I have a $25K CPF education loan (2.5% ann int.) for my Uni fees. Over the years I saved $30K. Do I clear all the CPF loan with the money or invest them while doing monthly repayment to the CPF loan? - Seedly

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Asked by Anonymous

Asked on 31 Oct 2018

I have a $25K CPF education loan (2.5% ann int.) for my Uni fees. Over the years I saved $30K. Do I clear all the CPF loan with the money or invest them while doing monthly repayment to the CPF loan?

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Gabriel Lee
Gabriel Lee
Level 6. Master
Updated on 01 Nov 2018

Personally, I would clear off the education loan first so as to reduce the amount of interest payable since all investments carry risks and the returns are not guaranteed. Clearing off the debt gives me a peace of mind too!

But of course, some would recommend investing if you can achieve higher returns than your loan's interest rate. But then again, investments returns are not guaranteed.

Rule of thumb is to invest only with money that you can afford to lose.

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Yixiong Chang
Yixiong Chang
Level 5. Genius
Answered on 31 Oct 2018

I assume the CPF is from your parents. Your parent can actually waive the repayment if they are at least 55years old and had set aside the basic retirement sum.

You can always give cash to your parents monthly or topup their special account (for their retirement). The monies in special account earns interest rate at 4% and your parent will receive tax relief for the amount that is topped up. Eg. If they are in the 7% tax bracket, u are effectively 'earning' 7% return on the amount that u topped up.

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Good Day Every Day
Good Day Every Day
Level 6. Master
Answered on 30 Nov 2018

Settle the debt first so as to reduce the interest payable. Once your debt is cleared, you could then save more to accumulate your capital for investment or trading.

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Derek Ang
Derek Ang
Level 2. Rookie
Answered on 31 Oct 2018

I think if you can invest at a higher return than the loan interest, then invest.

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