Guide to personal loan effective interest rates

Find out the real cost of your loan with the personal loan effective interest rate.


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If you’ve been browsing for personal loans, you’d probably notice that the loans are accompanied by two sets of interest rates, the advertised interest rate (AIR) and effective interest rate (EIR). The advertised interest rate, also commonly known as applied interest rate or nominal rate, is comparatively lower than the EIR, which can be somewhat confusing. So what exactly is the EIR and how should you factor it into your loan? Find out everything you need to know about these interest rates in this guide.

What is the effective interest rate and how do you calculate it?

The EIR reflects the true cost of the loan. It incorporates the interest rate and any fees and charges, such as admin charges and processing fees, combined into one rate. These two aspects are what you are ultimately paying back and makes up the cost of your loan.

According to the Code of Advertising Practice for Banks, it is mandatory for banks and financial institutions to display the EIR alongside the advertised rates so that borrowers can be aware of the true cost of the loan before committing to it. The process of calculating the EIR is complicated and varies according to the loan, interest rate, fees, loan term and loan amount. If you’re interested to find out how exactly it was derived, please check with the lender for the breakdown.

Why shouldn’t I look at the interest rate?

Checking the interest rate that you’ll be charged for a loan is an important part of the comparison process. However, the interest rate isn’t the only detail you need to check.

Finding out how flexible the loan is in terms of repayments will give you an idea of what you can and cannot do with your loan over the next few years. Comparing upfront and ongoing fees will give you an idea of the costs you’ll need to cover on top of the interest rate.

This is where the EIR comes in – you will be able to see the fees and interest rate expressed as a percentage, giving you an easy way to compare a loan’s affordability to other loans.

What else should I consider when comparing personal loans?

  • Interest rates.
    As the interest repayment will make up the bulk of the loan, it’s important to compare. There are many low rate loans available or you can select a personal loan with a higher rate and more features. The interest rate should be one of the first things you compare when selecting a personal loan. Typically, the lower the interest rate, the cheaper the loan will be for you over the loan term.
  • Loan term.
    The loan term is the length of the loan. With personal loans, the loan term tends to fall between one to seven years. You should first consider how much you are borrowing and your current financial situation and select a loan term that you are comfortable with.
  • Fees.
    Fees and charges can end up making a seemingly inexpensive personal loan more expensive. Make sure you know upfront all the fees and charges you may be liable for and compare personal loans based on this.
  • Secured or unsecured.
    You also need to consider whether you want a secured or unsecured loan. With secured loans, you typically use an asset of yours as security against the loan. With unsecured loans, you don’t have to use an asset of yours as security but they tend to have higher rates as you are seen as a higher risk.

Advertised interest rates and effective interest rates are crucial when comparing and selecting a personal loan as they help you understand the true cost of the loan. Start comparing rates today to help find the best personal loan for you.

DBS Personal Loan

DBS Personal Loan


3.88 % p.a.


  • Borrow from S$500
  • Repayment flexibility, subject to lending criteria
  • Instant approval

DBS Personal Loan

Apply today to get approved for up to 10X your monthly salary over 5 years.

  • Max. loan amount: Up to 10x fixed monthly income
  • Loan tenure: 1 - 5 years
  • Approval duration: Instant approval
  • Effective Interest Rate: 7.56% - Apply today and you could get an interest rate as low as 3.88% p.a.
  • Fees: 1% processing fee
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Compare personal loan comparison rates

Name Product Interest Rate From Minimum Loan Amount Maximum Loan Amount Loan Tenure Turnaround Time
DBS Personal Loan

EIR: 7.56%

Up to 10x your monthly salary
1 - 5 years
Instant approval
Apply today and you could get an interest rate as low as 3.88% p.a. (EIR 7.56% p.a), plus a 1% processing fee. Loans of up to 10x your salary may be available.
POSB Personal Loan

EIR: 7.56%

Up to 10x your monthly salary
1 - 5 years
Instant approval
Enjoy a fast approvals service and an interest rate starting at 3.88% p.a. (EIR 7.56% p.a), plus a 1% processing fee.
HSBC Personal Loan

EIR: 7%

Up to 7 years
1 minute approval in principle. "Next Day" approval available for loans up to S$100,000
Get S$108 cashback plus an S$88 processing fee waiver if you apply by 12 June 2020. T&Cs apply.
Standard Chartered CashOne Personal Loan

EIR: 7.67%

Up to 4x your monthly salary, subject to a cap of S$250,000
1 - 5 years
Next working/banking day. T&C's apply
Take advantage of 50% cashback on your first month’s loan instalment, resulting in a S$199 refund on your loan account. Offer ends 30 June 2020.
Citi Quick Cash Loan

EIR: 8.5%

Up to 5 years
1 hour loan approval. T&C's apply
Get cash starting at 4.55% p.a. (EIR 8.5% p.a.) on a 36-month loan tenure. The interest you pay will vary depending on factors such as your credit score.

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