Best Personal Loan Rates in Singapore (2023): When You Need It For Emergencies

When emergencies hit you with that…

DDU-DU, DDU-DU, DU (geddit?)…

We might have to refinance or find an alternative that could help us better handle the current financial situation, including taking up a personal loan from a bank, licensed moneylenders and credit unions!

As with any loan, a personal loan comes with an interest rate, processing fee, minimum repayment fee and loan tenure. 

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 straightforward. There are quite a few things you need to carefully consider when you want to find the best personal loans for you.

TL;DR: Best Personal Loans Rates in Singapore For April 2023

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• Terms related to personal loans
• Personal Instalment Loans
• Line of Credit / Overdraft Facility
• Balance Transfer / Funds Transfer
• Debt Consolidation Plan
• Other types of personal loans

Note: All rates are as of 26 April 2023 and may be subjected to changes. Please check with the respective banks for updated information. 

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised financial advice. Readers should always do their own due diligence and consider their financial goals before committing to any financial product and consult their financial advisor before making any decisions.

Important Terms About Personal Loans

Before reading anything further, here are some essential terms to know:

• Interest rate (‘From X% p.a.’): Banks typically give you a customised interest rate that you’ll see only after approved application, as each situation is unique. Your credit score, income, and repayment history will determine your final loan interest rate. You will likely get a better rate if you have a good track record. 
• Effective Interest Rate (EIR): The EIR is a more accurate reflection of the cost of borrowing because it also considers other factors such as the processing fee and loan repayment schedule. Basically, the higher this is, the more interest you must pay.
• Processing/Administrative fees: These usually range from $0 to 3% of the loan amount borrowed and are deducted from the loan amount borrowed. E.g., your loan amount is $30,000, and it comes with a 2% processing fee, which means that the amount disbursed to you will be $29,400. Banks will occasionally waive the processing fee and offer promotional interest rates.
• Early Repayment Penalty: These loans usually come with an early repayment penalty.

There are two main categories of loans.

An Unsecured loan means that you are not required to put up any collateral (e.g., house, car) to borrow the money.

On the other hand, a secured loan is backed by something you own, and you can lose the asset if you default.

Regardless of whether the loan is unsecured or secured loan, it is important to know whilst the bank cannot hold you responsible for not repaying and writing off the debt as a loss.

This also means that the borrower is in default and there are severe consequences which can affect your employment, access to money from your accounts, go through legal proceedings when initiated by the lender, and may potentially experience limited to no access to loans such as education, housing etc., due to poor credit record.

These are the available loans in Singapore and their promotions:

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Types of Personal Loans

Next up you need to familiarise yourself with the types of personal loans.

Personal Instalment Loans

This is the most straightforward loan which offers you a sum of cash upfront, and you will need to pay back the amount in instalments over a tenure. Four main factors you should consider before taking up a personal loan from a bank.

• How it works: Once you have submitted your application with the amount you intend to borrow, you will make an upfront one-time processing fee and commit to repaying the total amount via fixed equal monthly instalments that can stretch up to 60 months. The interest and fees you will have to pay are first calculated and computed in the total loan amount. You can also get your bank to waive the processing/administrative fee.
• Loan Tenure: 1 – 7 years
• Reason(s) for taking up this loan: This loan is suitable for the purchase of big-ticket items or expenses that you cannot pay all at once
• Early Repayment Penalty: Yes

Example: One of your relatives met an unexpected medical emergency that requires complicated surgery. They have not been insured under a Health Insurance Plan, which can help cover the medical expenses incurred. The medical bill totals up to $10,000, and your relative’s family can take up a personal instalment loan and slowly repay it over a longer timeframe.

GXS FlexiLoan

Recently, GXS has announced a new product called GXS FlexiLoan that combines both features of a credit line and a personal instalment loan. The GXS FlexiLoan is an unsecured loan that does not have an early repayment penalty, annual fee, processing fee, or late payment fee. However, it does charge late interest upon late repayment.

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Line of Credit / Overdraft Facility

Sometimes known as an Overdraft Facility, it is an established arrangement between the bank and clients which determines the maximum loan amount the customer can borrow.

Once the application is approved, the borrower can access funds from the line of credit at any time, as long as they do not exceed the maximum amount set in the agreement.

With that being said, banks often charge fees for opening a credit line and annual fees to maintain your credit line account.

• How it works: Start applying via your bank and once it is approved, you can withdraw the funds via mobile/internet banking, physical branch, cheque or ATM. You will be charged daily the moment you start withdrawing your funds. It is good to note that you stop paying the interest once you repay the loan amount.
• Additional Fees/Interests: There are two layers of interest. Firstly, you will need to open a line of credit which comes with an annual fee. Second, the interest rates on the amount you borrow range from 18.6% to 22%.
• Loan Amount: Banks typically offer up to 2-6 times your monthly salary. 
• 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.
• Reason(s) for taking up this loan: This loan is suitable for purchasing big-ticket items or expenses that you cannot pay all at once or when you face unexpected situations where cash is not immediately available. This allows you to withdraw the money without processing it except for the initial application. 
• Early Repayment Penalty: These loans do not have an early repayment penalty.

Example: As a small business owner, you may not have sufficient cash flow to free up the purchase of operational supplies during peak periods. Once sales are settled, you can quickly repay the amount owed to the bank. This may be the most suitable for those who foresee needing to borrow cash multiple times throughout a year.

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Balance Transfer / Funds Transfer

A Balance Transfer or Funds Transfer is a type of unsecured, short-term loan that uses the available credits on your credit card.

It transfers your outstanding balance from credit cards to a 0% or low-interest account, commonly offered on a credit card over a grace period, usually from three to 18 months.

his is most often used to reduce interest payments and help consolidate multiple credit debts into one place. Generally, you are not required to pay any interest if you manage to pay off all credit card balances before your grace period. 

• How stuff works: Once you submit an application for Balance Transfer on your credit card, you will pay a one-time processing fee on the amount you borrowed. Afterwards, you will enjoy a low to 0% interest rate over the grace period. You will be charged interest ranging from 18% to 29% when the grace period has ended, depending on the credit card. There is usually a minimum repayment you need to commit to. 
• Additional Fees: You will also be charged a one-time processing fee typically ranging from 1% to 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 to 10 times your monthly salary if you have a high monthly income and a good credit score.
• Loan Tenure: 3 to12 months grace period until the high-interest rates kick in based on the initial interest rate of all your credit cards. 
• Reason(s) for taking up this loan: 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 loans do not have an early repayment penalty.

Example: *Choy, touchwood* You might have racked up $20,000 in credit card debts spread over many credit cards as you could not keep up with your expenses tracking. Rather than paying the total 20-25% interest rates on all those credit cards, you can apply for the Balance Transfer to focus your repayment on one. The 6 to 12 months grace period will give you time to think. Make your best effort to pay back the debt as soon as possible and develop a repayment plan. 

To avoid the example above, you can read the Seedly Money Framework for 2022 & Beyond!

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Debt Consolidation Plan

A Debt Consolidation Plan is an instalment loan used to pay off your personal debt.

Yup, a plan to combine all your credit card debts and personal loans into one loan with a lower interest rate. This is often to manage and eliminate your debt over several years and sometimes termed the Debt Restructuring Programme. This may sound similar to the Balance Transfer, but there is a criterion — the borrower’s debt must exceed 12 times their monthly salary.

Do note that debt consolidation loans usually come with a one-time processing fee, a flat interest rate, and a 1 to 10 years tenure!

• How it works: Once you have submitted your application, the bank to which you have submitted your application will combine all the loans into a single loan by buying out all your outstanding balances, fees and charges. After that, you will then make monthly repayments to the said bank over a few years until your debt is cleared. 

The essence is finding a plan of low interest and fees while keeping your monthly payment at a reasonable level. You should also be mindful that some loans are advertised like this – “as low as X%” – which suggests that you may be offered higher rates than expected. 

While you look for the best loan that works for you, remember to look for promotions that may give you interest-free periods. Don’t be afraid to ask for a waiver of your annual fees!

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Licensed Moneylenders

Alternatively, you can borrow money from Licensed Moneylenders.

‘Licensed’ says that these moneylenders are legal entities that operate within the Moneylenders Act and Rules. These moneylenders are certainly not the typical Ah-Longs you know who spray O$P$ on walls! They are restricted by law on the amount they can lend, the fees they charge and the acceptable interest rate. One Seedly contributor has rightfully pointed out the differences between borrowing from a moneylender versus a bank, and you can read it here.

Compared to borrowing from banks, licensed moneylenders operate as small businesses and loan out small amounts that are pegged to your income – up to $3,000 if your annual income is less than $20,000. Otherwise, they can loan you up to 6 times your monthly payment. With lesser processes, borrowing from licensed moneylenders may be faster, and there may be fewer restrictions on citizenship and income.

HOWEVER, moneylenders could potentially charge you up to 30% of the interest rate even though the Government’s guidelines has a cap on the monthly interest rate as they may not abide by the guidelines set, or have other hidden fees. 

Hence, always do your due diligence to check and enquire for the details so that you stay on top of your finances! 

Based on guidelines set by the Ministry of Law, a licensed moneylender is only permitted to impose the following charges, interests and expenses:

• The monthly interest rate is capped at 4%,; 
• The monthly late interest rate is capped at 4% for each late repayment, and the late interest can only be charged on an amount that is repaid late; 
• A late fee of not more than S$60 per month;
• A fee not exceeding 10% of the principal of the loan when a loan is granted; 
• Legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan;
• An administrative fee that must not exceed 10% of the principal loan granted;
• The total cost charged by a legal lender, including interest, late interest, administrative fees, late fees, and other related charges, must not exceed the principal loan amount.

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Loans From Credit Unions

The lesser-known sibling of banks and moneylenders, a Credit Union is a non-profit-making money cooperative whose members can borrow from pooled deposits at low-interest rates.

Credit Unions, sometimes termed “Credit Co-operatives” or “Credit Co-ops”, are financial institutions created and operated by their members, who pool their resources to help one another. Unlike commercial banks, a credit co-op is not for profit and it aims to provide access to affordable financial solutions for its members, who are also its collective owners.

Nonetheless, with Co-op being an exclusive initiative, there are things you need to know:

1. You need to be a Member of the Union to start borrowing
2. You need to show that you can repay the loan and how you use the funds

Some notable names include TCC Credit Co-operative and Straits Times Co-op.

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So, is a Personal Loan for you?

While most of us really wish that we don’t have to resort to taking up personal loans to finance certain aspects of life, it can become inevitable, especially when heavily cash strapped. As such, these are some essential considerations should the situation arises:

• Ensure that this is your FINAL resort (i.e., even after trying to borrow from loved ones) as a move to taking up a personal loan may affect your application for other loans, including education, renovation and housing 
• Ensure that for personal loans, you remain confident and have an action plan managing your expenses based on the fixed repayment structure and will not be late for any payment, given that all interests and late fees will add up. 
• Ensure that for Credit Line, only use it during emergencies as the high-interest rate kicks in when you withdraw funds.
• Ensure that for Balance Transfers, pay it within the grace period.

When in doubt, you can always head over to our friendly Seedly Community to ask for opinions and advice!