The notion of taking up a personal loan may sound daunting, but personal loans are in fact one of the most accessible and useful financial products that can help you in various ways. One of the ways it can help you is to reduce your liabilities in the long run. 

1. Reduces Debt Quicker

A personal loan can help you to save money if it offers a lower interest rate than your current liabilities. With a lower interest rate, the monthly installments payable are reduced and this will in turn reduce your debt and liabilities in the long run. However, this must be done prudently – before agreeing to take up any loans, always read their terms and conditions carefully and all other fine print relating to the loan. Look out for the terms regarding late payments and make backup plans to reduce the chances of such unnecessary fines or penalties of late payment.

2. Improving your cash flow 

Do not underestimate the time-value of money – when executed well, you can make the money work for you. Let us show you how powerful the time-value of money can be with an example:

Consider a 15-year-old kid with S$10,000 right now. Assuming that the kid invests in a stock that gives him 10% returns annually:

In the end of first year, the kid will have:

$10,000 x 1.1 = $11,000

Assuming that the money is not taken out, at the end of the second year the kid will have:

$10,000 x 1.1 x 1.1 = $12,100

So at the end of the 15th year, the kid will have:

$10,000 x 1.115 = $41,722

Compared to a guy who does nothing with the S$10,000, the kid is now four times richer than the guy. Using the same concept, you can use your current money to help you earn money and pay off current liabilities with a personal loan.

School Loans

If you are a student or a working adult looking to further your studies, personal loans are excellent tools to lessen your financial burden and provide you with an avenue to obtain your tertiary degrees.

In Singapore, many banks such as DBS, OCBC and Maybank provide interest-free loan for students while they are currently studying at institutions.

For example, assuming you borrowed S$20,000 over five years for further education in Singapore, the amounts repayable are as follows:


Type of Loan


Monthly Instalments

Interest Payable*


FRANK Education Loan





RHB Monthly Rest Education Loan





Maybank Monthly Rest Education Loan





CIMB Monthly Rest Education Loan





POSB Further Study Assist




*This is the interest you owe the bank for borrowing money. For example, the total amount that one owes OCBC will be $20,000 (principle) + $2,372 (interest) = $22,372.

The rates are very affordable and by freeing up your current cash for alternative uses such as investments, you can stand to gain much from your very own financial planning.

Imagine investing $10,000 into a blue-chip stock that reaps a return on investment of 4% a year for the five years that you are studying.  That will turn out to be $12,763 , compounded interest), which means you have effectively earned $2,763 and can easily cover the interest that is payable from the loan you make.

In fact, by taking up OCBC loan and repaying the interest through the dividends you have earned, you have “made” $400 ($2,763 - $2,372) simply by taking up a personal loan and repaying your principle amount in the future.

3. Use additional capital you have as leverage

With the additional capital, you can use them as leverage to invest and subsequently repay the loan amount and the interest.

Imagine the following situation: you borrow S$12,000 repayable at 6% per annum. If you invest these S$12,000 in stocks and indexes such as Straits Times Index ETF (According to a report by SGX in 2014, ST Index has generated 8.4% annualized returns over past 10 years. So yes, it is possible.), that gives dividends of 8% per annum, you can pay back the 6% loan and still earn the 2% returns from ST Index at absolutely no cost.

Using the same idea, when planned properly, you can also “use” the personal loan to earn more money to pay off debts, to pay for your children’s education or for your own vacation.

4. Debt Consolidation

You may have a lot of different credit cards and may owe different amounts to different credit card companies. By taking a personal loan, you can consolidate your credit card debt into one single debt, and this normally comes with lower interest rates compared to owing several different credit card creditors. 

Another good reason to consolidate your debt is that you will not forget to pay a certain credit card, which allows you to avoid the problem of late payment charges. This will also to help prevent more unnecessary spending and in the long run, help you to reduce your liabilities.

A word of caution

While personal loans are helpful, taking excessive loans may serve more harm than good and will increase your debt burden in the long run. Only by making calculated risks and being aware of your financial abilities can you make prudent use of such loans. Remember: personal loans are double-edged swords – they can clear your debt but overwhelm you with debt as well. Plan well in advance and start managing your liabilities better through them.


Disclaimer: While Personal Loans may sound very attractive here, it may not be suitable for your unique financial situation. Always seek help and assistance before making any financial decisions.

Check out our comparison tool and find the best Personal Loan for your needs.  

GoBear team

Brought to you by GoBear Insurance Broker (SG) Pte. Ltd., a registered insurance broker with the Monetary Authority of Singapore