The Best Ways to Borrow Money in Singapore

Borrowing money should ideally be a last resort, but life sometimes presents situations where it becomes necessary. When that happens, understanding the diverse ways to borrow money in Singapore is crucial to navigating your options wisely and avoiding potential financial difficulties.

This guide will walk you through some of the quickest and most cost-effective methods available, empowering you to carefully weigh the pros and cons of each, considering factors such as cost, convenience, and your individual eligibility, before making a decision on how to borrow money in Singapore.

» Read more: Best personal loans in Singapore

Fastest ways to borrow money

1. Online personal loans

2. Mobile loan apps

3. Credit card cash advances

4. Loan from family or friends

5. Pawnshop loan

Affordable ways to borrow money

1. Bank or co-operative personal loans

2. 0% EIR credit card

3. Buy now, pay later

4. Secured loans against fixed deposits

5. Personal line of credit

6. Home equity financing

When urgent financial needs arise, these borrowing methods offer the quickest access to funds, albeit often with higher associated costs.

1. Online personal loans

Online lenders in Singapore offer a convenient and often speedy way to borrow money online. With a fully online application process and quick approval times, they can be faster than traditional banks that may require in-person visits.

» Read more: Best online loans

Online loans in Singapore offer flexibility with loan amounts typically ranging from S$1,000 to S$50,000 and repayment terms spanning two to seven years. Remember to pre-qualify and compare licensed lenders on SingSaver to find the best Effective Interest Rate (EIR).

» Read more: Pros and cons of personal loans

2. Mobile loan apps

Cash advance apps available in Singapore provide a convenient way to access small amounts of funds quickly, often offering instant advances on your paycheck. These apps typically integrate with existing digital banking platforms, streamlining the application and loan management process.

Examples of borrow money app options in Singapore include DBS Digibank, OCBC App, SC Mobile App, Citi Mobile® App, Trust Bank SG, and MariBank.

While these apps offer convenience, be aware of potential fees, including processing fees, prepayment fees, and in some cases, subscription or service charges. Loan amounts are generally smaller compared to personal loans, and repayment terms are shorter.

3. Credit card cash advances

Cash advances from credit cards in Singapore allow you to borrow money by withdrawing cash from ATMs or banks using your credit card’s PIN. However, this convenience comes at a cost. Be aware of cash advance fees, ATM charges, and significantly higher interest rates that start accruing immediately, without a grace period.

4. Loan from family or friends

Borrowing from family or friends can be a quick and affordable way to access funds in Singapore, often resembling a traditional lending circle where trust and informal agreements prevail, typically without credit checks or formal applications. However, even within these close circles, it's crucial to formalise the agreement to avoid potential conflicts.

It's also recommended to put terms such as interest rates (if any) and repayment schedules in writing and consider having the agreement notarised to ensure clarity and legal standing within Singapore's culturally sensitive financial environment.

5. Pawnshop loan

Pawnshop loans in Singapore offer immediate access to funds by pledging valuables such as jewellery, gold, or electronics as collateral. While the process is quick and doesn't involve credit checks, be aware of the costs involved.

Interest rates and additional fees for storage, appraisal, and insurance can lead to high Effective Interest Rates (EIRs). Failure to repay the loan within the agreed timeframe can result in the loss of your valuable item.

For those prioritising lower interest rates and manageable repayment terms, these borrowing methods offer more cost-effective solutions, though they may require a stronger credit profile or a longer approval process.

1. Bank or co-operative personal loans

Banks and cooperative societies in Singapore generally offer the lowest Effective Interest Rates (EIRs) for personal loans. Many banks in Singapore offer personal loans with varying eligibility criteria, which may include specific requirements for foreigners seeking a personal loan. It's essential to check with individual banks on their specific policies.

» Read more: Best bank loans in Singapore

While cooperative societies may offer even lower rates, particularly for those with lower credit scores, you typically need to become a member to apply for a loan from them.

» Read more: Requirements for a personal loan

2. 0% EIR credit cards

A 0% Effective Interest Rate (EIR) credit card can be a cost-effective way to borrow money in Singapore if you are disciplined about repaying the balance within the introductory period, which can range from 15 to 21 months. However, you typically need good or excellent credit to qualify for these cards.

A 0% EIR credit card can be useful for managing unexpected expenses such as medical bills or car repairs, provided you have a plan to repay the borrowed amount before the promotional period ends.

» Read more: Best 0% EIR credit cards

3. Buy now, pay later

Buy Now, Pay Later (BNPL) plans available in Singapore allow you to purchase items and pay for them over several weeks or months, usually without interest or fees if you adhere to the repayment schedule. Services like Atome and hoolah offer zero-interest options at many major retailers. However, be cautious of the risk of overspending and the late fees that may apply if you miss payments.

» Read more: Compare buy now, pay later apps

4. Secured loans against fixed deposits

A secured loan against your fixed deposit in Singapore allows you to borrow money by pledging your fixed deposit account as collateral. These loans typically come with lower interest rates compared to unsecured personal loans because the bank has security in the form of your fixed deposit.

However, remember that this reduces your fixed deposit balance, impacting your savings, and the bank has the right to seize your fixed deposit if you fail to repay the loan on time. Therefore, carefully assess your ability to repay before opting for this borrowing method.

It's also worth noting that while not a direct loan, CPF funds can sometimes be used for specific borrowing purposes like housing; however, direct personal loans from CPF are not a common offering.

5. Personal line of credit

A personal line of credit in Singapore functions as a hybrid between a personal loan and a credit card, offering flexibility to borrow funds based on your credit profile and income. You can draw money as needed, up to a pre-approved credit limit, and you only pay interest on the amount you use. This option is ideal for borrowers who need flexibility in accessing funds and are unsure of the total amount they will need. However, good or excellent credit is usually required to secure the lowest interest rates.

6. Home equity financing

Home equity financing in Singapore allows you to borrow against the value of your home, minus your outstanding mortgage balance. This can take the form of a home equity loan, which provides a lump sum payment to be repaid over a long term, or a home equity line of credit (HELOC), which allows you to borrow as needed during a draw period (typically up to 10 years) and only pay interest on the amount used. Home equity financing often comes with lower interest rates compared to unsecured loans or credit lines because it is secured by your property. However, the significant risk is that you could lose your home if you fail to make payments on time.

Before you decide on a borrowing method in Singapore, it's crucial to take a step back and carefully assess your individual circumstances and financial needs. Rushing into a loan without considering the key factors below can lead to unnecessary costs and long-term debt.

• Loan amount: The amount you need to borrow should guide your choice. Small amounts might be best suited for cash advance apps or credit card advances, while larger sums may necessitate personal loans or home equity financing.

• Loan purpose: The reason for borrowing can influence the most suitable option. A 0% EIR credit card might work for planned purchases, while a personal loan could be better for debt consolidation or larger expenses.

• Repayment terms: Consider how quickly you need to repay the borrowed funds and what your budget allows for monthly payments. Short-term options like payday loans require fast repayment, while personal loans offer longer terms.

• Personal preferences: Your comfort level with different borrowing methods, your risk tolerance, and whether you prioritise speed or cost will also play a significant role in your decision.

1. Payday loans

Payday loans in Singapore offer a very quick way to borrow small amounts of cash until your next paycheck. However, they come with extraordinarily high fees (e.g., a fee for every S$100 borrowed) and sky-high Effective Interest Rates (EIRs). If you are unable to repay the loan quickly, these high costs can easily lead to a cycle of debt.

2. High-interest instalment loans

High-interest instalment loans in Singapore, often offered by non-bank lenders, may seem appealing with their longer repayment periods. However, their interest rates can be significantly higher than those of bank personal loans, making them difficult to repay and potentially trapping you in a cycle of debt. Avoid these if possible.

After you borrow money in Singapore, creating a clear and realistic repayment plan is essential to avoid long-term debt and maintain a good credit standing. Consider using budgeting rules like the 50/30/20 rule, which allocates 50% of your income to needs, 30% to wants, and 20% to savings (including your emergency fund) and debt repayment.

This framework can help you balance your living expenses, debt obligations, and savings goals, ensuring you have a clear path to paying back any money you borrow online or through other means and providing a financial buffer for unexpected events.