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Personal Loan FAQs

A personal loan is a one-time unsecured loan from a bank or financial institution, which is repaid through fixed monthly instalments. It usually offers a lower interest rate (4% to 8% per annum) compared to credit cards (24% to 28% per annum).

Most banks and financial institutions offer loans with a tenure of 12 months to 84 months, with a minimum loan amount of S$1,000.

You can use a personal instalment loan for needs that other loan types cannot cover. Examples include paying for weddings, renovations, and medical costs not covered by insurance.

Some people prefer taking out a personal instalment loan instead of using a credit card because the fixed monthly repayments are easier to plan for.

For other purposes such as paying for cars, education fees, housing, it is usually cheaper to use a loan specific for that purpose. Ask your bank about car loans, education loans, home loans, et cetera. It is advised to only use personal loans when you cannot find a loan that matches your needs.

Most banks will require you to be a Singapore Citizen or Permanent Resident, aged 21 and above. Foreigners can apply for personal instalment loans, but some requirements (e.g. minimum income) may be higher.

You will usually need to produce your CPF statements or pay slips dating back three months (or six months if you are self-employed). Most personal instalment loans require you to earn at least S$30,000 a year to qualify. There are exceptions, such as POSB Loan Assist, which has a minimum annual income requirement of S$20,000.

Banks will also look at your credit rating before approving or rejecting the loan application.

As a borrower, you can get a personal loan of up to four times your monthly salary. This amount may vary based on the bank's policies and your credit history.

There is usually a minimum amount you must borrow to take the loan (e.g. S$1,000). If you need to borrow less, you should consider using a credit line instead.

Most personal instalment loans are repaid in fixed monthly instalments (exceptions may exist).

Repayments can usually be made by mail, online, through an ATM, or at a bank branch. If the loan is from the same bank you keep your savings account in, your loan repayments can be automatically debited from this account. You can also set up a GIRO account so you'll never forget another payment.

Some personal instalment loans can also be repaid at AXS stations.

A secured loan means there is some form of collateral (guarantee) made to the bank. Examples of collateral include your property, car, stock portfolio, gold assets, etc. The value of the collateral must exceed the loan amount. If you do not repay the loan as agreed, the bank has the right to seize the collateral.

An unsecured loan does not require collateral. There is no guarantee beyond your signed loan agreement (which is a legally binding contract).

In general, unsecured loans have a higher interest rate than secured loans.

This is an insurance policy that repays all or a large portion of the loan, in the event you are unable to continue repayments. A typical fee for loan insurance is 1% of the loan amount, and this may or may not be optional (some banks automatically include it as a fee).
This is a fee imposed for missing repayments. There is usually a grace period of 60 days, starting from the stated date of repayment, during which late fees will not be charged. However, this policy varies between banks. Late fees typically cost around $60.

This is the amount charged for the administrative effort in granting you the loan (e.g. a legal team was required to draft the terms and conditions, staff are needed to upkeep accounts, and so on).

Processing fees vary with each bank. This is the reason a loan may be slightly less than the agreed upon amount. For example, you might borrow S$2,000, but get S$1,930 due to a $70 processing fee.

This is a fee imposed when you attempt to pay down your loan before the given loan tenure. A typical sum is 1.5% of the remaining loan amount, but this varies significantly between banks.
This is a form of revolving credit facility. If you are granted a credit line, you can borrow a given sum of money (usually up to two times your monthly income) as and when you need it, offering you the flexibility that you don't get with a personal loan. You can withdraw the money from an ATM or transfer the loan to your bank account.
This is usually around 18% per annum, but differs between banks. The interest rate is charged on a daily basis and compounds, so make sure you repay as soon as possible. Check SingSaver.com.sg's comparison tools to find the best rates for lines of credit.
A credit line usually has a lower interest rate (18% per annum) as opposed to a credit card (24% per annum). It is more tolerable to use a credit line for these rollover debts, as the interest rate is more manageable. Additionally, you will be charged a cash advance fee on a credit card, which is usually S$15 or 6% of the amount. Credit lines charge no fees when you withdraw funds from it.

A balance transfer is a way to transfer debt in such a way that you incur lower interest rates. This is done by transferring the debt on a credit card to a credit line (which has lower interest rates), or to a credit card that specifically offers lower rates for a balance transfer.

Balance transfer, when used correctly, can help you reduce your existing debt in a shorter time due to the lower interest rates.

If you are about to incur rollover debt (you are not able or willing to pay your credit card in full at the end of the month), and the amount of the debt is significant, you should consider making a balance transfer to reduce the ongoing interest rate.

If you are about to incur rollover debt (you are not able or willing to pay your credit card in full at the end of the month), and the amount of the debt is significant, you should consider making a balance transfer to reduce the ongoing interest rate.

Note that, if you make a balance transfer, you should also stop using the credit cards for other purchases. Doing otherwise could tempt you into aggravating your debt.

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