If you’re planning to fund home renovations, pay for medical care or simplify debt, a personal loan could help you cover the upfront cost. Here’s how to find the most competitive personal loan rates and terms available to you.
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What's in this guide?
- Start your personal loan comparison
- Some of the top lenders we review
- Top personal loan guides
- How do personal loans work?
- The types of personal loans that are available to you
- Features of personal loans: What makes a loan competitive?
- Interest rates and fees to expect on personal loans
- How can I improve my chances of the loan being approved?
- Am I eligible for a loan?
- How to apply for a personal loan
- Required documents
- The questions we've been asked about personal loans
How do personal loans work?
A personal loan lets you borrow a fixed amount of money for a set time period, typically at a fixed rate of interest. This type of loan is a secured or unsecured line of credit of up to S$250,000 over one to seven years. You can use the money for a range of purposes, such as consolidating debt, paying for a wedding or even taking a holiday.
Personal loans are an agreement between you and a lender for you to have a certain amount of money and pay it back over time, plus interest. A personal loan can be a more affordable way to borrow money than a credit card, if you’re looking to borrow a lump sum over an agreed timeframe.
Here is how personal loans work:
Application and approval. You can apply for a personal loan from a bank, credit union or standalone lender online, over the phone or in-branch, depending on what application types the lender offers. The time it takes to be approved depends on the lender, but it can range from anywhere between 60 seconds to a week or two.
Loan contract. When you are approved for a loan, you will need to agree to a loan contract that sets out certain terms. These terms include how long you’ll have to repay the loan, what fees you’ll need to cover, and the rate of interest you’ll be charged on your loan amount.
Loan terms. Your loan terms will be set out in your loan contract. Loan terms generally range between one and seven years.
Loan costs. Lenders agree to lend you money in exchange for interest, which is usually at a fixed rate in Singapore. Other loan costs may include establishment fees, monthly fees and annual fees. You should also check if you will be charged fees for repaying your loan early or making additional repayments.
Loan types.There is a wide variety of personal loans available in the market, each with varying terms and features. For instance, when you apply for a car loan the lender usually requires that the entire loan amount is used for the car purchase and the car to be used as security in case you default on the loan. An unsecured personal loan, on the other hand, is more flexible and you won’t have to use an asset to secure the loan.
The types of personal loans that are available to you
There is a wide range of personal loans available in Singapore to those who have stellar credit, average credit or bad credit. Find out what loan may work for you with the below options.
- Secured personal loans. This type of loan works by you offering an asset as security in exchange for lower rates and fees. Usually, this loan is used to purchase a car, but other types of assets can be used as well.
- Unsecured personal loans. If you don’t want to put up an asset as security or want to finance other endeavours unsuited to a secured personal loan, you might want to consider a loan that doesn’t require a guarantee. Note that the loans shown in the table above are all unsecured.
- Line of credit. You’ll get access to a set credit limit, but only pay interest on the funds you’ve used. You can consolidate debts or even fund a range of purchases with this type of loan.
- Debt consolidation loan. Existing debt can be managed by taking out a debt consolidation loan. Consolidate separate loan accounts into one easy-to-manage loan with a potentially lower rate and with fewer fees.
- Overdrafts. An overdraft is a lot like an unsecured loan, but it is generally attached to your everyday bank account. You are given a set amount that you can withdraw from your account, once your own funds have been exhausted.
- Bad credit loans. If you have bad credit but are in need of a loan, there are still options available to you. Either apply with a lender who doesn’t perform a credit check, or who accepts applicants with negative listings on their file.
Features of personal loans: What makes a loan competitive?
When comparing your personal loan options, it’s helpful to keep in mind the range of features that are available with these loans. When comparing, here are some of the questions you’ll need to ask.
- Does the loan have a competitive interest rate? Compare rates across similar loan products to ensure you’re getting the best deal.
- What are the fees and charges? You’ll need to consider both ongoing fees and fees charged at the onset of the loan. Common fees include an application fee or loan set-up fee, while monthly fees and annual fees are common ongoing fees. If you miss a payment for any reason, you can expect to be charged a late payment fee. You may also be charged to use additional features of the loan.
- Is there repayment flexibility? How often are you able to make repayments? Are you able to make additional repayments or pay off the loan early without penalty?
- Do the loan terms match your needs? Personal loans are usually offered for terms of between one and seven years, with other loans on offer for shorter periods. Some lenders are more restrictive than others when it comes to how long you have to repay your loan – for instance, only offering terms of one, three or five years. Make sure the loan terms on offer are what you need. Long-term loans over seven years often see lower repayments but a greater amount of interest paid.
Interest rates and fees to expect on personal loans
The interest rate and fees you are charged depend on the loan you apply with (you can compare these on the table above), but each loan type comes with similar costs, and understanding these can help you compare personal loan options.
The interest rate
Your interest rate will typically be fixed. At the time of writing, the average EIR is 12.6% p.a. It’s important to keep in mind interest rates can fluctuate from 8% p.a up to 30% p.a. (or more depending on your credit score).
Why is there an advertised interest rate and an effective interest rate?
While comparing the personal loans available in Singapore, you’ll encounter at least two distinct interest rates attached to each loan. Here’s what they mean and how they differ:
- Advertised rate. This is also known as the nominal rate, which is the interest the bank charges you on the sum you borrow.
- Effective interest rate (EIR). The EIR reflects the true cost of borrowing to the consumer, which includes a variety of fees on the services the bank offers. These may be the administrative fees, which are added to the interest charged on your loan, and increases the amount you have to pay back in total.
Hence, if you are considering a personal loan, you should definitely pay attention to the EIR – which is the one you have to pay.
There are three types of fees you should expect: Upfront fees (establishment and application fees), ongoing fees (monthly, annual or direct debit fees) and fees that are charged if you default on the loan or miss a repayment. Do note that the lender might not necessarily charge you all these fees, so make sure to check with them before applying.
To get an estimate of your borrowing power, input your loan amounts into a personal loan calculator on the lender’s website to see what the monthly repayments will approximately be.
How can I improve my chances of the loan being approved?
There is no way to guarantee your approval for a personal loan, but giving yourself the best chance at being approved starts with meeting the eligibility criteria set by the lender. To further your chances of being approved, keep the following in mind:
- Establish your borrowing capacity. What repayments can you afford? Lenders will use a variety of criteria to decide how much you’re eligible to borrow, but you need to know how much you can afford to repay.
- Building good banking history. Keep your account in good standing to build a positive relationship with your bank, even if you don’t plan on borrowing from them.
- Keep your credit rating in good standing. Make sure you keep track of all your payments, from credit cards to utility bills, because any arrears, debts, or missed payments will affect your ability to access credit.
- Keep track of your saving goals. If you manage to contribute to your savings regularly, it shows lenders that you are likely to manage ongoing loan repayments.
Am I eligible for a loan?
Eligibility for personal loans depends on a few different things:
- If you have a low income. Applicants with low incomes or who work part-time can still be approved for personal loans. It’s always a good idea to check the borrowing requirements and check your repayments with a loan calculator.
- If you have bad credit. You’re still able to apply for certain personal loans if you have negative marks on your credit file. Bad credit loans are still possible. You might end up paying a higher interest rate on these loans, so it’s important to compare a range of offers before applying.
- If you have an existing credit card or personal loan debt. You may still be approved for a new personal loan but if this is the case, but you should calculate your repayments and your debt levels before proceeding.
- If you don’t meet the minimum requirements. You still might be able to apply with a guarantor. This is where someone, usually a family member such as a parent, agrees to ‘guarantee’ your personal loan should you fail to meet your obligations.
But I'm an expat/foreigner with work visa - can I still get a loan?You could still get your personal loan approved if you hold a visa, although many of the major banks won’t lend to you. If you are researching institutions that might provide loans to you, then it’s best practice to go in armed with as much knowledge as possible. Find out what banks could offer you a loan, what the criteria are and how you can maximise your chances of being approved.
How to apply for a personal loan
1. Determine the amount 💰
Crunch some numbers to figure out how much you need to borrow and how much you can afford to pay back each month. Also, compare different types of loans to find the one that suits your needs best.
2. Shop around 🛍️
Look for lenders that offer the type of loan you need and eligibility requirements you can meet. Then compare factors like rates, fees and terms.
3. Prequalify 📝
After you narrow down your choices, check if the shortlisted lenders supports preapprovals. With preapprovals, you can learn which rates and terms you might get without making an application that can affect your credit score.
4. Finish the application ✅
After you decide on a lender, follow the steps to complete the full application and submit the required documents to verify your income.
Each bank and institution have their own criteria that you’ll have to meet when submitting a loan application.
The questions we’ve been asked about personal loans
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