The Ultimate Guide to Taking Personal loan in Singapore
Money troubles and tight cash flow are something us humans have to deal with in life at some point or another. Whether it is for your children’s education or for hospital charges or for planning a vacation with family, you need to be in a strong financial position to bear the expenses. This is where personal loan in Singapore can help. If you are embarrassed or too (paiseh) to ask money from your friend or family, taking a personal loan is a great way to get access to quick cash.
Personal loans are unsecured loans that you can take without putting up collateral. Personal loans are small loans; hence, they are not tied to any of your assets like secured loans. Since you don’t have to put up collateral like your car or house on loan, you will find the interest rates slightly higher as compared to other loans.
To be approved for a personal loan in Singapore, you typically need to have a steady income, followed by a good credit score. However, there is more to that.
In this post, we will discuss everything you need to know about taking a personal loan in Singapore, followed by some FAQs. So, keep reading.
Personal Loan – Explained
A personal loan is the money borrowed from the financial institution, bank, online lender, or credit union that you pay back in fixed monthly installments. Personal loans are not backed by collateral, and there are no harsh consequences for not paying the loan back. However, defaulting a personal loan will take a toll at your credit score, which may prevent you from taking loans in the future.
In Singapore, there are majorly four types of personal loans that people take. They include:
This type of personal loan goes by numerous names like flexible repayment loan, cash line, revolving loan, or credit line. In Line of Credit, the bank agrees to set aside a fixed amount for you to withdraw when required. So, you have the options to either withdraw the entire sum or just part of it. You only have to pay interest for what you draw. Although you can repay the loan as quickly as you want, there is no fixed repayment period. However, you need to understand that with this type of loan, the more money you owe, the higher the interest you will have to pay.
This type of personal loan allows you to borrow a fixed amount from the bank, which then you have to repay with interest. You have the flexibility to choose a specific period to repay the loan. It can range from 1-7 years, depending on your loan amount and interest.
This type of personal loan is taken when you owe money to multiple banks or lenders. As the name suggests, a Debt Consolidation Loan is the loan taken to repay an existing loan. You need to find a bank that provides such loans. When you take the loan, the bank will pay off the money you owe to multiple debtors. It is a great way to manage your outgoing expenditure, as you will only have one repayment to worry about. Such loans are strictly regulated in Singapore, and for you to qualify for a debt consolidation loan, you need to owe 12 times (at least) your monthly salary.
A balance transfer loan is a type of personal loan in Singapore, which is mostly taken for managing credit card debt. A balance transfer loan is also known as short-term funds allocation facility or fund transfer. It allows you to transfer your credit card debt to a new credit card. The best, it charges 0% interest for 6-12 months. In simple words, it is like using a new credit card for paying off the debt of your existing card. It is a great option to take if you have a solid repayment plan. Once the specified interest period runs out, higher interest rates will kick in, which could bring you to the starting point. Moreover, there is a loan processing fee associated with this type of loan. You have to pay it once your loan is approved.
What do you need to know before taking a personal loan in Singapore?
When you are considering a personal loan in Singapore, there are several factors that come into the play. From finding the licensed moneylenders or financial institutions to understanding the interest rates and terms, rules and regulations for banks, and more, there is a whole lot of hassle. So, before you take up a personal loan, review the following aspects and consider where do you stand at the moment.
#1 General Information about Moneylenders
It is important that you research the moneylenders, banks, or financial institutions before you go up to them and ask for a personal loan. It may be difficult but finding a reputable and licensed moneylender or bank in Singapore is not impossible. A regulated financial institution or bank in Singapore will boast all the necessary certifications and licenses to operate and offer personal loan services to people.
You need to check whether the bank or the financial institution provides reasonable terms of collection and payment, along with other payment structures. If you are looking for money for an urgent need, you need to find a reputable moneylender. For this, you need to check government directories for licensed moneylenders in Singapore. Only consider banks that are certified by the Ministry of Law. The authenticity of the bank is vital as a first step to create trust.
Different financial institutions, banks, and moneylenders have different criteria for offering a personal loan in Singapore. For some, your credit history is all what matters, and for some, they need a solid assurance that you will repay the loan back; hence, they consider your monthly income. The interest rate, repayment period, and maximum loan amount will stimulate accordingly.
#2 Interest Rates and Loan Terms
Personal loans in Singapore are pretty dynamic since they depend on the amount you want and for how long. You need to understand that the interest rate is personalized after the financial institution assesses your risk profile. That means the rate at which you got the personal loan will not be the same as someone else taking the same amount from the same bank.
We will help you understand this aspect with an example.
Suppose you want to borrow $10,000 with a maximum loan term of 36 months. Your income is $5000. Let’s calculate the interest rates from prominent financial institutions in Singapore.
|Personal Loan||Rate of Interest||Processing Charges||Monthly Installment (X 36 months)|
|Bank of China $mart Loan||6.52% per year with effective interest rate of 14.69% per year||3% x $10000 = $300||$308|
|Maybank CreditAble Term Loan||5.86% per year with effective interest rate of 12% per year||2% x $10,000 = $200||$326|
|OCBC Cash-on-Installments||4.7% per year with effective interest rate of 9.46% per year||1% x $10,000 = $100||$317|
|Citibank Quick Cash||4.55% per year with effective interest rate of 8.5% per year||None||$316|
|UOB Personal Loan||4.25% per year with effective interest rate of 8.86% per year||1.5% x $10,000 = $150||$313|
|POSB Personal Loan / DBS Personal Loan||3.88% per year with effective interest rate of 7.9% per year||1% x $10,000 = $100||$310|
|HSBC Personal Loan||3.7% per year with effective interest rate of 7% per year||None||$309|
The processing charges are deducted from the principal amount. That is, if the processing fee is $100 for a personal loan of $10000, you will only get $9900.
#3 What are the rules and regulations for banks and licensed moneylenders?
As of October 1, 2015, the moneylenders in Singapore have to follow new regulations regarding interest rates, fees, unfair contracts, and discriminatory lending practices.
|New Controls on Borrowing||Old Controls on Borrowing|
|100% cap on total borrowing costs||No cap on total borrowing costs|
|No additional fees allowed||Additional charges allowed in some situations|
|Late fees capped at $60/month||No cap on late fees|
|4% maximum late interest rate/month||Late interest attached to the interest rate per month|
|4% maximum nominal interest rate/month||· No interest rate cap for debtors earning $30,000 pa · 20% maximum effective interest rate/year for debtors earning less than $30,000 pa|
|10% maximum upfront administrative fee||No upfront administrative charges|
#4 Information on new/amendments laws and regulation that had changed for the past few years for banks and licensed moneylender
In the present scenario, over 200 financial institutions have a presence in Singapore. The nation’s success as an international financial center is strengthened by its effective regulatory framework and pro-business environment.
The Monetary Authority of Singapore (MAS) is the country’s central bank and sole regulator. It is under The Baking Act, where the primary legislation is regulating and licensing the businesses of banks and moneylenders in Singapore.
Under the new amendments:Under the new amendments:
• Licensed financial institutions and moneylenders must carry a physical address with a landline
• Licensed financial institutions and moneylenders will never transfer your personal loan amount directly. Borrowers are required to visit their establishments, sign the papers and then collect their money
• Licensed financial institutions and moneylenders are not allowed to message people about their personal loan schemes • Licensed financial institutions and moneylenders cannot use misleading texts like “instant cash,” “immediate approval,” or “instant approval”
• There is a maximum amount you can loan, which depend on your annual income
• Licensed financial institutions and moneylenders will never use illegal methods or violence when it comes to debt collection
• Licensed financial institutions and moneylenders cannot charge a processing fee of more than 10% of the total loan amount
Looking for a personal loan in Singapore?
Taking a personal loan in Singapore is a hassle-free affair if you the credentials right. You never know, an emergency can come knocking at your door any time. It is not always possible to have access to a lump sum amount whenever needed. This is where a personal loan comes into the play. Whether it is a medical emergency or a family emergency, vehicle repair, educational expenses, and credit card debts, among others, a personal loan can help you cover costs associated with any of these factors. It can help ward off the financial pressure from your shoulders and will allow you to live a stress-free life.
We can help you get the best deal on your personal loan. We are one of the leading financial institutions in Singapore that are fully regulated and licensed to do operations. Contact us for more details.
How is a Grab Taxi / Gojek Driver Loan Useful?
The following are the most frequently asked questions on personal loan in Singapore.
To avail a personal loan in Singapore:
• The applicant must be a citizen of Singapore
• Should be at least 18 years of age
• Must hold an active bank account in any of the regulated and licensed financial institution
Banks: You need to fill the application at the bank, which includes your full name, address, and your monthly income. You also have to mention the loan amount you want. The bank will review your credit score and based on that will decide whether or not to approve the asked loan amount. Your documents have to be legal when applying for the loan.
Licensed Moneylenders: Same goes for loan applications with licensed moneylenders. To begin the process, you will need to fill out an application at the loan office. Please be reminded to bring along with you, 1. your Identity Card and 2. your SingPass login credentials.
Banks: It differs from bank to bank, your credit score, and the loan amount you want to take. Some banks in Singapore processes the loan within 3-4 days, and some might take even a week or two. The good your credibility is, the higher are the chances of your loan getting sanctioned early.
Licensed Moneylenders: As for Licensed moneylenders, it will take only up to 30 minutes for you to receive your loan. You loan should be disbursed to you in cash upon loan approval, on the same day of your visit.
Banks: Most banks in Singapore offer a dedicated customer service that is happy to assist you regarding your personal loan. In order to apply online for a personal loan, you will need an online account with the respective bank and a valid email address to agree to your loan terms.
Licensed Moneylenders: No, it is not possible to apply for a loan by phone as well as anywhere online for that matter. However, you may still enquire about a personal loan by phone or online. Borrowers are required to be physically in the loan office in order to apply for a loan.
Banks: To some extent, yes, it will impact your credit score. However, if you agree to the loan terms and repay the loan in time, or do not default it, your credit score will only improve.
Licensed Moneylenders: Unlike secured loans, an unsecured loan doesn’t affect your existing credit scores that degrade your chances of getting a mortgage loan or a car loan from other financial institutions.
Banks: In most cases, you will receive an approval notification via post to your home address informing about the loan. With banking getting digitized, you will also receive an email notification regarding the same. In some cases, the bank personal may call you about the loan. You may have to visit the bank before the final approval.
Licensed Moneylenders: It takes only 30 minutes for your loan to be processed and disbursed to you. The respective loan officer attending to you will be able to tell you your loan results in a matter of minutes.
Banks: Once your loan has been approved, the bank will open a repayment account as well as the loan account in order to facilitate monthly repayment. In some cases, the funds are directly transferred to the main account.
Licensed Moneylenders: Once your loan application is submitted and approved, your loan should be disbursed to you in cash on the same day of your visit.
Banks: Your monthly repayment amount will be automatically debited from your account on each due date. You can transfer the funds to your repayment account through bank transfer, cash, or by check.
Licensed Moneylenders: You will be briefed and advised on the available payment modes by the loan officer attending to your case.
Banks: In case you do miss the loan repayment due date, the bank is liable to charge you with late payment fee and in some cases, late payment interest. It will be mentioned in your loan approval notification letter.
Licensed Moneylenders: Late fees and late interest fees will be charged accordingly.
Banks: No. your repayment due date should be established at the time of your loan approval. Repayment schedules are automatically set by the system unless advised otherwise.
Licensed Moneylenders: No. your repayment due date should be established at the time of your loan approval. Repayment schedules are automatically set by the system unless advised otherwise.