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A personal loan is an amount of money you can borrow from a bank, licensed moneylenders, or credit unions. This sum of money can be used for various reasons, such as for renovation, weddings, or housing.
Personal loans have both short-term and long-term loan tenure options that you can choose from and must be repaid over time with interest. Apart from interest, these instalments are subjected to additional fees that you need to be aware of, namely: processing fees, late repayment fees, and changes in tenure fees.
Deciding which personal loan to go for can be confusing when you are unsure what the different interest rates mean on bank advertisements and brochures. There are generally two types of interest rates you need to take note of:
Fees | What It’s For |
|---|---|
Processing fee | Administrative cost banks charge for processing your loan application |
Late repayment fee | A penalty charge imposed when you miss or fail to make a payment by the stipulated payment date |
Early repayment fee | A penalty charge imposed when you pay off your loan earlier than agreed |
Types of Fees to be Aware of When Applying for a Personal Loan
There are several types of personal loans available on the market. Here are four common types of loans you will likely come across in your search for the best personal loan:
Loan Type | What Is It | Suitable For |
|---|---|---|
Personal instalment loans | Personal instalment loans enable you to borrow a sum of money that you will need to repay over a specific period of time, in fixed monthly instalments | Ideal for those who require significant funds or to finance an unforeseen situation, such as home renovation, wedding, funerals, or medical emergencies. |
Line of credit | A line of credit is a credit arrangement you make with a bank that enables you to withdraw funds from your credit line whenever you need it. The maximum amount of money that you can withdraw is predetermined | Ideal for those whose borrowing needs are hard to predict, such as for those who may face inconsistencies in their salary drawn or businesses that meet cash flow crunches. |
Balance transfer | A balance transfer essentially transfers your outstanding available credit on your credit card to a low or 0% interest account for a period of time (typically three to 18 months) at a one-time processing fee. | Ideal for those with small outstanding credit card balance or personal loan, and are confident to repay over a few months. |
Debt consolidation plan | A debt consolidation plan is a debt refinancing programme that enables you to combine all your outstanding credit card debts and unsecured loans across financial institutions into one loan at a lower interest rate. You will need to make monthly instalments to the new financial institution of your choice for a tenure period that ranges from one to 10 years. | Ideal for those with multiple and significant amount of credit card bills or loans, since they can repay it over a few years at a lower interest rate. |
Types of Personal Loans and Recommendations
Name of Loan | Interest rate (% p.a.) | Type of Loan |
|---|---|---|
From 3.5% (EIR: 6.4%) | Personal Loan | |
From 3.45% (EIR: 6.5%) | Personal Loan | |
From 3.88% (EIR: 5.79%) | Personal Loan | |
From 3.2% (EIR: 6%) | Personal Loan | |
From 5.42% (EIR 10.96%) | Personal Loan | |
From 3.48% (EIR: 7.3%) | Personal Loan | |
From 3.4% (EIR: 6.42%) | Personal Loan | |
18.5% p.a. | Line Of Credit | |
- First 3 months: 0% - Above 3 months: 20.5% p.a. for those with an annual income above S$30,000 23.5% p.a. for clients with an annual income below S$30,000 after the promotion period | Line Of Credit | |
9% for first year 19.8% p.a. thereafter | Line Of Credit | |
20.5% p.a. | Line Of Credit | |
20.9% p.a. | Line Of Credit | |
20.95% p.a. | Line Of Credit | |
EIR: 20.95% p.a. | Balance Transfer / Funds Transfer | |
EIR: 25.9% p.a. | Balance Transfer / Funds Transfer | |
EIR: 18.5% p.a. | Balance Transfer / Funds Transfer | |
EIR: 25.9% p.a. | Balance Transfer / Funds Transfer | |
EIR: 19.8% p.a. | Balance Transfer / Funds Transfer | |
EIR: 19.98% p.a. | Balance Transfer / Funds Transfer | |
EIR: 25.9% p.a. | Balance Transfer / Funds Transfer | |
EIR: 26.9% p.a. | Balance Transfer / Funds Transfer | |
EIR: 25% p.a. | Balance Transfer / Funds Transfer | |
EIR: 25% p.a. | Balance Transfer / Funds Transfer | |
From 6% (EIR: 7.48%) | Debt Consolidation Plan | |
3.99% (EIR: 7.5%) | Debt Consolidation Plan | |
3.58% (EIR: 6.95%) | Debt Consolidation Plan | |
From 3.4% (EIR: 6.5%) | Debt Consolidation Plan | |
From 3.58% (EIR: 6.95%) | Debt Consolidation Plan | |
From 3.48% (EIR: 6.79%) | Debt Consolidation Plan | |
From 4.5% (EIR: 8.41%) | Debt Consolidation Plan |
Find the Best Interest Rates for Personal Loans in Singapore
Taking on a personal loan is a long-term commitment. Before doing so, these are some factors that you should take into consideration before committing to one:
Foreigners can apply for personal loans in Singapore. However, do note that the eligibility criteria for foreigners are different from that of Singaporeans and often stricter. Banks will require your proof of identity, address, income and employment, and a valid work pass. Foreign applicants also have to be above the age of 21.
Several major banks in offering personal loans to foreigners in Singapore. They include DBS/POSB, OCBC, HSBC, Citibank, and Standard Chartered.
Understanding personal can feel like a tall order with the different components to consider. We have done the work so you do not have to! Here are three curated guides on personal loans to help you grasp all you need to know about personal loans before you commit to taking one:
Personal loans are generally delivered as a one-time cash payment, often deposited into your bank account. You may be required to open a bank account with your chosen personal loan provider in order to obtain the personal loan.
A personal loan term length is the amount of time taken to repay your loan, and you can often decide how long you want to take to repay the loan. While personal loan terms can vary between 12 to 60 months or more, do take note that a longer repayment term would incur higher interest costs in the long run although you may be paying a lower monthly instalment cost.
There are several reasons that you may have been declined to take on a personal loan. Some of these reasons may include: borrowing an amount that is deemed by the bank as too high for you to repay, not meeting the income threshold for borrowing, not meeting the basic borrowing requirements, having a low credit score, or high debt-to-income ratio. Understanding why you were rejected is an important first step to increase your chances of securing a loan. Alternatively, you may choose to approach a licensed money lender.
It is important to understand both types of interest rates when taking a personal loan. An annual flat interest rate on your personal loan refers to the percentage on your principal borrowed sum until you repay the loan. On the other hand, an effective interest rate (EIR) reflects the true cost of taking a loan as it considers other factors, such as processing or administrative fees. It is thus crucial to consider both types of interest rates, as the annual interest rate often determine if the monthly instalment is affordable to you while EIR will ultimately influence the total cost of your loan.
There are numerous factors to consider before taking a personal loan. Before deciding on your loan amount, a crucial factor to consider is whether the monthly repayment amount is something you can afford. Will this monthly instalment have an impact on my monthly budget? What impact? And to what extend? As a general guideline, you should aim to spend no more than 35% to 43% of your take home salary on repaying your debts.
As the terms differ between banks, the best bank for personal loans is greatly dependent on which is of most importance to you when taking on a personal loan. Take into consideration annual interest rate and EIR before deciding on which bank to take a loan from.
There are several ways a personal loan can come in helpful for you:
Annual percentage rate refers to the yearly interest bank charges for a loan. The maximum tenure and APR differs across banks. Generally, the maximum tenure is typically 5 to 7 years, while maximum APR stands at about 8.93%.
Depending on your bank of choice, expect to obtain your personal loan within one to seven business days.
A personal loan can have a positive impact on your credit score if it is repaid on time, since this demonstrates that you are able to responsibly handle your debt.
You may want to consider taking up a personal loan if:
Banks look at several factors before deciding if you are a credible borrower who will likely have the means of repaying your loan. Eligibility criteria defers between banks, but some of the deciding factors often include: your credit score, income and employment history, debt-to-income ratio, residency status, loan term and quantum.
Taking a personal loan in the form of a debt consolidation plan can be especially help if you are repaying several loans monthly, since it charges a lower interest rate. It can also help build your credit score if you are confident of making timely repayments every month. As personal loans can be used for a wide variety of purposes, it affords you fast access to a sum of money and greater flexibility in terms of how you use it.
This depends on whether you are obtaining a secured or unsecured personal loan. A secured personal loan requires a collateral as a condition of borrowing. Depending on the issuing bank, borrowers can borrow up to 12 times their monthly income of unsecured loans.
It is possible to get a loan with zero interest rates. However, zero interest rates often come with hefty penalties for late repayment or heavy fees that will effectively add up to loan equating to a personal loan that charges an interest rate.
While you are generally required to produce your proof of salary to apply for personal loans, individuals may still be able to apply to get a loan if they do not receive regular payslips. Such individuals may do so by submitting other documentation to show proof of income. Further, banks may also require such individuals to pledge high-valued assets as security and maintain a healthy credit score to be eligible for personal loans.
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