In Singapore, lending companies and banks provide a personal loan to help those who need assistance with funds for easing into investments, consolidating debt or financing car repairs.
For renovation or education purposes, more specialised loan products are designed to suit these needs. As not all personal loan lenders are the same, one has to evaluate what they offer and how they differ before making the right selection. Be it the terms, interest rate or fees, these have to be taken into equal consideration.
In Singapore, personal loans are placed among the category of term loans to apply for because they come with a set period of time and fixed monthly instalment payments. If you are borrowing a term loan, you must repay the money you owe by the end of the loan period.
Several banks may have term-loan programmes that can support small businesses with the cash they need to operate on. Smaller businesses may use the term loan to purchase fixed assets such as equipment for its production process.
However, some personal loans are designated as revolving loans. For revolving personal loans, a borrower can use his credit up to a set limit whenever he needs it. You can pay only interest so long as the line is drawn and after you pay off the amount drawn, the credit becomes readily available to be drawn once again. Interest rates charged are usually higher than that of a term loan and the interest rate type can be fixed or variable.
Fixed interest rates typically apply for unsecured loans whether they are term or revolving loans, unless promotional interest rates apply. In the case of secured loans, a consumer will have a choice of fixed or floating interest rate options.
Personal loan features and benefits
As one of fast loans that banks and other financial institutions can offer, personal loans give borrowers quick access to get cash. The borrower could also look forward to take advantage of the following extra features and benefits:
- Flexible payment terms that allow you to pay above the required amount for your cash loans, as well as to change the terms of your personal loans, therefore helping you settle your debt faster.
- A revolving credit line, which is a finance service that allows you to get a certain amount of cash advance for when you need the money, in exchange for paying a commitment fee.
- Personal loans should also be aimed to improve your cash flow. It can help you settle your bills and the loan ensures you keep your cash flow constant so you do not run the risk of defaulting on important bills. It is essential that you are timely in meeting your loan payments once you have the cash in supply.
- A good personal loan will allow you to consolidate your debts. If you have taken multiple loans from various sources, a personal loan should be considered. You will only have to make a final payment at the end of the month and the personal loan will have a lower interest rate than the other loans.
Are you eligible for a personal loan?
You can get personal loans in Singapore if you are a Singaporean citizen, typically between 21 and 70 years old. Some institutions also allow foreigners from certain countries to apply for bank personal loans.
An applicant also needs to file documents that prove his residence and identity, or government-issued IDs and clearances. In addition, proof of employment and employer details, financing requirements, your NRIC copy, the CPF statements submitted over the past 12 months and your latest original computerised payslip are needed, these details determine the maximum amount of money you can borrow. Banks also want their personal loan clients to have landline phones at home or in the office.
Personal loan interest rates and other fees
Once you sign up for personal, you need to be aware of the interest rates that come with that debt. Most banks in Singapore peg the annual add-on interest rate at 4.5% to 8.3%. That percentage changes depending on the amount you borrow and the time it takes you to pay the borrowed money back.
Aside from personal loan interest rates, there are other loan-related fees you need to look out for. These fees include the disbursement fee (applies for every time you cash out money on your loan), the pre-payment and late payment fees (applies when you pay your debt before or past the due date scheduled on your loan terms), transactions in foreign currency (the exchange rates used to convert these transactions into local currency may vary day to day and book to book), finance charges for interest rates (if an outstanding balance is not fully or partially paid by the due date, interest will be charged on your amount owed) and the loan modification fee (applies when you want to change some details of your loan).
Let GoBear help you find the best loans
Here at GoBear, we do our best to update you with information on the terms of each personal loan product offered in Singapore. GoBear’s main feature is a comparison tool that generates the most favourable loan product for you, depending on your needs. We also provide tips on how to be a wise borrower, by disclosing important information about personal loan lenders and their products, as well as by alerting you about tips and other useful information via our blog.
Do you want to see which personal loan is the best for your needs? Fill out the form above to compare personal loans with GoBear using the loan calculator today!
Follow us on Facebook, and learn more about Personal Loans through our blog and FAQs.
A personal loan is an unsecured installment loan that you can use for pretty much whatever you want. You can use it to finance a medical emergency, a family holiday or even that new laptop you’ve been eyeing on. There are more specialised loan products available if you need to finance your renovation or education.
To qualify for a Personal Loan you need to be:
- A Singaporean/PR or foreigner.
- Aged between 21–65.
Also, you will need to earn at least
- $20,000 per year if you are a Singaporean or PR.
- $40,000 per year if you are a foreigner.
3.What documents are required for a personal loan application?
- Photocopy of your NRIC (both sides)
- If you are a salaried employee, you’ll need your latest e-statement, or your CPF contribution history statement for the last 12 months, or your latest Income Tax Notice of Assessment.
- If you are self-employed, you’ll need your latest two years of Income Tax Notice of Assessment.
- For education and renovation loans, you will need to provide extra documentation for verification of the loan purpose.
The tenures for personal loans can range from one to seven years. Renovation loans are limited to five years and education loans can be up to 10 years. The length of the loan, or tenure in jargon, is an important determinant. The longer the tenure, the more interest you will pay.
Banks revise their personal loan rates from time to time. Personal Loan rates usually range from 4%–10% per annum.
This is the Flat interest rate – more importantly, is the effective interest rate, which shows the actual cost of borrowing.
8.What is the Effective Interest Rate and why is it important?
The effective interest rate takes into account the fact that you are repaying your principal, but your total interest paid will not be reduced. Sounds complicated right?
We’ll give you a short example here.
Imagine you borrow $1000 for two years to buy a new mobile phone at a “flat interest rate” of 5%.
You will be paying $87.50 per month for one year (effective interest rate of 9.10%).
Why is the effective interest rate almost twice as high?
Let’s look at the two different calculations:
1. The loan balance is reduced every month.
((interest rate(%)/12) x loan amount) / (1-((1+interest rate(%)/12))(-loan tenure x 12)
2. The loan balance remains the same during the tenure
((Interest Rate x Years)+1)/(years x 12)) x Principal.
9.Why does GoBear not include the Effective Interest Rate?
The Effective Interest rate is introduced by moneysense to provide a clearer overview of the cost of borrowing. However, banks have some liberty in definition of effective interest rate and include or exclude certain factors to lower these rates. It is mandated by law for banks to notify you on the Effective Interest Rate.
When comparing loans of the same tenure, it is easier to look at the total payment you will be making on a loan. At GoBear we include all costs associated with the loan and break it down for you in easy categories so you can see what you are paying at a glance.
When getting a loan, transparency about costs and repayments is often lacking. To provide you with a better overview, we have broken down all the costs that are associated with your loan:
Monthly payment: your monthly payment for the total duration of the loan (this includes interest payments and principal repayment.
Total Payment: Includes all interest paid, all principal repaid and loan servicing costs.
Interest Payments: All interest that you will pay during the duration of the loan
Servicing costs: All non-interest payments such as processing fee, servicing costs or annual fees.
The total payment includes all costs that you will pay when taking the loan plus the repayment of the loan.