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A personal instalment loan is a type of loan that lets you borrow a specific amount of money which you have to pay for over a period of time. Personal instalment loans have a fixed interest and fixed monthly repayments so that makes it easy to plan your budget. The length of time needed to pay the loan can be as short as a year to as long as 7 years. This gives you the ability to bring down the cost of your monthly payment.
Since this is a multipurpose loan, you can use the money that you borrowed for a variety of reasons. The choice is up to you!
For example, you can borrow up to 4x your monthly salary (or 8 times, if your annual income is above $120,000) with POSB Loan Assist. Receive the loan directly in your POSB or DBS account.
Unlike a credit card cash advance, an instalment loan has a much lower interest rate.
Cash advance interest rates range from approximately 25% to 28%, and comes with a cash advance fee - commonly the higher of S$15 or 6% of the cash advance amount. However, interest rates on personal loans range between 6% to 12%, and can go even lower during special promotions or limited-time offers. This means it is cheaper to take a personal loan rather than a cash advance.
Another advantage of a personal loan is the regular repayments you will be prompted to make. A cash advance must be paid in full come the due date, whereas a personal loan can be repaid in fixed monthly instalments over 1 - 5 years. This helps you keep your monthly budget under control, while providing a fixed reference point for you to clear your debt.
When comparing personal loans, you will need to find out how much interest you will have to pay. You should be looking out for two figures - the advertised interest rate, and the effective interest rate (EIR).
You'll notice that both the advertised rate and the EIR will be different. This is because the advertised rate is the interest rate the bank charges on the loan you are applying for.
In contrast, the EIR includes admin fees or service charges charged by the bank for processing and approving your loan. Because of these extra charges, your interest rate goes up. Therefore, the EIR represents the true cost of borrowing, and you should always check the EIR to account for the fees you have to pay.
Yes. If you qualify for a bank personal loan, choose this over a moneylender. That's because moneylenders charge an interest rate so high, it actually becomes impossible for you to repay your debt.
In Singapore, moneylenders are allowed to charge interest rates as high as 48% p.a. This is almost twice what a credit card cash advance costs (usually 25% p.a.), and around 8 times the interest rate of the average bank loan. So if you were to borrow S$1,500 from a moneylender at 48% p.a., you will need to repay S$2,400 in 12 months. After 3 years, the amount you owe will be S$6,155 - more than 4 times what you initially borrowed.
The one advantage to borrowing from a moneylender is that they offer fast loans, which are meant to be paid in full within a short period. Regardless, if you have access to bank loans, it is still a far better option than turning to a moneylender. Not only do you get a lower interest rate, but repayments are as easy as allowing the financial institution to debit the amount from your savings account. Some personal loans even have welcome offers that help you save money, such as cash credit or vouchers.
In general, personal loan requirements in Singapore are quite straightforward. You must be at least 21 years old, with a minimum annual income of S$20,000 and above.
Prepare your proof of residency and income, which includes your NRIC, latest 12 months' CPF contribution statement, and latest Income Tax Notice of Assessment. Applications that do not have the required documents, or have incomplete information, will usually get rejected, so be sure to have these ready when you apply for your loan.
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