It acts like a credit card, allowing you to draw funds as needed and pay interest only on the amount you use. 

In Singapore, a personal credit line is a popular option for managing ongoing or unexpected expenses, providing an alternative to both the structured repayments of personal loans and the potentially higher interest rates of credit cards.

Secured lines of credit

Secured credit lines in Singapore require you to pledge an asset as collateral. If you fail to repay, the lender can claim the asset. 

Common examples of secured PLOCs include home equity lines of credit (HELOC), where your property is the security, and car loans, where the vehicle itself is the collateral.

Unsecured lines of credit

Unsecured lines of credit don’t require any collateral. Lenders in Singapore approve these based on your creditworthiness, income, and existing debts. 

Common examples of unsecured personal lines of credit in Singapore include those offered by local banks like DBS, UOB, and OCBC.

Revolving credit

Revolving credit is a type of credit line where you have continuous access to funds up to a specific limit. As you repay the borrowed amount, your available credit is replenished, allowing you to borrow again. Personal lines of credit and credit cards in Singapore both operate as revolving credit facilities.

A personal line of credit in Singapore is a flexible loan that gives you access to a pre-approved pool of funds. This is unlike an instalment loan, which involves a set amount of money repaid with interest over a period of time.

Credit limits can range from a few thousand to hundreds of thousands in Singapore dollars, depending on your creditworthiness. It's particularly useful for managing ongoing expenses, funding smaller projects, or having a financial safety net for unexpected needs. 

Personal line of credit in Singapore: How does it work?

Once approved for a personal line of credit in Singapore, you can access funds as needed, often through online transfers to your bank account. You'll only pay interest on the amount you've actually borrowed. 

Interest rates for these credit lines tend to be variable, and repayment schedules can be flexible, with minimum monthly payments required. For instance, a personal line of credit from UOB’s CashPlus option offers credit limits up to S$200,000, with variable interest rates based on your credit profile.

To get a personal line of credit in Singapore, you'll typically need to meet certain requirements, such as a minimum income level, a good credit score, and stable employment. Banks will conduct credit checks and require documentation like proof of income (payslips, CPF statements), your NRIC, and an employment letter.

Here’s a general guide on how to get a personal line of credit in Singapore:

1. Research: Compare offerings from major banks like DBS, UOB, and OCBC, both online and in-branch.

2. Check eligibility: Ensure you meet their minimum requirements.

3. Prepare documents: Gather all necessary documents.

4. Apply: Submit your application online or at a branch.

5. Approval: Wait for the bank's decision, which involves a credit assessment.

Once you've received approval for your personal line of credit, here are some practical tips for managing it effectively:

• Create a budget to track your withdrawals and repayments.

• Ensure timely repayments to avoid late fees and negative impacts on your credit score.

• Avoid drawing more than you can comfortably repay.

• Monitor your available credit regularly.

Applying for a personal line of credit in Singapore involves a credit check, which may slightly and temporarily lower your credit score. 

However, the main impact comes from how you manage the credit line. Consistent, on-time repayments reported to the Credit Bureau Singapore (CBS) can improve your credit score over time. 

Conversely, missed or late payments and high credit utilisation (borrowing a large portion of your available limit) can negatively affect your score.  

Benefits	Drawbacks
Flexible access to funds. Lower interest rates than credit cards. Revolving credit line. Can be used for various financial needs.	Variable interest rates. Risk of accumulating debt. Potential fees and penalties. Requires good credit for favourable rates.

Line of credit benefits

As they are often unsecured, personal lines of credit in Singapore offer several advantages, making them a suitable option for larger or longer-term financial needs.

• Flexibility: A personal line of credit provides flexible access to funds up to your approved limit. You can withdraw money as needed, when you need it, without having to apply for a new loan each time. This makes it ideal for managing ongoing expenses or funding projects with uncertain timelines.

• Lower interest rates than credit cards: Generally, personal lines of credit in Singapore come with lower interest rates compared to credit cards, especially if you have a good credit score. This can result in significant savings on interest charges, particularly if you carry a balance for an extended period.   

• Revolving credit: Similar to a credit card, a personal line of credit is a revolving credit facility. As you make payments on your outstanding balance, your available credit is replenished. This allows you to borrow again in the future without needing a new application, providing ongoing financial flexibility.

Line of credit drawbacks

Despite their benefits, personal credit lines also come with certain drawbacks, including potential fees like administrative or early repayment fees.

• Variable interest rates: The interest rates on personal lines of credit can fluctuate. This can lead to increased borrowing costs over time, making budgeting more challenging as your monthly payments may not be fixed.

• Debt accumulation risk: The easy access to funds offered by a personal line of credit can lead to overspending and the accumulation of debt if not managed responsibly. It’s crucial to have a clear repayment plan to avoid borrowing more than you can comfortably afford to repay.

• Fees and penalties: Some lenders in Singapore may charge annual fees for maintaining a personal line of credit. Additionally, penalties may apply for late payments or exceeding your credit limit, adding to the overall cost of borrowing. 

When considering a personal line of credit in Singapore, it's wise to explore other financing options, such as: 

• Personal loans, which offer a lump sum with fixed repayments.

• Credit cards, which provide revolving credit for smaller, everyday expenses.

• Payday loans, which are a short-term, high-interest option.

• Debt consolidation plans, which can help streamline existing debts.

Understanding the benefits and drawbacks of each will help you make the best choice for your financial needs.

>> Read more: No money, no problem: 19 ways to earn some fast cash in Singapore