The best personal loan is the one that meets your needs and circumstances. While one person might need a personal loan to buy a car, another might take one out for home renovation or make a consolidated debt. With a large number of personal loans available, how should you find the most suitable one for you? This guide (continued below the comparison table) will take you through what you need to know.
- Borrow from S$5,000
- Fixed monthly repayments
- Redraw on your existing loan
HSBC Personal Loan
Apply today to get approved for up to S$200,000 over 7 years.
- Max. loan amount: Up to 8x fixed monthly income or up to S$200,000
- Loan tenure: Up to 7 years
- Approval duration: 1 minute approval in principle. "Next Day" approval available for loans up to S$100,000
- Effective Interest Rate: 7% - applicable only to customers who earn at least $80,000 p.a. and tenor between 3-7 years
- Fees: S$88 processing fee, S$75 late payment fee, 2.5% early repayment fee, 2.5% + prevailing interest overdue interest fee
- What do you need? Decide why you’re taking out the loan and what you need from it. For example, you might need the loan to buy furniture as well as a car and you want to be able to make additional repayments.
- What is available? Compare the types of loan you want to apply for. Personal loans can be secured or unsecured, can be taken out in the form of a line of credit or an overdraft facility, and you can get loans with fixed or variable rates. Compare different loan types according to their features and find one that offers you everything you need. Then, check the eligibility criteria to make sure you can apply for it.
- What does the loan cost? You need to find a loan you can afford. Check whether the loan charges a fixed or variable rate, look for upfront and ongoing fees and see how flexible the repayments are. Make sure the ongoing repayments will be manageable on your budget.
When you want to apply for a personal loan, you should first compare multiple offerings so you can track down the right product. Pay attention to the following aspects and you could enjoy considerable savings:
- Do you want a secured or unsecured loan?
If you get a secured personal loan, you stand to lose the asset you’ve used as a guarantee in the event you have a problem making repayments. An unsecured personal loan, on the other hand, offers no such risk but attracts a higher interest rate.
- What are the advertised interest and effective interest rate (EIR)?
Ensure that you are comparing the EIR before signing on the dotted line. Unlike the advertised rate (also known as nominal rate), the EIR includes all additional fees and represents the true cost of the loan.
- What are the fees and charges you’ll be paying?
Some personal loans attract prepayment penalties, late charges that vary from loan to loan, and some even require you to pay application fees. Comparing these extra costs as they are important when you’re trying to determine the true cost of the loan.
- What will the term of your loan be?
While a lower interest rate might seem promising at first, you should also compare loan terms. The shorter the loan’s duration, the less you pay in the form of interest over the life of the loan.
- Online applications are easy and can offer quick turnaround
The application process is quick and the majority of lenders allow you to complete the whole process online. Some lenders, including major banks, offer same-day turnaround for personal loans.
- Range of personal loans available
You can choose from secured and unsecured personal loans as well as lines of credit, car loans and even peer-to-peer loans.
- You can get access to a competitive interest rate
If you compare the interest rates between personal loans and credit card, you’ll see why some people prefer personal loans over credit cards.
- You may not be approved
As some personal loans do not require any form of security, you can expect strict eligibility criteria. If you don’t have a good credit rating, your chances of approval are slim.
- The loan purpose might be restrictive
Depending on the type of personal loan you choose, you may be restricted as to how you can use it.
Finding the best personal loan*
Many personal loans claim to be “the best”, and that’s just what Sam found when she set out trying to find one. She needed to purchase some furniture for her house and also finance a holiday she was planning to take. She wanted to borrow S$7,000.
She had a good credit score and a full-time job. With a salary of S$50,000 p.a. (and her other expenses) she worked out that she could comfortably afford repayments of S$250 per month. She decides that an unsecured loan would best meet her needs as she wasn’t purchasing an asset to attach it to nor did she own her own home.
As unsecured loans tend to have higher rates, she found one with minimal upfront and ongoing fees to help keep her costs down. She also compared her options and found a loan with a comparison rate of 14.26% that she could repay in three years, making her repayments S$241 a month. There was also no penalty for early repayment if she found herself able to repay it early.
While personal loans are helpful in many scenarios, it’s in your best interest to avoid certain traps and pitfalls.
- Read the fine print.
Scrutinise all your options carefully right from the start and remember to look for ongoing account-keeping fees, early repayment fees and late payment fees. Read the terms and conditions document from start to finish.
- Check if the lender is licenced.
There are some credit brokers and providers in Singapore that operate illegally. If you wish to safeguard your interests, it is best that you do your research to avoid borrowing from these lenders.
- Don’t take on a loan you can’t afford.
When borrowing money, it is always important to use a calculator to find out what your repayments will be. If you can comfortably afford a loan, don’t be tempted to consider borrowing more in the event that you can’t afford it.
Before you apply for a personal loan, establish how much you want to borrow and your monthly repayment ability. You should find out how long it might take for you to pay the loan off completely, remembering that you can usually choose between making weekly, fortnightly or monthly payments.
If you’re buying an asset such as a car, you can apply for a secured loan, where the car acts as collateral, and choose between a fixed or a variable rate. You can use finder Singapore to compare personal loan rates, fees, charges and term periods of different personal loans. Once you find a loan you wish to apply for, proceed to the lender’s website by clicking “Go to Site”.
Remember that lenders will want to ensure your ability to repay a loan before they lend you any money. As a result, they might want to take a look at your credit file and may also ask for copies of your payslips, details of other loans you have, credit card bills and bank account statements.