• Personal Loan BYTES FROM OUR KITCHEN

    What are the various types of loans available in Singapore?

    If you think that taking a loan signifies financial distress, then think again! Far from distress, loans can also signify that you have achieved a significant milestone in your life. Maybe you have decided to buy a new car or further your education. Whatever the reason, the one thing you should keep in mind is ensuring that you choose a loan that suit your needs.

    In Singapore, there are a number of loans for you to select from. A good understanding of loan products available will help you make this decision.

    Personal Loan

    True to its name, a personal loan can be used for almost any personal reason. This is a type of unsecured loan which means that you don’t need to provide any type of collateral. It is granted on the basis of your creditworthiness. To qualify for a personal loan, Singaporean citizens need to have a minimum annual income of S$20,000. A foreign national working in Singapore will need to have an income of at least S$40,000 to be eligible to apply for a personal loan. In addition to this, you need to be between 21 and 65 years of age.

    You can borrow an amount that can range anywhere from 2 to 6 times your monthly income up to S$200,000. If your annual income is S$120,000 or above, you may even be able to borrow up to 10 times your monthly income. Since you will have to make monthly payments on the amount that you borrow, you should also look for the lowest effective interest rate.

    Advantages:

    • You can borrow the amount for a fixed term at an interest rate that is predetermined.
    • You know the exact amount that needs to be paid every month and when your loan will be repaid.
    • It ensures that you plan your borrowing in advance and aids in better financial planning.

    Home Loan

    Buying a home is something all Singaporeans aspire to. Since it is a long-term commitment, it is important that you understand the amount you are eligible for as well as the monthly instalment that you will have to pay. Private properties, homes under construction, as well as Housing & Development Board (HDB) flats, are eligible for a mortgage. Loans to purchase a home can be taken at fixed rates of interest or variable rates of interest.

    Advantages:

    • Some banks provide home loans that include legal fee subsidies, valuation fee subsidies as well as free fire insurance for a fixed period of time.
    • A larger amount can be disbursed in the case of joint borrowers since the bank takes into consideration the weighted income of the borrowers.

    Renovation Loan

    Renovation loans are also known as Reno loans and are usually taken when you want to make repairs to your property or remodel it. The loan tenure for renovation borrowings can range from 1 to 5 years. The amount that can be borrowed ranges from S$10,000 to S$30,000. The interest rate varies from bank to bank and is usually anywhere between 3% to 6% each year. Eligibility for a renovation loan requires the applicant to have a minimum annual income of at least S$24,000. This income requirement can change depending on the bank and can even be S$30,000. There is also a minimum loan amount for renovation loans, which is S$10,000.

    Advantages:

    • Reno loans can be taken at fixed interest rates or floating interest rates. This way, you can take advantage of lower interest rates.
    • Some banks offer free insurance protection as part of the renovation loan.
    • This advance does not cover furnishings, so this amount can be used for remodelling and renovations exclusively. For furnishings, your bank will provide you with a furnishing loan.

    Education Loan

    Got into the university of your choice, but worrying about how to pay your tuition fees? Well, education loans can be used to pay not only your tuition fees, but this borrowing also cover books and living expenses. Since this is an unsecured loan, it requires no security. In fact, you don’t need to pay instalments during the period of your study if you don’t wish to.

    Advantages:

    • Education loans have flexible repayment options and interest rates which are lower than other types of loans.
    • During your study period, you can make monthly payment instalments on the principal and the interest or only the principal amount.
    • Repayment for most education loans begin only 6 months or 1 year after your graduation, giving you time to look for a job and become an active part of the workforce.

    Foreigner Loan

    This loan, as the name suggests is provided to foreigners who have a valid Singaporean work permit or employment pass. These loans are extremely useful in times of emergencies. For foreigners working in Singapore, one of the advantages of a foreigner loan is that banks require few documents to provide an approval. Some banks, may, however, ask for a collateral against this borrowing.

    Advantages:

    • This loan is not subject to background and credit checks that are extensive.
    • The loan amount is processed fast.
    • Most foreigner loans have low rates of interest.
    • You will know your loan approval status on the spot.

    Business Loan

    What do you do when your business is facing a short-term cash flow? Taking a business loan is one way to solve this problem. These loans are given by banks and other recognised financial organisations. Most advances taken for business purposes are unsecured loans. The funds can be used for any purpose and the repayment period is between 3 and 5 years.

    Advantages:

    • Quick approval in comparison to other loans.
    • Other than solving cash flow problems, one of the benefits of a business loan is to help businesses multiply working capital.

    Instant Cash Loan

    If you have a financial emergency and need money quickly, then you should apply for an instant cash loan. The approved loan amount depends on your current salary. You can borrow up to 4 times your monthly income. The interest rate for this type of borrowing, however, is very high.

    Advantages:

    • Eligibility criteria for an instant cash loan aren’t restrictive. As long as you have proof of income, you are eligible for this loan.
    • Unlike other loans, your credit score doesn’t play a big role in the loan approval.

    Short-Term Loan

    Sometimes, you may come across a situation where you need cash for a very short period of time, like a few months. In this case, taking a personal loan or a business loan may not be ideal. This is where short-term loans come into the picture. These funds help you tide over a difficult time. Lenders who offer financial assistance usually have simple online application procedures.

    Advantages:

    • This loan has no application fees.
    • Once your documents have been verified, the approval period for your loan is sometimes just a few hours.
    • In most cases, lose credit checks are involved.

    Payday Loan

    When life throws a curveball your way, you may not always be financially equipped to deal with it. When your monthly earning is just enough to make ends meet, it becomes even tougher to deal with such unexpected situations. In such instances, payday loans provide you with cash quickly. One of the best features of payday loans is their easy application process. Payment can be made once you receive your next pay cheque.

    Advantages:

    • Approval for payday loans is fast and easy. The approval and disbursement process takes only a few hours.
    • There are no stringent credit checks involved.

    Cash Advance Loan

    Similar to a payday loan, cash advance loans also allow you to borrow a certain amount of cash before you receive your next pay cheque. Application for this loan is simple and does not require any collateral to be placed as security. The amount that can be borrowed depends on your income per month.

    Advantages

    • Cash advance loans are processed quickly, which means you will receive the funds faster.
    • Approval rates are high and credit checks are minimal.

    SME Loans

    Depending on the size of your business, you can take out a small and medium-sized enterprises (SME) loan. The types of SME loans available are SME Micro loans and SME Working Capital loans. If your business employs 10 or less people, then you can apply for an SME Micro loan up to S$100,000. The repayment period is usually up to 4 years.

    An SME Working Capital loan is an initiative by The Standards, Productivity and Innovation Board (SPRING), which functions as an agency under the Ministry of Trade and Industry of Singapore. Companies can access unsecured loans up to S$300,000 for a period up to 5 years.

    Interest rates for both types range from 3.2% to 3.75% p.a.

    Advantages:

    • Interest rates are charged at a reducing balance. This means that the interest you pay every month is calculated on the outstanding loan amount.
    • If you repay your loan in full before the completion of its tenure, no penalty charges will be incurred.

    Term and Revolving Loans

    Term loans and revolving loans are named after the terms of their repayment. Term loans require you to repay the borrowed amount in instalments or the entire amount at the end of the loan period. Revolving loans, on the other hand, allow you to use any amount of money up to an agreed credit limit. When the borrowed amount is repaid, you can draw on the account once again. Overdrafts are revolving loans that allow you to draw a certain amount of money from your current account. Interest is only paid on the amount that you have taken as an advance.

    Advantages:

    • Revolving loans provide flexibility in terms of payment. You can repay the amount at any time.
    • Unless you default on the loan, the bank cannot recall your term loan on demand.

    Knowing the benefits of the different types of loans available will help you make the right choice before you sign on the dotted line.

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