How to apply for a Personal Loan

    A personal loan can be a great tool not just for getting out of a tricky situation but also allows you to service your expenses without having to dip into your hard earned savings. What’s more, the loans are primarily unsecured, which means you don’t need to put up your house or other valuable possessions as security nor would you require the need for a guarantor. But with so many personal loan products available on the market, it becomes quite a task to figure out which loan to opt for and how to go about applying for it. Application for the loan will be a fairly straightforward process once you have settled on the loan that is right for. Figuring this out is where the actual research lies. Below are points one should take into consideration when going about applying for a loan.

    What to consider for when choosing the right loan

    Reason for a loan: before you embark on taking out a personal loan, be sure of your reasons for it. If it is just to have some extra spending money, it is advisable to be more prudent with your spending and not take a loan. Medical emergencies, undertaking repair costs, wedding expenses, holiday expenses etc. qualify as good reasons for a personal loan. Other larger expenses such as home renovations or buying a car can be taken up through specific loans such as renovation loans or car loans. These loans offer higher loan amounts and better rates and tenures but can be used only for a specific purpose.

    Choosing the right loan tenure: Your loan tenure is an important factor which not only determines how long it would take to pay off the loan that usually determines the rate of interest you would be charged. Most personal loans in Singapore have loan tenures that range from 1 to 5 years. There are certain banks that offer loans with tenures that go up to 7 years as well but getting this tenure is subject to the bank’s discretion and does require the applicant to meet certain criteria such as a higher level of income.

    The most important thing to keep in mind is that longer tenures for a particular loan amount would result in lower monthly instalments. But the rate of interest charged would mean that you end up paying more in interest over the tenure. Lower tenures would mean that instalments would be higher but the amount of interest you end up paying would be much lower.

    Source of income: It goes without saying that your income level would be a qualifying criteria for a loan. Earning the optimum level of income allows you to negotiate for better rates. If you’re salaried it would be easier to get a loan. If you’re self-employed you would be required to provide certain income proof documents that date back for a few years at least.

    Credit Score: Another deciding factor in landing the right loan is your credit score. You might have found the best loan around but there’s no guarantee you’ll get it if your credit score is not in good standing. Late payments or missed payments on your credit cards have a significant impact on your credit score. If you have a bad credit score, wait till it gets better to apply. The chances of having the loan approved will be higher. Banks use your credit score as a gauge to see if you’re capable of paying back a loan amount.

    Keep your debt ratio under control: Debt ratio basically means the amount of loans you have against your gross monthly income. This ratio should not exceed 40% of your income. This does not mean you can’t take on smaller loans. It just means that all your loan instalments combined shouldn’t exceed 40% of your income. Larger instalments such as mortgages take precedence over smaller, less important debts such as car loans or credit card loans. Keeping debt ratios under control will allow you to take a personal loan if the need ever arises or if there is an emergency situation.

    Negotiate the rate: While banks generally advertise their rates of interest, you can still try and negotiate the rate and make it a little lower. Do keep in mind, this does not mean the bank will give you the desired rate and it works most in situations where you already have a good relationship with a bank.

    These points allow you to make the right decisions when opting for a personal loan.

    While applying for a loan one must also take their eligibility into consideration. Below are common criteria used to consider your eligibility for a loan.

    Personal loan eligibility criteria

    • Nature of Employment: The loan applicant should preferably have a stable source of employment either with a government institute or a private sector institute. Self-employed applicants are required to have been in operation for a minimum of 3 years and must be profitable.
    • Income: All applicants are required to earn a minimum annual income. This level depends on the loan amount you have chosen as well as the tenure.
    • Age: You should be a minimum of 21 years to apply. Your maximum age cannot exceed 65 years by the end of the loan tenure. This is because 65 years is considered as retirement age and would imply that you have no steady source of income.
    • Credit rating: As discussed above, a credit score goes a long way in not only getting you the right loan but also deciding on whether your eligible or not. If your credit score is bad, banks or lenders may deem you as a risky candidate and will not approve the loan.

    Keeping these points in mind, one can apply for the right personal loan


    Q. How can I apply for a personal loan in Singapore?

    A. You can apply for it online, through phone banking, or by visiting the nearest branch of the bank. However, a few banks might have additional ways through which you can apply for a personal loan. For example, HSBC Bank offers you a Live Chat option. With this option, you can have most of your queries answered instantly.

    Q. How can I apply online?

    A. You can use your online banking username and password and apply for a personal loan on your bank’s online portal.

    Q. How can I apply via phone banking?

    A. You need to call the bank’s hotline number and speak to one of the phone bankers. You can discuss your personal loan requirement, based on your eligibility, your loan application will be approved.

    Q. How does it work?

    A. When you apply for a personal loan, you will be approved a specific amount of money depending on your eligibility. You will need to repay your loan amount within a specific period with additional interest. For most personal loans, the repayment period and interest rate will be fixed.

    Q. What are the common reasons due to which my loan application might get rejected?

    A. Your loan application might get rejected for quite a few reasons. However, common ones include:

    • Poor credit score
    • Low monthly income
    • Unstable work profile
    • Invalid documents
    • Other eligibility criteria not met

    Q. What are my tenor options?

    A. Your tenure options depend on the bank you choose. Let’s take the example of an HSBC's Personal Loan for a better understanding:

    Your loan tenor options for an HSBC's Personal Loan ranges from 1 to 5 years. However, in case you are a salaried individual, your loan tenor can go up to 6 or 7 years.

    Q. Can I apply for a personal loan if I am self-employed?

    A. Yes, you can apply for it even if you are a self-employed individual as long as you meet the eligibility criteria in terms of age, income, documentation, and a few other factors.

    Q. How does having a savings account help me when I apply for a personal loan from the same bank?

    A. If you have a savings account with a specific bank, and you’re applying for a personal loan from the same bank, your loan approval process will be faster. Banks already consider you as a legit customer as you already have an account with them. Also, if you have a salaried account with the bank, it just works better. They will be assured of your steady income in this case. Essentially, existing customers are given more preference, compared to new customers who need to get their documents verified from scratch.

    Q. What documents do I need to submit?

    A. You will need to provide the below set of documents:

    • Identity proof:
      • Singapore Identification Card (IC)
      • Employment Pass (EP)
      • Passport
    • Address proof:
      • A document which has your residential address included. For example, your utility bill.
    • Income proof:
      • Latest computerised payslips (for a specific period as mentioned by your loan issuer)
      • Latest Income Tax Notice of Assessment
      • Latest Central Provident Fund (CPF) contribution history statement

    However, the documents mentioned above vary from bank to bank. The document criteria also depend on factors such as your residential status, and whether you are a self-employed or a salaried individual.

    Q. What are the documents I need to submit if I am a salaried individual?

    A. The document criterion varies from bank to bank. For most banks, salaried employees must submit the following documents (but are not limited to):

    • Photocopy of NRIC (both front and back)
    • Latest 3 months’ computerised payslips

    Q. What documents can I submit when I don’t have the latest 3 months’ payslips?

    A. In case you don’t have the latest 3 months’ computerised payslips, you could either submit the latest Notice of Assessment along with the latest 1-month payslip, or latest 6 months' CPF statement.

    Q. What is the document criterion for a foreigner?

    A. Foreigners must submit the following documents (but are not limited to):

    • A copy of their passport.
    • Employment Pass with a validity of at least a year.
    • Latest 3 months' computerised payslips or latest Notice of Assessment with latest 1-month payslip or latest 6 months’ CPF statement.
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