People opt for Personal Loans for a variety of reasons: education fees, holiday, wedding, personal emergencies or transferring outstanding credit balances from Credit Cards. Whatever the reason may be, it is important to understand the different types of personal loans before applying for one that suits your needs.
1. Personal Loans
Personal Loans in Singapore are unsecured loans – you don’t have to put up a collateral when getting the loan. This is the most popular type of loan in Singapore. Loans from these licensed money lenders normally have lower interest rates than mortgage loans. They are often taken up for numerous reasons, such as paying for debt consolidation, for daily purchase or big purchases.
For the approvals of such loans, consider the following:
(1) The amount you want to borrow
The higher the amount you ask to borrow, the less likely you will get your approval fast. There will be many checks conducted by the institutions to ensure that you have the ability to pay back in the future.
(2) Your personal credit rating
Institutions and banks will review your Credit Rating by analysing your monthly income and the amount of liabilities that you are carrying. If they deem you to have the capability to pay back with all your current financial liabilities, they will approve your loan. (Normally your loan repayments should not exceed 60% of your net salary.)
2. Payday Loan
This is a short-term unsecured loan of a small amount. Don't be misled by the name - the repayment of the loan may not necessarily be linked to your payday. These loans can usually be approved and obtained within a couple of hours and there is less paperwork to be done as compared to a normal bank loan.
The credit check for such loans is usually less strict as well, so it will be highly likely that your loan request will not be rejected. Some of the basic requirements include:
- Valid proof of employment
- Aged between 21 to 64 years old
- Singapore citizen/PR/valid work permit holder
Such loans are normally taken up for financial emergency needs and the loan interest rates depends on how much is offered to you by the different moneylenders. It is thus important for you to search online or ask for recommendations from your friends to get the lowest interest rate loans. Finally, before borrowing the money, go on to the Ministry of Law’s website to ensure that the moneylender is credible and legitimate.
3. Foreigner Loan
This loan applies to foreigners in Singapore. There are many reasons as to why a foreigner may need to take up a loan in Singapore, ranging from the renovation of a new apartment to relocation expenses to family emergencies.
The loan interest rates varies across different money lenders, so be sure to shop around for the best rates before applying for the loan. You can also use GoBear to help you search for the lowest interest rates provided by different moneylenders.
4. Education Loan
These are loans provided specifically for students to complete their education. In general, there will be several general criteria necessary for the loan to be approved:
- The applicant must be 21 years old or above
- Minimum income requirement of $12,000 to $30,000 – while many students may not have the cash, the parents can come in to be the guarantor.
There are two different types of education loan rates, namely flat rate and monthly rest. Monthly rest loans normally works out to be cheaper, but you have to do your due diligence before applying for the loan.
Some other terms and conditions you should look out for include the loan tenure, the prepayment penalty and other hidden fees relating to the loan.
5. Renovation Loan
A renovation loan is typically taken up for any renovation, refurbishments and home improvements. Such loans normally have a high credit ceiling and are very flexible: borrowers can choose their repayment methods (weekly, monthly, etc), can select between fixed rates and flexible rates and can select the loan tenure.
6. Cash Advance Loan
Cash advance loans are pretty similar to payday loans. You can borrow a said amount of money from a licensed lender before your payday. The advantages of such loans include not having to put down any collaterals, high approval rate and a simple application and collection process. How much you can borrow would depend on your income. Do note though that cash advance loans come with a high interest rate.
7. Car Loan
This is a loan used for the purchase of vehicles. Some of the documents required to apply for the car loan includes:
- Registration of the vehicle
- Photocopy of Passport, NRIC (both sides), Employment Pass etc.
- Income Proof (such as CPF Statements, latest payslips, Income Assessments Notice for the last two years etc.)
- Purchase and Sales Agreement
There are also certain rules that have been imposed by Monetary Authority of Singapore:
- The maximum loan tenure for any car loan is five years;
- The maximum loan amount depends on the Open Market Value (OMV):
-The maximum loan amount (Loan to Value) offered cannot be higher than 60 percent of the Open Market Value (OMV) of the vehicle if the purchase price for vehicles priced S$20,000 or below.
-The maximum loan amount (Loan to Value) offered cannot be higher than 50 percent of the OMV of the vehicle if the purchase price for vehicles priced above S$20,000.
8. Vacation Loan
You probably didn’t know you can take up a loan for your vacation, did you? The hectic lifestyle of Singaporeans and the high stress environment would mean that a vacation trip is definitely one way to get away and rejuvenate yourself. Although honestly speaking, we would advocate living within your means, rather than taking up a loan to go on a vacation.
9. Instant Cash Loan
When you require some extra cash to see you through emergencies, you can make use of instant cash loan with financial institutions and licensed moneylenders. They will work on your loan terms once your request is sent in and the money will be disbursed as soon as they approve the loan.
You can borrow up to two to four months of your monthly income. As long as you can show proof of your income, you can qualify to apply for the instant cash loan. There is one catch though – the interest rates for such loans are usually very high.
10. Debt Consolidation Loans
If you are currently in debt and have difficulty keeping track of your existing debt, a debt consolidation loan may be something worth considering. This loan allows you to consolidate all the tiny loans into one big loan so you can focus on just paying that one loan.
Such loans normally have lower interest rates than the individual small loans, thus reducing your debt liabilities and allowing you to manage your debt payments more simply.
One note of caution is that while debt consolidation loans can help you, you should also be cautious not to take up any additional loans.
Now that this article has provided you with a good overview of the various personal loans provided in Singapore, we hope you will be able to make better financial decisions and utilise the different loan schemes when needed.