How Do Personal Loans Work In Singapore?

Alevin Chan

Alevin Chan

Last updated 22 April, 2024

Personal loans are popular financial tools in Singapore that are helpful in a wide variety of circumstances. Find out how personal loans work, what you can use them for and what you need to consider when getting one.

If you find yourself in need of extra funds, one of the most convenient solutions is to get a personal loan. Not only are personal loans flexible, their fixed repayment structure and lower interest rate also make them easier to manage than credit cards. How do personal loans work in Singapore, and what’s the process of getting one? Let’s take a closer look. 

Table of contents:


What is a personal loan?

A personal loan is a sum of money borrowed from a licensed lender, under terms agreed upon by both parties. The loan is extended by the lender on an unsecured basis – i.e., without collateral. In return for taking the loan, the borrower agrees to repay the entire loan with interest to the lender by a stipulated date. 

Commonly, personal loans in Singapore are structured according to a monthly repayment schedule. This means that the borrower has to pay a fixed amount by the same due date each month, until the debt is paid off. 

How much to pay each month depends on the amount borrowed, the interest rate, and the duration of the repayment period aka the loan tenure. We’ll discuss these factors in more detail in a later section. 

Personal loans in Singapore may be obtained from banks and licensed moneylenders. To ensure your rights are protected, never get personal loans from unlicensed lenders or unknown parties. Doing so will cause you to be subject to unfairly high interest, harassment, threats and even violence. 

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What can a personal loan be used for?

A personal loan can be put to any use, at your own discretion. Once the loan is disbursed to you, there are no restrictions on how you can use the funds.

Some common uses for personal loans include to pay urgent bills, to cope with an emergency, to meet extra expenses, or simply to pay for a large-ticket purchase or a costly expense. 

If you’re planning to get a loan to renovate your home or pay for further education, you may be interested in a renovation loan or an education loan instead. Such loans are also considered personal loans, but you only use them for their stated purposes and not any others. 

For instance, a renovation loan can only be used to pay for the costs of renovation, and not to purchase furniture and appliances for your home. You may be asked to submit proof of renovation work done as verification.

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Why do people apply for a personal loan?

People apply for a personal loan to get extra funds that they need, for a variety of reasons, as mentioned above. 

One reason why borrowers go for personal loans is because they have a lower cost of borrowing compared to credit cards and credit lines. This makes personal loans a more cost-effective solution for many.

Along with lower interest rates, personal loans also may be paid back over a longer duration, ranging from 12 months to 60, or even 84 months. This breaks up the amount borrowed into multiple smaller instalment sums paid once a month, making managing debt easier for those who need to borrow a large loan.

People may also apply for a personal loan because they see it as a better solution than wiping out their personal savings. By getting a personal loan with a reasonable interest rate, a borrower can pay for what they need while keeping their savings for emergencies

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How to apply for a personal loan?

To apply for a personal loan, you should first look up the different personal loans available in Singapore. Browse and compare different loan packages on SingSaver to get a sense of the average interest rates. This will help you gauge if a loan package is worth your while. 

Enter your loan amount and loan tenure to see how much your monthly repayments would be. You can choose different amounts and tenures to find a monthly repayment amount that is comfortable or seems manageable for you. 

You should also check the eligibility requirements to make sure you qualify for the loan.

Once you have selected the loan you want, you can start the application process online. To do so, look for an “Apply Now” (or similar) button. Then simply follow the on-screen instructions to complete and submit your loan application. 

Once done, wait for your bank to inform you of the outcome of your loan application. If your loan is approved, you will receive the loan amount in your bank account. 

If your loan is not approved, you can check with the bank why. Depending on the reply you receive, you may consider reapplying, or try to apply for another loan from another lender instead. 

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Best personal loans in Singapore

Personal loan

Interest rate

Maximum loan amount

Loan tenure

CIMB Personal Loan

From 2.80% p.a. (EIR from 5.28% p.a.)

S$200,000

1 to 5 years

 

HSBC Personal Loan

 

from 2.92% p.a. (EIR 5.50% p.a.) Up to 8X your monthly income 1 to 7 years

Citi Quick Cash Loan

from 3.45% p.a. (EIR 6.50% p.a.) Up to 8X your monthly income  1 to 5 years

 

 

 

OCBC ExtraCash Personal Loan

 

 

From 2.88% p.a. (EIR from 5.84% p.a.) Up to 6X your monthly income 1 to 5 years

 

 

UOB Personal Loan

 

 

from 2.88% p.a. (EIR from 5.43% p.a.) Up to 95% of
the available credit limit of your UOB CashPlus account
1 to 5 years

 

 

DBS/POSB Personal Loan

 

 

from 2.68% p.a. + 1% processing fee (EIR from 5.43% p.a.) Up to 10X your monthly income 6 months to 5 years

 

 

Standard Chartered CashOne Personal Loan

 

 

from 2.88% p.a. (EIR 5.84% p.a.) Up to 4X your monthly salary or $250,000 1 to 5 years

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Things to consider when getting a personal loan

Eligibility requirements

Personal loans in Singapore have eligibility requirements that must be met for the loan to be approved. Typically, personal loans require:

  • Age 18 and above
  • Minimum annual income of S$20,000 or S$30,000 for Singaporeans and PR, S$45,000 to S$60,000 for foreigners
  • Resident of Singapore, or with valid employment pass 

You will also be required to submit personal information, proof of income and other documents as part of your application. The most convenient way to do so is with SingPass - you can authorise the bank to retrieve the relevant details electronically. 

If you do not have SingPass, you will need to gather and submit copies of the required documents, whether via email, online or by post.  

Also, note that many banks require you to have a bank or credit card account with them when getting a personal loan. If you do not have such facilities, you will be asked to apply for them before applying for your loan.

This can be inconvenient, but is usually a one-time process. Alternatively, you may look for a personal loan that does not have such requirements. Note that you will still need to have a bank account in your name in order to receive the funds.

Interest rate

The interest rate of your personal loan determines how much interest you have to pay on your loan. The lower the interest rate, the better, which is why it is a good idea to compare different personal loans before getting one. 

You will notice there are two sets of interest rates attached to a personal loan. These are the advertised rate, and the Effective Interest Rate (EIR). Note that the EIR may be higher than the advertised rate, depending on the method used to calculate the loan’s interest. 

The EIR represents your true cost of borrowing, It is the rate you should look at when comparing between different loan packages. 

Note that the interest rate of a loan may vary according to the loan tenure. 

Loan tenure

The loan tenure is the duration over which you repay your loan. Personal loans in Singapore have loan tenures ranging from 12 months to 60 months. HSBC Personal Loan offers the longest loan tenure, up to 84 months. 

Understand that the longer your loan tenure, the more interest you will pay in total. This is because interest on a personal loan is charged per annum. 

A longer loan tenure can be useful, as it lowers the monthly repayment amount. Choosing a long loan tenure may help you manage better when borrowing large sums. 

The key is to choose a loan tenure based on a monthly repayment amount that you are confident you can meet. Try to find the best balance between “higher monthly payments for shorter” and “lower monthly payments for longer”.

If in doubt, paying more monthly to clear your debt faster is preferred, but only if it doesn't exceed your ability to pay. 

Fees and charges 

Personal loans may come with fees and charges, including early redemption fee, late payment charges, and admin or processing fees. 

Thus, besides comparing interest rates, you should also pay attention to the fees and charges attached to different personal loans. Remember that a loan with a low interest rate but high admin fee could turn out to be a worse deal than one with a slightly higher interest rate but no admin fee. 

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Frequently asked questions (FAQs)

Q: How is a personal loan paid out?

Once your application is approved, your personal loan will be paid out to a bank account that you own. 

Note that some banks may require you to have an existing bank or credit card account with them to receive the loan, and you will have to apply for such facilities before your loan can be granted. 

 

Q: Do you get the money right away from a personal loan?

How soon you will get your funds depends on a number of factors. 

If you are an existing customer of the bank and/or recently applied for an unsecured credit facility like a credit card or personal loan, you could receive your loan within the same business day. 

In general, personal loans take around 2 to 4 business days for your application to be processed and to receive your loan. This may be longer if additional documents or checks are required.  

 

Q: Is a personal loan bad on your credit?

Taking a personal loan by itself is not bad for your credit score, provided you pay your instalments on time. However, if you neglect to do so, missing your payments will damage your credit score, and the more this happens, the lower your credit score will become. 

Another situation in which a personal loan may negatively impact your credit score is if you take multiple personal loans in quick succession. This can be read as a sign of financial trouble, which increases your likelihood of default and makes you a credit risk. 

Hence, applying for several loans from different lenders is bad for your credit score. It’s better to apply for a single loan for the entire amount you require, and focus on repaying just that one loan.

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An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.

FINANCIAL TIP:

Use a personal loan to consolidate your outstanding debt at a lower interest rate!

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