THE Guide to Getting the Best Personal Loans in Singapore With the Smallest Interest Rates (2020)
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THE Guide to Getting the Best Personal Loans in Singapore With the Smallest Interest Rates (2020)

Joel Koh
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Times are tough.

But as with life, there are many ups and downs.

I would think that due to the fallout of COVID-19, many of us would be experiencing a down right now with the loss of income due to COVID-19 becoming quite common.

Regardless of whether you need it for an emergency or are looking to manage your personal cash flow. Most of us might need a personal loan at some point.

Somebody lend me money
Source: Giphy

If you happen to need money urgently and would not want to burden your friends and family, you can consider heading to a bank for a personal loan.

Although the application process is quite straight forward. There are quite a few things you need to carefully consider before getting one.

TL;DR: Guide to Getting the Best Personal Loans in Singapore With the Smallest Interest Rates (2020)

Name of LoanInterest Rates (% .p.a.) - New to BankType of Loan
CIMB Cashlite3.5% (EIR from 6.4%)Personal Instalment Loan
OCBC Personal Loan3.5% (EIR from 6.96%)Personal Instalment Loan
HSBC Personal LoanFrom 3.7% (EIR 7%) Personal Instalment Loan
Citi Quick Cash3.99% (EIR from 7.5%)
Personal Instalment Loan
POSB / DBS Personal LoanFrom 3.88% (EIR from 7.56%)
(New + Existing Customers)
Personal Instalment Loan
Standard Chartered CashOne 3.88% (EIR from 7.67%) Personal Instalment Loan
UOB Personal Loan4.25% (EIR from 7.75%) Personal Instalment Loan
CIMB Balance Transfer0% for 3-12 months
Processing fee from 0.5% (EIR 2.06%)
Balance Transfer
Standard Chartered Funds Transfer0% for 3-12 months
Processing fee from 0.7% (EIR 2.83%)
(New + Existing Customers)
Balance Transfer
HSBC Personal Line of Credit From 18.5%
(New + Existing Customers)
Line of Credit
Maybank CreditAble (Personal Line of Credit)19.8%
(New + Existing Customers)
Line of Credit

Personal Loans in Singapore Explained

A personal loan is money you borrow from a bank or licensed moneylenders that you pay back via fixed monthly payments, instalments or at one shot.

Loan repayment periods in Singapore typically range from a minimum of one year to a maximum of seven years.

You can usually use the money for any reason under the sun. However, you should not take a personal loan for home renovation or education.

This is so as banks in Singapore typically offer home renovation loans or education loans with lower interest rates and requirements compared to personal loans

Unsecured Personal Loan vs Secured Personal Loan

Most personal loans are “unsecured” this means that they not backed by collateral of assets like your car or house.

A secured loan backed by something you own is typically cheaper, but you can lose the asset if you default.

Rates on personal loans are typically more affordable than those on credit cards, and the limits on how much you can borrow are usually higher.

How Do Personal Loans in Singapore Work?

In order to get a personal loan from the banks in Singapore, there are quite a few requirements you’ll need to fulfil.

Do You Qualify to Apply for Personal Bank Loan?

If you would like to take up a personal loan in Singapore, you will need to be a Singaporean, Permanent Resident or foreigner between the ages of 21 and 65 years old.

The next number established lenders will look at is your annual income. If you are a Singaporean or Permanent Resident, you will need to be earning at least $20,000 a year.

However, the crucial thing to note is that if you earn between $20,000 and $30,000; the interest rates you will be paying will be higher than those who make more than $30,000 a year.

Britney Reaction Gif
Source: Giphy | Yikes

If you are a foreigner, you will need to be earning from $40,000 and S$60,000 a year depending on the lender. You will also need an Employment Pass with at least twelve months’ validity.

How much can you borrow with a Personal Loan?

Lenders make their decisions based on factors including credit record and other existing credit facilities.

Not surprisingly, consumers with excellent credit scores receive the lowest rates and can usually borrow more.

Unsecured personal loans usually offer loan amounts up to four times of your monthly income, while secured personal loans depend mostly on the value of your collateral.

For example, car loans allow you to borrow from 60% to 70% of the purchase or valuation price, depending on the vehicle’s Open Market Value (OMV).

The True Cost of a Personal Loan Singapore

Of course, borrowing money comes at a price.

Bad price meme
Source: Giphy

The sum of money you received has to be repaid over a fixed period of time. These instalments are also subjected to interest rates and processing fees.

So when taking up a home loan, I urge you to look out for all interest rates, ‘hidden’ fees and ensure that you have a proper plan to repay those personal loans.

Interest Rate vs Effective Interest Rates

Interest Rate

Ever noticed why banks label their interest rates ‘from ‘X%’?

This is due to the dynamic and personalised nature of personal loans. Banks typically give you a customised interest rate that you’ll see only after your application is approved. This rate is dependent on three factors:

  1. Your credit record and other credit facilities
  2. How much you will be borrowing
  3. How long – your loan tenure

Effective Interest Rate (EIR)

When taking up a personal loan the number you should be looking at is the Effective Interest Rate (EIR) as it accounts for other ‘hidden’ fees (processing fee) and your loan repayment schedule.

EIR stands for Effective Interest Rate, it is a more true reflection of the cost of borrowing because it also takes into consideration the other fees (like processing fees; see next point) and loan repayment schedule.

Processing Fee

An important number to look at is the processing fee which is taken from the amount you borrowed (principal).

Many banks offer up personal loans with an attractive 0% interest rate. But, these kinds of loans usually come with a processing fee.

For example, let’s say you were to borrow $20,000 from a bank. Although the interest rate is advertised at 0%, they charge a processing fee of 2% or $400 on the amount borrowed (principal). This means that you will only be getting $19,600.

This is the extra cost of borrowing you need to take into account.

How Long Should Your Loan Tenure be?

As mentioned earlier, loans terms range from one to seven years, and you will need to commit to it when applying for your loan.

Although your monthly repayments get smaller the longer your loan tenure is, the more interest you will have to pay! I hope you don’t go jumping in to tie yourself down to a long seven-year loan.

Rather, you should be picking as short a loan tenure as you can to reduce the interest paid.

Do make sure that you are able to comfortably repay the monthly instalments as you will be charged late fees if you cannot meet the payments.

Types of Personal Loans in Singapore

There are three main types of personal loans in Singapore. Which are:

  1. Personal Instalment Loan
  2. Credit Line
  3. Balance Transfer or Funds Transfer
Cash From Money tree
Source: Giphy

1. Personal Instalment Loan

First on our list is the most common type of personal loan that you might already be familiar with.

The personal instalment loans go by different names across the banks but the nature of it is the same across the board.

How stuff works: You apply to borrow a specific amount, fork out the one-time processing fee (ask your bank to waive this) and commit to repaying the full amount via fixed equal monthly instalments that can stretch up to 60 months. The amount of interest and fees you will have to pay is first calculated and computed in the total loan amount.

Additional Fees: Processing fee which ranges from $0 to 3%. The interest rates for this loan are different from bank to bank and start at 3% (EIR 6.96%) and above. Banks will occasionally waive the processing fee and offer up promotional interest rates at times as well.

Loan Amount: This amount is dependent on the available credit limit in your personal loan account. Most banks offer up to four times your monthly salary but if you are earning more than $120,000 annually and have a good credit score, you can get up to ten times your salary. Your mileage may vary.

Loan Tenure: 1 – 7 years

What it is good for: This loan is good for the purchase of big-ticket items or expenses that you cannot pay all at once.

Early Repayment Penalty: These types of loans usually come with an early repayment penalty.

Example: Unfortunately, your business might have to shut down due to factors outside of your control which left you with a debt of $20,000. You can take up a personal loan personal instalment loan and slowly repay it over a longer timeframe.

2. Line of Credit

The second type of personal loan you can get in Singapore is what we call in financial lingo a line of credit or an overdraft facility.

In other words, the bank only charges you interest when you withdraw from this line of credit.

How stuff works: You apply for this line of credit with your bank. Once the application goes through your bank will give you the money. However, it is a ticking interest bomb. You will be charged daily the moment you withdraw your funds. However, once you repay it the ‘bomb’ is defused and you stop paying interest.

Additional Fees: There are two layers of interest. Firstly, you will need to open a line of credit which comes with an annual fee of $60 to $120. Second, you the interest rates on the amount you borrow range anywhere from 18.6% to 22%.

Loan Amount: Banks typically offer up two to six times your monthly salary. Your mileage may vary.

Loan Tenure: Flexible. You decide how long the loan tenure will be but do note that you will be paying interest on it until the day you repay.

What it is good for: This loan is good for the purchase of big-ticket items or expenses that you cannot pay all at once.

Early Repayment Penalty: These types of loans do not have an early repayment penalty.

Example: Unfortunately, one of your family members might have tripped and fell and chipped his/her tooth, hurting themselves in an accident that is not covered by the Integrated Shield Plan. You will need to pay for a root canal and get a dental crown with the bill running up in the thousands.

However, you do not have enough cash on hand and will only be able to pay at the end of the month when your pay comes in. Once the surgery is over and your pay comes in quickly repay the amount owed to the bank.

3. Balance Transfer (BT) or Funds Transfer (FT)

The third type of loan you can get in Singapore the Balance Transfer (BT) or Funds Transfer (FT). This is available to those with a credit card.

You can request for a BT up to the available credit limit you have on your credit card.

How stuff works: You apply for the BT on your credit card and pay a one-time processing fee on the amount you borrowed. Afterwards, you will typically enjoy a low to 0% interest rate for a grace period of 3 to 12 months. When the grace period has ended, you will be charged interest which ranges anywhere from 18% to 29%, depending on the credit card you used.

Additional Fees: When applying for the BT, you will be charged a one-time processing fee typically ranging from 1% – 5% depending on your credit card company. Occasionally, some credit cards will offer up promotions when this is waived.

Loan Amount: The amount you can loan is based on your credit card limit. Banks usually require a minimum loan amount but can offer up 10 times your monthly salary if you have a high monthly income and a good credit score.

Loan Tenure: 3- 12 months grace period until the high-interest rates kick in

What it is good for: This particular type of loan allows you to transfer any outstanding loans you already have into one place. Balance transfer loans are a great way to consolidate your debt into a more manageable account with fixed monthly repayments you can budget for. Do look out for promotions where banks will waive the processing fee via cashback or incentives.

Early Repayment Penalty: These types of loans do not have an early repayment penalty.

Example: You might have racked up $20,000 in credit card debts spread over many credit cards. Rather than paying the full 20-25% interest rates on all those credit cards, you can apply for the balance transfer to pay off all the credit cards and focus your repayment on one. The 6 – 12 months grace period will give you time to think. Make your best effort to pay back the debt as soon as possible and come up with a repayment plan.

Best Personal Loans in Singapore (2020)

We have carefully curated a list of personal loans with the lowest interest rates from the different banks for your consideration; valid April 2020.

Name of LoanInterest Rates (% .p.a.) - New to BankType of Loan
CIMB Cashlite3.5% (EIR from 6.4%)Personal Instalment Loan
OCBC Personal Loan3.5% (EIR from 6.96%)Personal Instalment Loan
HSBC Personal LoanFrom 3.7% (EIR 7%) Personal Instalment Loan
Citi Quick Cash3.99% (EIR from 7.5%)
Personal Instalment Loan
POSB / DBS Personal LoanFrom 3.88% (EIR from 7.56%)
(New + Existing Customers)
Personal Instalment Loan
Standard Chartered CashOne 3.88% (EIR from 7.67%) Personal Instalment Loan
UOB Personal Loan4.25% (EIR from 7.75%) Personal Instalment Loan
CIMB Balance Transfer0% for 3-12 months
Processing fee from 0.5% (EIR 2.06%)
Balance Transfer
Standard Chartered Funds Transfer0% for 3-12 months
Processing fee from 0.7% (EIR 2.83%)
(New + Existing Customers)
Balance Transfer
HSBC Personal Line of Credit From 18.5%
(New + Existing Customers)
Line of Credit
Maybank CreditAble (Personal Line of Credit)19.8%
(New + Existing Customers)
Line of Credit

*Do note that the respective banks terms and conditions apply.

To help you further, you can also check out the reviews from our friendly Seedly Community as well!

Here are some additional things to consider:

  • Make sure you can pay it back before you can borrow as defaulting on a personal loan can really impact your credit score. This will affect your application for other important loans like your home loan or education loan down the road.
  • When you are late on your payments, the late payment fees and interest rates will snowball.
  • Do consider borrowing from your family and friends if they can afford it and are willing to help you.
  • Once you decide a personal loan is a good choice for you, know what you have to pay every month and manage your monthly budget to make good on your payments.
    • Personal loans often come with fixed, regular monthly payments, so you’ll have an idea of what to expect as you manage your budget.
    • For Credit Line, only use it during emergencies and pay it back as soon as you can.
    • For Balance Transfers, do make plans to pay it as soon as the grace period.

About Joel Koh
History student turned writer at Seedly. Before you ask, not a teacher. My time as a history student has equipped me with the skills to evaluate the impact societal development has on financial and nonfinancial events.
You can contribute your thoughts like Joel Koh here.

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