Borrowing isn’t evil. Debt is. Borrowing may not be dangerous. Debt could be if left “unattended”. The crux is that if you borrow, make sure that you repay on time. However, it could be easier said than done. With an instalment loan from OCBC, making payments is usually as easy as borrowing. There are multiple convenient payment plans to choose from. You might also find it easier to repay the loan if you have a proper budget and plan since your monthly payments would be fixed.
Affordability and attractiveness of any loan is usually determined by the interest charges and the fees. The interest applicable on this term loan is calculated using the monthly rest method and can change depending on the approved loan amount and the tenure. The applied interest rate, which depends on your minimum annual income, will be 15% p.a. if your annual income is greater than or equal to S$20,000 but less than S$30,000 and it will be charged at 22% p.a. if your annual income is S$30,000 or above. The effective interest rate (EIR) will include a one-time processing fee.
Let us assume that your annual income is S$25,000. You have applied for a loan amount of S$5,500. A one-time processing fee of S$100 will apply. So, the disbursed loan amount will be S$5,400. If you plan to repay the loan in full within 1 year/2 years/3 years/4 years/5 years, you’ll be charged interest in the following manner:
|Tenure||Nominal Rate (Flat)||Applied Rate||Effective Rate||Monthly instalment|
|1 year||12.31% p.a.||22% p.a.||26.77% p.a.||S$515|
|2 years||12.25% p.a.||22% p.a.||25.66% p.a.||S$285|
|3 years||12.5% p.a.||22% p.a.||25.27% p.a.||S$210|
|4 years||12.81% p.a.||22% p.a.||25.08% p.a.||S$173|
|5 years||13.14% p.a.||22% p.a.||24.96% p.a.||S$152|
Let us now assume that your annual income is S$40,000 and that you have applied for a loan of S$12,000. A one-time processing fee of S$240 (=2% of the approved loan amount) would apply. Therefore, the loan disbursed would be S$11,760. If you plan to settle the dues within 1 year/2 years/3 years/ 4 years/5 years, interest would be charged in the following manner and you’ll have to repay the following monthly instalment:
|Tenure||Nominal Rate||Applied Rate||Effective Rate||Monthly Instalment|
|1 year||8.31% p.a.||15% p.a.||20.61% p.a.||S$1,083|
|2 years||8.18% p.a.||15% p.a.||18.47% p.a.||S$582|
|3 years||8.27% p.a.||15% p.a.||17.73% p.a.||S$416|
|4 years||8.4% p.a.||15% p.a.||17.36% p.a.||S$334|
|5 years||8.55% p.a.||15% p.a.||17.13% p.a.||S$286|
[Disclaimer: The numbers shown in the above tables are for illustrative purposes only and may be different from the actual figures.]
Reasonable fees and charges also contribute to affordability of this loan. Here are the ones that you should be aware of:
|Early partial or full redemption fee||3% of the amount repaid, subject to a minimum of S$1,000|
|Restructuring fee||3% of the outstanding balance|
|Immediate redemption||1 month interest in lieu|
Consider the following points before you submit your loan application:
Don’t forget to keep your supporting documents ready when you’re ready to apply.
Applying for this loan is usually smooth. You can use any of the following modes for applying:
Q. What is monthly rest interest?
A. Under this method, interest on the loan is calculated based on the outstanding balance from the last month.
Q. Will I be penalised if I fail to clear the outstanding dues on time?
A. If you don’t clear your monthly instalment or other dues on time, the bank may levy an additional interest rate on the payable amount. You’ll also have to cough up a late payment fee.
Q. I want to cancel my loan. Will the bank impose a cancellation fee?
A. The bank may impose a cancellation fee at its absolute discretion. The value would also be determined by the bank.
Q. I also plan to apply for a home loan. Can I do so immediately after I have applied for this loan?
A. In Singapore, the Total Debt Servicing Ratio (TDSR) can’t exceed 60% at any point of time. This means that your total borrowings can’t exceed 60% of your gross monthly income. You can apply for this personal loan and any other loan, provided your TDSR doesn’t breach the limit.
Q. I want to restructure the loan. What is the procedure?
A. If you decide to restructure your loan, talk to the bank. The bank will review your request and inform you of its decision. A loan can be restructured only if its tenure is 4 years or less.