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If you are thinking of applying for a personal loan in Singapore, there are certain things that you need to keep in mind if you are to get a good deal. Anybody who wishes to apply for any type of loan definitely wants a good deal, don’t they? There are several banks out there offering personal loans at different rates of interests. So, as a first step, you can explore interest rates offered by Singapore’s top banks and see which bank currently offers the lowest interest rate on their personal loan product.
Banks usually quote the annual rate of interest on the personal loan. This annual interest rate gives you an idea of how much you’d be paying as part of the interest through the period of your loan tenure. However, the annual interest rate does not accurately reflect the actual cost of borrowing – the actual cost of borrowing is determined by the Effective Rate of Interest (EIR). The EIR takes into account the compounding factor on the remaining loan balance as and when you keep making your monthly payments.
Personal loans offered by banks come with certain eligibility conditions that need to be met. Each bank has its own eligibility parameters – banks fix their eligibility parameters to make their product competitive, and also meet in-house standards as far as choosing the right customers is concerned.
The most common eligibility criteria set by banks are based on a customer’s annual income, employment stability and credit score. These three aspects form the fundamental eligibility standards for personal loans offered by banks in Singapore.
You can visit the nearest branch of your bank and enquire about the bank’s personal loan product – check out the EIR on your loan, decide on the loan amount you are eligible for (this is dependent on your annual income) and physically fill out the personal loan application form. You will be required to submit your necessary documents to the bank after filling out the form. The bank will then subsequently process and review your loan application.
Here are a few points you can keep in mind while choosing your personal loan:
Choosing the right loan tenure: Your loan tenure is an important factor that usually determines the quantum of interest you’d be paying. Personal loans in Singapore usually have a loan tenure of about 5 years – it can go beyond 5 years in certain cases, usually if the amount in question is huge and the bank approves your request for a prolonged loan tenure.
You should be well aware that a longer loan tenure would translate to a higher interest payment – although the Effective Interest Rate is lower for longer tenures than short loan tenures, the amount you’d be paying as part of interest will be much larger. So, if you want to reduce your loan repayments, it is advised that you choose a short tenure.
Negotiating with the bank: While banks usually quote a particular rate of interest on their official website, you can get a reduced interest rate on your loan by negotiating with the bank. This usually works out well if you already have a relationship with the bank (either by way of holding another loan with the same bank or having a credit card issued by the bank).
Employment stability and having a good credit score: Banks take into account your employment stability (time period spent with his/her current organization, total years of work experience) while reviewing your application. Having a good credit score will also benefit you a great deal, as a good credit score is indication of the fact that you’ve been good in managing your credit in the past. So, if you wish to apply for a personal loan, make sure your employment stability and credit score parameters are strong.
Making sure your existing debt isn’t too large: One of the most important things to note before applying for a loan is to pay off a large percentage of your existing debt. Already having a massive credit card debt and applying for a personal loan on top of that will only make things worse for you. Loans are always a sticky wicket – so be completely aware of the consequences of large debts and defaults.
By taking note of these few points into consideration, you can make the right decisions when you apply for a personal loan and get the loan sanctioned at the best interest rate. Personal loans are unsecured loans - so you aren’t required to submit any form of collateral or security to the bank.