Personal Loan Balance Transfer

    A customer may want to transfer their outstanding personal loan balance to another bank in order to get lower interest rates and easier loan repayment options.

    However, bank-to-bank loan transfer option is not available to Singaporeans. The concept of Balance Transfer is limited to credit card debts only. There is also no option of buying out loans by other banks.

    There are, however, a couple of options available for Singaporeans who want to enjoy the benefits of a lower interest rate.

    Funds Transfer

    Although traditional Funds Transfer only includes transfers to Credit Card or Credit Line accounts, financial institutions like Standard Chartered Bank offer Funds Transfer Loans to customers to help them pay off their personal loan debt from other banks as well.

    A customer can get a low interest or a 0% interest rate loan for a tenure of 6 to 12 months, after which the prevailing interest rate applies. To make sure that the use of Funds Transfer is beneficial, a customer has to able to pay off the entire loan during the low interest or 0% rate promotion period.

    Standard Chartered Funds Transfer

    Standard Chartered Bank allows customers to transfer funds from their Standard Chartered Credit Card to:

    • Transfer funds into any bank's current or savings account.
    • Pay your credit card bills from other banks.
    • Pay your loan from other banks.

    The rate of rate of interest offered is as follows:

    Personal Loan Features 6-month tenor 12-month tenor
    Applied Interest Rate (p.a.) 0% 0%
    Processing Fee    2% 5%
    Effective Interest Rate (p.a.) 4.14% 5.41%

    Getting a New Loan to Repay the Existing Loan

    A customer can take a lower interest personal loan to repay an existing loan he or she has. But one must be careful when getting another loan to pay for one.

    Things to consider before taking one loan to pay off another:

    • Interest rates:  

      This is the first thing a customer has to take into account. If the interest rate of the new loan is almost equal to the previous loan, the effort to get a new loan to repay the old one is not worth it. In all probability the profit won’t justify the effort.

    • Interest free period:

      Many lenders offer an interest free period of 6 or 12 months as part of their promotions to attract new customers. New loans are beneficial for the customer if they are able to pay of the debt within this period.

    • Monthly installment amount:

      Taking a new loan means new rates and tenure, hence a new amount to pay each month. This can affect any already established financial plans of a customer.

    • Prepayment charges with your original lender:

      Most loans have a prepayment charge levied if a customer wishes to pay off their loan in advance. Careful calculations need to be done to ensure that the amount of the existing loan plus prepayment charges does not exceed the amount the customer has to repay (principal + interest) with the new loan. There can be no hope of any gain if the charges are too high.

    • Secured and unsecured loan:

      The customer has the option of choosing between secured and unsecured loan for a second loan. But getting another unsecured loan would be more difficult over an existing loan. Obtaining a secured loan would be much easier.

      But getting a secured loan means risking an asset if the customer is unable to pay back the new loan. Moreover, secured loans are of longer terms, so the total payout would be more, nullifying any chance of gain from the new loan.

    • Financial circumstances:

      A customer needs to be in good financial situation to consider taking a second loan. Because banks won’t consider lending a new loan if the profile is not sufficiently financially sound. Also, the monthly repayment amount would be more than the current sum being paid if the borrower wants to be debt free sooner.

    • Debt consolidation:

      If a customer has multiple personal loans and also credit card debts, it would be a better idea to check if they are eligible for debt consolidation loan. Any Singaporean who has accumulated a debt of more than 12 times his/her annual salary in multiple credit facilities can apply or a debt consolidation loan.

      Interest rates on debt consolidation loans are much lower than the usual personal loan rates. These loans are designed to help people pay off all their debts early, and hence, are already customer friendly.

    Cash Loans Drawn on Credit Cards

    Cash can also be drawn on credit cards to pay off some installments of a loan if the circumstances demand. But these cash advances will not be sufficient to pay off a personal loan. Nor should one ever opt for these as interest rates on cash advances on credit cards are bound to be higher than any existing personal loan interest rate.

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