TIP OF THE DAY
“Borrow what you can afford: You might feel tempted to take a personal loan to pay for luxurious foreign trips or expensive cars, but avoid that. Borrow only when you are sure that you can repay it. There is no point piling up debt without a legitimate reason.”
A personal loan is an unsecured loan, meaning, you do not need collateral or security to apply for this loan. A personal loan is best suited to meet immediate financial needs. One of the biggest advantages of applying for a personal loan over other lines of credit is that it allows you the flexibility to use the loan for any need or requirement, i.e. it is a general purpose loan.
There are two broad types of personal loans currently available in Singapore – a term loan and a personal line of credit or a revolving loan.
There are many reasons to apply for a personal loan. As they are general purpose loans, they can be used to fulfill any monetary requirement. Here are some reasons to apply for a personal loan:
If you have a relationship with a bank, they may already have your documents and you may not have to submit additional documents or submit only minimal documents. However, the standard documents that banks in Singapore request applicants applying for a personal loan to submit are as follows:
Usually, banks in Singapore will require personal loan applicants to meet the following eligibility criteria:
Personal loans are a great option when you are in need of funds. But before you take a personal loan, it is important to understand the certain financial terms to ensure you are aware of the terms and conditions associated with it.Read More
The interest rates on personal loans in Singapore vary from 4.5% to over 20% p.a. The rates change depending on the kind of loan you’re taking, the bank, your income, the loan amount, and other factors.View
Having questions related to your personal loan eligibility? Looking for tips to find the right personal loan? Want to know how to apply for a personal loan? Find answers to most of your questions here.Read More
The following are the ways of applying for a personal loan offered by banks:
Before you apply for your personal loan, if you wish to know how much you will need to pay on a month-on-month basis to clear the outstanding balance, you can use the monthly instalment calculator.This calculator will provide you your monthly payment schedule for your loan tenure. You can even use this calculator to determine if you can actually afford the personal loan at the interest rates offered by a particular bank. To get a clearer picture of what your monthly instalment payments will look like and how much interest you will be paying on your personal loan, you may be required to provide the following information regarding your loan:
Based on what you feed into this calculator, your monthly instalment amount will be computed. Many banks on the island provide online calculators for their loans for interested applicants to determine what and how much they will be paying throughout the tenure of the loan. There are also third-party calculators available to make such calculations. Many banks including DBS, POSB and OCBC to name a few, have also provided an illustration of what your loan package may look like – information such as the processing fee, disbursed loan amount, loan tenure, interest rate and monthly instalment amounts are provided in the illustration for a specific loan amount across different loan tenures.
Banks in Singapore have made it extremely simple to apply for their personal loan products through any means convenient for consumers. You can use this as your guide to know the ins and outs of personal loan options, eligibility, factors affecting your loan approval and choose a bank and personal loan that best suits your needs, requirements and financial circumstance.
The amount of interest that is due for the duration of your loan tenure is referred to as the interest rate. The interest rate that is offered to you by your lender will depend on factors including your loan amount, loan tenure, credit score, annual income, etc.
Find below the interest rates offered for Personal Term Loans and Personal Line of Credit from banks in Singapore:
|Bank Name||Interest Rate|
|DBS Personal Loan||Starting from 5.88% p.a. with EIR from 11.32% p.a.|
|OCBC Personal Loans||
• Flexible Repayment (EasiCredit) – Interest rate for new EasiCredit customers starting from 0% p.a. with an EIR of 5.19% p.a. for 6 months with balance transfer
• OCBC ExtraCash Loan – Starting from 8.18% p.a. and EIR starting from 17.13% p.a.
|Standard Chartered CashOne||Starting from 6.88% p.a. with an EIR of 12.75% p.a.|
|UOB Personal Loan||Flat interest rate of 8% p.a. with an EIR of 14.94% p.a.|
|POSB Personal Loan||Starting from 5.88% p.a. with EIR from 11.32% p.a.|
|CIMB Personal Loans||
• CIMB CashLite – Starting from 4.50% p.a. with an EIR of 8.21% p.a.
• CIMB Renovation Loan – Starting from 2.98% p.a. with an EIR of 4.85% p.a.
• CIMB Education Loan – CIMB Prime Rate is 0.11% p.a. (monthly rest rate) with EIR starting from 5.83% p.a.
• CIMB Portfolio Financing – Interest rates are pegged to SOR and SIBOR rates
|Citi Personal Loan||Starting from 7.39% p.a. with an EIR of 13.50% p.a.|
|Maybank Personal Loans||
• CreditAble Term Loan – Starting from 7.48% p.a. with an EIR of 14.67% p.a.
• CreditAble (Personal Line of Credit) – Promotional interest rate of 9% p.a. for the first year
• Maybank Education Loan – Starting from 4.50% p.a. monthly rest
• Home Renovation Loan - – Starting from 4.33% p.a.
|Bank of China Personal Loans||
• MoneyPlus Line of Credit – Starting from 1.65% per month with an EIR of 19.80% p.a.
• MoneyPlus Term Loan - Starting from 6.38% p.a. with an EIR of 14.58% p.a.
|HSBC Personal Loan||
• Personal Loan – Starting from 3.8% p.a. with an EIR of 7% p.a.
• Personal Line of Credit – Starting from 12.0% p.a.
Banks in Singapore offers two types of interest rates associated with personal loans – fixed interest rate and flexible interest rate.
Also referred to as a flat interest rate, under this rate package, the interest rate will remain fixed for a part or the whole of your personal loan tenure. The interest rate will remain oblivious to market fluctuations. This rate package is ideal for those who want consistency in their monthly instalment payments without worrying about changing interest rate structures and monthly repayment amounts.
Under this rate package, the interest rate will vary according to market conditions. The interest rate can increase or decrease from time to time throughout the term of your loan. Banks usually offer a lower interest rate for a variable rate personal loan package when compared to a fixed rate personal loan package. However, once the introductory period of your loan elapses, your interest rate can increase or decrease. This rate package is better suited for those who have enough financial bandwidth to accommodate any changes in the interest rate structure in case of an increase in rates. They are usually willing to take the risk in the hope that their interest rates will be on the lower end for a majority of the loan term.
In Singapore, variable rates are available in 3 forms – interest rates pegged to SIBOR (Singapore Interbank Offered Rate), SOR (Swop Offer Rate) or interest rates pegged to the bank’s internal board rates.
Loan tenure/loan tenor/loan term refers to the period of time over which you will repay the complete outstanding loan amount. Loan tenures in Singapore typically ranges between 1 year and 5 years. Loan tenures are applicable to personal term loans.
Find below the loan tenures offered for Personal Term Loans from banks in Singapore:
|Bank Name||Loan Tenure/Term||OCBC Extra Cash Loan||1 year to 5 years|
|Standard Chartered CashOne||1 year to 5 years|
|UOB Personal Loan||12 months to 60 months|
|POSB Personal Loan||1 year to 5 years|
|CIMB Personal Loans||1 year to 10 years (varies according to the type of personal loan)|
|Citibank Personal Loans||12 months to 60 months|
|Maybank Personal Loans||12 months to 60 months|
|Bank of China MoneyPlus Term Loan||12 months to 36 months|
|HSBC Personal Loan||1 year to 7 years|
|ICBC Personal Loans||1 year to 3 years|
The amount that your lender offers you, the borrower, is called the loan amount. What loan amount you are eligible for will depend on various factors including your income, TDSR (total debt servicing ratio), your age, etc. You may be eligible for a loan amount higher or lower than your expectation. If you are eligible for a higher loan amount than what you require, it does not mean that you have to accept that offer. This is because, repayment of a loan amount comprises of two components – the principal amount and the interest amount. The interest rate applied on your principal loan amount will determine the interest amount you need to repay. Therefore, the higher your loan amount, the higher interest you will be paying on the loan.
For term loans, banks in Singapore usually offer a loan amount against your monthly income. In case of a personal line of credit, you will be eligible to borrow against a certain percentage of your credit limit.
Find below the loan amount offered for Personal Term Loans and Personal Line of Credit from banks in Singapore:
|Bank Name||Loan Amount|
|DBS Personal Loan||
• Up to 4X your monthly income
• Up to 10X your monthly income if your annual income is above S$120,000
|OCBC Personal Loans||
• Flexible Repayment (EasiCredit) - Up to 6X your monthly income
• OCBC ExtraCash Loan - Up to 6X your monthly income
|Standard Chartered CashOne||Up to 4X your monthly income|
|UOB Personal Loan||Starting from S$1,000 onwards|
|POSB Personal Loan||
• Up to 4X your monthly income
• Up to 10X your monthly income if your annual income is above S$120,000
|CIMB Personal Loans||
• CIMB CashLite – Up to 80% of your credit limit
• CIMB Renovation Loan – Up to 6X your monthly income OR S$30,000, whichever of the 2 is lower
• CIMB Education Loan - Up to 8X your monthly income OR S$200,000, whichever of the 2 is lower
• CIMB Portfolio Financing – Loan to Value up to 100%
|Citi Personal Loan||
• Up to S$100,000
|Maybank Personal Loans||
• CreditAble Term Loan – Up to 90% of your credit limit
• CreditAble (Personal Line of Credit) - Up to 4X your monthly income
• Secured Overdraft – Pegged to pledged assets, not income
• Maybank Education Loan - Up to 8X your monthly income
• Home Renovation Loan - Up to 6X your monthly income
|Bank of China Personal Loans||MoneyPlus Line of Credit - Up to 4X your monthly income|
|HSBC Personal Loan||
• Personal Loan - Up to 8X your monthly income
• Personal Line of Credit - Up to 2X your monthly income capped at S$100,000
|ICBC Personal Loans||Up to 90% of the pledged asset|
Getting a personal loan is a commitment and making a mistaken when applying and accepting a personal loan can really come back to bite you. Here are some common mistakes made when applying for a personal loan in Singapore:
There are several factors, on the basis of which a bank or financial institution may approve or reject your personal loan application. Find below the factors that influence your personal loan approval/rejection decision:
One of the first factors that banks in Singapore consider while reviewing your personal loan application is your nationality. Certain banks only offer their personal loan services to Singapore Citizens (SCs) and Permanent Residents (PRs), while other banks extend their personal loan services to even to foreigners. For instance, POSB and DBS banks offer personal loans only to SCs and PRs, whereas, banks such as Standard Chartered offer their personal loans to SCs, PRs and foreigners. CIMB bank’s various types of personal loans, some of which are eligible only for SCs and PRs, while others extend to foreigners as well.
Your annual income is an important deciding factor for the approval or rejection of your personal loan. It is one of the most crucial factors in determining your capacity to repay the loan. It will give an idea of whether you may default on your personal loan or not. It is also a deciding factor for the bank to assess whether you can afford the personal loan at the rates offered by the bank. Hence, in order to eliminate concerns revolving around the repaying capacity of applicants, banks impose a minimum income criterion to be eligible for their personal loans. Furthermore, as foreigners are perceived to be a higher risk when compared to Singapore Citizens and Permanent Residents, the minimum income criterion for foreigners is higher than that of SCs and PRs.
Your age is another deciding factor when it comes to the approval or rejection of your personal loan application. All banks have a minimum and maximum age criterion. The minimum age required to apply for a personal loan in Singapore is 21 years. This is a unanimous criterion across all banks on the island, whereas, the maximum age usually varies between 60 and 65 years. This is because it is considered to be the ballpark age for retirement for salaried as well as self-employed individuals after which the source of income generally becomes scarce.
All banks require you to furnish your employment documents to verify your employment status. Whether you are a salaried employee, self-employed or a commissioned/variable employee, will be considered when you apply for your personal loan. Certain banks have different income requirements for salaried employees and self-employed/commission based employees. Your commission slips, Income Tax (NOA) Notice of Assessment, payslips, etc. are requested to verify your employment status.
For salaried employees, the reputation of the employer may also be taken into consideration when approving or rejecting a personal loan application. You may be requested to verify your employment status with your employer via providing valid documents that confirm the same. Especially for foreigners applying for a personal loan, banks may request a letter of employment certified by the employer for verifying the employment status, directly from the employer.
Your credit history and score are pivotal for the approval of your personal loan application. When you send an application to a bank, they will request your credit report from the credit bureau. Your credit history will provide insight into your financial behavior such as your repayment history and pattern, your open and terminated line of credits, your debt to income ratio, etc. It is not only an indicator of whether you will be able to keep up the payments on your loan, but also an indicator of how likely you are to default on the loan.
Individuals whose credit score are on the higher side, a score between 1911 and 2000 with an “AA” rating, have the least probability of defaulting on the loan. On the other hand, those who have a credit score between 1000 and 1723 with a rating of “HH”, have the highest probability of defaulting on the loan. If you do not have a sufficient credit history, you will receive an ungraded score of “CX”, which means “Insufficient Credit Activity”.
Related Read: How Credit Ratings Affect Personal Loan Eligibility
In order to get the best personal loan package available in Singapore, the following are some of the parameters you should give due consideration to before you apply for your personal loan:
One of the most important as well as influential factors in a personal loan package is the interest rate. It will determine how expensive or inexpensive it is to apply for the loan. The interest rate and amount will determine how much extra you will be paying the bank for applying for their personal loan product. A low interest rate means lower monthly instalments and a high interest rate means bearing high instalment payments on the loan. Banks offer the lowest interest rates to customers who have an impeccable credit history. This is because, a high credit score means the least chance of defaulting on the loan. Therefore, if you have a good credit score, you are likely to get the best rates from all banks in Singapore. So, you should shop around and see what the best rate package you are eligible for is.
Additionally, some banks also offer the lowest interest rate packages to new customers, as a way of increasing their customer base. For example, OCBC bank is currently offering new customers of their bank a 0% interest rate with an EIR of 5.19% p.a. on their Flexible Repayment personal loan – EasiCredit + balance transfer.
Your credit score is an integral cog in your personal loan application. The loan package that the bank offers you will heavily depend on your credit score. Your credit history and score will provide your lender a peek into your reliability, repaying capacity and help establish a pattern of your repaying habits, i.e. whether you make timely payments on your various lines of credit, whether you repeatedly miss payments or make late payments, etc. It will also let your lender know if you can actually afford the personal loan – they will determine this based on your TDSR or Total Debt Servicing Ratio which will provide an insight into how much of your monthly income is used to repay existing debts and how much is available to take on the personal loan repayments.
Most importantly, your credit score will determine your probability of defaulting on the personal loan. No lender wants to risk offering a personal loan to an applicant who is highly likely to default on their loan. This is how they determine the likelihood of defaulting on loans based on your credit score:
If you do not have a sufficient credit history, you will receive a grade of “CX” meaning “Insufficient Credit Activity”. Hence, as you can see, the higher the credit score, the lesser the probability of defaulting on the loan, thereby, the higher the chances of getting your personal loan approved and at the best interest rates.
But, if you have a low credit score at the moment, do not be disheartened. You can repair your credit score in several ways before you apply for your personal loan. Some of them include making timely payments on your open line of credits, making more than the minimum payment on your credit cards, closing unnecessary line of credits to decrease your debt to income ratio, etc. If none of this helps, you could always have a co-signer on the loan to get a better package or even use a collateral to better assure your lender of your sincerity to make timely payments on your loan.
When you finally receive your offer letter from the bank detailing the various facets of your personal loan, do not just rush to sign the contract. You should take some time to read the details of the loan agreement, especially the fine print – terms and conditions. Do not just skim through the document, look into any hidden fees and charges and how they impact your personal loan. Look for costs that you did not take into consideration, such as processing fee, legal charges (if any), prepayment penalties, loan cancellation charges (if you get a better offer), etc. Have you been offered a low interest rate only for a specific period of time? Is your low interest rate an introductory/promotional offer? If yes, then find out what your interest rates are after this period elapses. Generally, banks offer a low interest rate for the first 6 months or up to a year into your loan tenure. After this period elapses, the interest rates tend to be higher. Hence, it is extremely important to read the terms and conditions associated with your personal loan before you sign the papers.
Your loan tenure:
If you take a quick glance at any bank’s loan repayment table or chart, the first thing you will notice is that, the longer the loan tenure is, the lesser the monthly repayment amounts are. However, are you really paying lesser throughout your loan tenure? Although you will be making lower payments on your instalments, you are paying a higher interest on your loan. The total interest amount on your loan will be higher, the longer your loan tenure is. If your debt to income ratio is currently high and you are unable to make higher monthly instalment payments on your personal loan, under such circumstances, it makes sense to take a personal loan with a longer loan tenure. However, if you are looking to save on your interest payments, it is better to choose a shorter loan tenure. Even if your monthly instalment payments are slightly higher, you will be paying lesser on your interest and you can rid yourself of the debt much sooner.
Personal loan or personal line of credit:
If you are looking for short term lending, then a personal line of credit is a better option for you. It is true that credit cards charge one of the highest rates of interest when compared to other lines of credit, however, they can prove to be extremely beneficial for short term lending purposes and here’s how – many banks in Singapore are offering customers a 0% interest rate on their personal line of credit (drawn on your credit card) for up to 1 year as an introductory offer. Therefore, if you are looking to borrow money for an immediate need and can repay it within this introductory period, you will be paying nothing in terms of interest on your personal credit line. But make sure to not keep spending on your credit card as your debt may start snowballing and this can come back to haunt you.
On the other hand, personal loans are offered for a minimum tenure of 1 year. However, with a personal loan, you can borrow a larger amount of money when compared to a personal line of credit which is pegged to your credit limit. Depending on your bank and credit card, you may be able to borrow a maximum of 90% of your credit limit for your immediate financial needs. A personal term loan amount, however, will depend on your annual income and various other factors.
AIP or approval-in-principle is a conditional or a provisional approval of your personal loan. This form of approval is usually provided instantly by the bank based on the information you have submitted on your application form. For example, HSBC Singapore offers an AIP in 1 minute to their applicants. However, it is important to note that this is not the final or formal approval of your loan application. Once you have submitted all the required documents and met all parameters of the eligibility criteria, the bank will offer their final decision on your application.
Another aspect that you need to note in reference with the AIP is that it is time bound. This means that once the bank has offered you with a conditional approval on your personal loan application, you then have a specific amount of time (generally a few days) to submit the remainder of the requested information and/or documents, in order to receive a formal approval of your loan. This time differs between banks in Singapore. For example, Standard Chartered provides a time period of 30 days to applicants after they receive their approval-in-principle, whereas, HSBC Singapore on the other hand, offer their applicants an approval-in-principle period of 14 days.
Here are some of the common fees and charges associated with your personal loan:
Note: Please check with the respective bank regarding the additional fees and charges associated with their personal loan.
Q. How will I know when my repayment due date for my personal loan is?
A. Your due date for monthly repayments would be mentioned in the notification letter that is posted to you by the bank. Usually, your first monthly repayment date will fall on the same date from your loan approval date. The date will remain the same for the coming months unless it says something else in the notification letter.
Q. What are the steps involved in personal loan approval from a bank?
A. You can apply for a personal loan using the following steps:
Q. There are plenty of financial banks and institutions. How do I decide which bank to take a personal loan from?
A. When you are applying for a personal loan, you will need to keep in mind that banks will have interest charges, processing fee, pre-closure charges, late payment fee and other charges. These charges that are applicable on a personal loan will vary from one bank to another.
It is advisable to first compare the details from all available banks, to get an understanding of the above charges and the clauses associated with them. Post this, you can opt for a bank that gives you the best deal.
Q. I am not sure about the amount that I need to repay on a monthly basis. Where can I find this information?
A. The amount you need to repay in monthly instalments will usually be mentioned in the notification letter you would have received from the bank. However, if this is not available, you can dial the bank’s hotline number to obtain information about your monthly repayments. The hotline number can be obtained from the respective bank’s website. Apart from this, you can estimate the amount required through a personal loan calculator, and ensure that you keep the money aside every month.
Q. What are the modes of monthly repayments?
A. You can pay your monthly repayments by cheque, by cash, or by bank transfer (GIRO or FAST).
Q. I was unable to pay my personal loan instalment on time. Will I be charged a late payment fee?
A. It is important that you pay your monthly repayments on time. Most banks in Singapore levy a late payment fee in case of missed payments by the due dates.
Q. Will my credit score be affected if I default on my personal loans?
A. Yes, your credit score and rating will depreciate if you default on your personal loan repayments. Banks and financial institutions will gauge your loan repayment capacity using your credit history. It is crucial that you maintain a good credit score as this will help you secure a loan in the future without any hassles.
Q. What are the types of fees involved while securing a personal loan?
A. Most banks charge certain common fees. These include loan processing fee, early repayment fee, overdue interest fee, and late payment fees. You can refer to the terms and conditions of the loan document for detailed information on the list of applicable charges.
Q. Can I opt for a personal loan pre-closure?
A. Yes, you can opt for a personal loan pre-closure. Most banks will require you to give a written communication or notice stating your request. Banks will also levy pre-closure charges or early repayment fees depending on the loan amount and tenure.
Q. I have applied for a personal loan but haven’t yet received any updates from the bank. What should I do?
A. Banks or financial institutions will have complete discretion on whether a loan can be granted to an individual or not. If you qualify for a personal loan and if you have applied online, you will receive an email or notification once your loan is approved by the bank. Certain banks may also allow you to check your application status online. Alternatively, you can call the bank’s hotline number to obtain information about the status of your loan.
Q. How can I apply for a personal loan?
A. Different banks will have different eligibility criteria. You will need to first check whether you qualify for the loan. If you do, you can visit the nearest bank branch and submit the mandatory documents necessary to process your loan. Alternatively, you can also apply for a personal loan online on the respective bank’s website or dial the bank’s hotline number for further information.