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Borrowing for a bright future

Sophie Paine

You have decided to apply for a student loan. But you are not sure how it works and where you can apply for one.

A student loan is a way to finance your education.

You borrow money today to pay for university and enhance your knowledge.

In a few years' time, you will use these skills to earn an income.

There are several types of student loans in Hong Kong. Some are subsidised by the Student Financial Assistance Agency.

Others are offered by private funds, such as charitable institutions, or by banks.

Their mechanism is similar: you get the money when you start studying.

This enables you to pay for the tuition and other expenses.

After you have finished your studies and you start earning money, you pay back your loan over a few years. Most loans carry interest. The interest rate depends on where the loan comes from.

Some loans might have negative real interest.

What does that mean?

You might remember how inflation 'eats up' the value of money slowly.

A real interest is the interest rate minus inflation. If inflation is higher than the interest, the interest you pay is worth less than its value.

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