Essential Things to Consider When Getting a Personal Loan in Singapore

Essential Things to Consider When Getting a Personal Loan in Singapore

A personal loan is a loan that gives you a fixed amount of money with a fixed interest. Personal loans are usually unsecured loans that require no collateral security. You must repay the loan in instalments within a term ranging from one to ten years and pay interest for the amount you owe.

If you are looking for a personal loan in Singapore, you must meet some eligibility criteria like

  • The applicant must be a Singapore Citizen or Singapore Permanent Resident
  • Foreigners with existing Credit Card accounts/ Cashline
  • The applicant must be between 21 – 75 years of age
  • The minimum annual income should be S$20,000

You can use the loan amount for anything like immediate medical expenses or any other emergencies.

Points to ponder before you apply for a personal loan in Singapore

While applying for a personal loan, you should consider some factors and compare the benefits you get from different lenders. Let us see how personal loans can benefit you and the precautions you must take while taking a loan.

  • Use your money properly

Check why you need a personal loan and use the money for a useful purpose. For instance, if you are paying high interest on your credit card, taking a personal loan with lower interest, and paying off your high-cost debt will be a good idea. You can get a personal loan for unexpected medical expenses, financial emergencies, home renovations, etc.

  • Check interest rates

In Singapore, personal loans are offered at two types of interest rates – Applied Rate (AR) and Effective Interest Rate (EIR). AR remains constant throughout the loan tenure, and the repayments will reduce the principal amount.

On the other hand, EIR indicates the exact cost of borrowing if you repay on time and a gradual reduction in principal over the loan tenure.

  • Check charges

Apart from the interest rate, you should check other charges incurred for personal loan processing and documentation. Some of the fees incurred by banks and financial institutions are overdue payment fees, annual fees, and changes in tenure fees. However, some best banks in Singapore, like DBS, offer “personalized interest rates as low as 3.88% p.a. and 2.88% p.a. AIR + 1% processing fee (EIR 7.56% p.a. 5.79% p.a.)!”

  • The maximum amount of money you can borrow

Most banks in Singapore offer different borrowing limits. The borrowing limit depends on several factors like the relationship with the bank, credit score, and monthly income of the applicant. If your earnings are minimum, you can avail of a loan amount up to four times the salary you earn, and if your earnings are in a higher income bracket, you can get a loan up to eight or ten times your monthly income.

  • The processing time of a personal loan application 

The loan processing time varies from bank to bank. However, the banks like DBS offer instant loan approval for current Cashline/ Credit Card customers and new customers with credit salary deposit accounts in the bank.

Personal loans are the best way to get immediate liquid cash if you have any medical emergencies and other reasonable expenses. However, analyze the fine print of the personal loans and understand the repayment details and interest rates based on your loan amount and tenure. You can visit the websites of the banks in Singapore to know more about personal loans in Singapore and the loan facility.