much of the education loan as soon as possible so that I will not need to pay much interest rates or should I do it slowly while putting the rest of the money i have in bank to earn interest?
I calculated that the money earn for interest rate 1%+ is much much lesser than the interest accumulated for my loan. I see that I have pay like every month $50 interest for my education loan.
Haiz...
In your case, pay as much as possible to repay the loan. Unless the bank or whatever investment you do, is giving you way higher than 2.5%pa, say maybe above 5%.
I'm not so sure about how CPF calculated their loan interest, but all banks calculate loan interest using a monthly-rest basis. Normal interest calculation is
simple interest calculation: u have to pay = rate(%pa) * no of days own * amt own / 365
monthly rest basis calculation is based on your loan tenor(LT) and monthly installments(MI). The shorter LT the higher the MI. BUT, interest is calculated every month. So part of your MI goes to reducing the outstanding (o/s) loan, part goes to pay the interest for that month, hence your o/s loan is reducing every mth. So based on this you'll realised very little of the MI goes to reducing the o/s initially, as most goes to reducing the interest.
Originally posted by airgrinder:In your case, pay as much as possible to repay the loan. Unless the bank or whatever investment you do, is giving you way higher than 2.5%pa, say maybe above 5%.
I'm not so sure about how CPF calculated their loan interest, but all banks calculate loan interest using a monthly-rest basis. Normal interest calculation is
simple interest calculation: u have to pay = rate(%pa) * no of days own * amt own / 365
monthly rest basis calculation is based on your loan tenor(LT) and monthly installments(MI). The shorter LT the higher the MI. BUT, interest is calculated every month. So part of your MI goes to reducing the outstanding (o/s) loan, part goes to pay the interest for that month, hence your o/s loan is reducing every mth. So based on this you'll realised very little of the MI goes to reducing the o/s initially, as most goes to reducing the interest.
On the cpf site, it wrote "If payment is not made by 31/03/2008, additional interest at the rate of $ 49.59 per month must be added to the total amount repayable."