Get access to much-needed funds and enjoy more flexibility with an unsecured personal loan.
An unsecured personal loan lets you borrow funds without using an asset as security. This type of loan comes with more flexibility in terms of how you use your loan amount. You can use your funds to make a large purchase, consolidate debt, or anything else you like. Find out if unsecured loans are the right fit for you in this guide.
Compare a range of unsecured personal loans
How unsecured personal loans work
Unsecured loans involve you receiving a certain amount of funds that you can use for any worthwhile purpose. You then pay the funds back with fees and interest within the borrowed term.
While you can generally use the funds however you deem fit, you may be asked to list the reason during application and this will form part of the lender’s decision.
- When completing your application, you will also need to state how much you want to borrow and the term.
Unsecured personal loans offer amounts varying between S$1,000 and S$200,000 and loan terms varying between one and seven years. You’ll find that unsecured loans come with higher interest rates than secured loans because the lender is taking on more risk.
- These loans can also come with establishment fees, monthly fees and annual fees, so be sure to check and factor them in before you apply.
Unsecured loans can be fixed or variable, and repayment restrictions differ between lenders – depending on your loan, you may be able to make additional repayments and repay your loan early without penalty.
Why is the interest rate higher than a secured loan?
Interest rates on unsecured loans are higher for borrowers as the lender is taking on a higher risk. If your loan is secured, the lender can seize the asset you’ve used for collateral to recoup the outstanding amount, but this isn’t possible with an unsecured loan. To safeguard themselves, lenders charge more interest so they have more to fall back on should you default.
Details to compare in unsecured personal loans
Comparing your unsecured personal loan options is an important part of finding the right loan. Here are some things to keep in mind when doing so:
- Interest rate. Check whether the interest rate is fixed or variable and whether it’s competitive.
- Minimum and maximum loan amounts. All lenders will set a minimum that you can borrow and the majority will have a maximum – these usually vary between S$1,000 and S$200,000. As you may not be eligible for either, it’s important to check that the amount you need falls between the two.
- Fees and charges. You can be charged upfront and ongoing fees with unsecured loans, so check what these are before you apply. You can look at the effective interest rate (EIR) which includes these fees for the total cost of the loan.
- Additional features. Your loan may come with additional features that you might find convenient, such as online account management, a redraw facility to access additional repayments or discounts on additional products offered by the lender.
Financing a trip awayHorace is looking for a way to finance his travels over the break before he returns to work as a school teacher. He doesn’t have enough money saved and so is looking to take out an unsecured loan, knowing he’ll be able to afford ongoing repayments on his current salary. He compares his options and found a loan that he’ll be able to afford to repay within a year, as he did not want running the risk of a longer repayment period in case he loses his job. He checks if he’s eligible and then applies. He soon finds out he’s been approved and makes his way to the Canary Islands.
Weighing up the pros and cons of unsecured personal loans
- No asset needed for security. When getting an unsecured loan, there’s no need to supply an asset as security. If you’re purchasing an asset with your funds, you won’t have to risk it, and you also won’t need to risk an asset you already own.
- Flexible loan purpose. You can use the funds however you like. Once you’re approved, the funds will be transferred to you and you can use them to consolidate debt, purchase what you need to or to invest.
- Easy application process. Applying for one of these loans is generally straightforward. The application can typically take place online if you can provide the appropriate documentation required. After the application, you can usually get a response in 60 seconds.
- Can have higher fees and interest. As there is no collateral with unsecured personal loans, there are higher fees enforced by the lender to compensate for the lack of security. This may come in the form of an establishment fee. Interest rates are usually much higher than secured loans as well.
- Penalties for missed payments. Again, as there is no security asset on an unsecured loan, the lender can charge you exorbitant fees for late payments or even take legal action against you if you default on the loan.
Things you should consider avoiding
- Lying about what you need the funds for. Always be upfront with your lender about why you’re applying for the loan, whether it be for business purposes or to consolidate debts.
- Getting into too much debt. If you are taking out an unsecured loan to consolidate existing debts, you should be wary of getting yourself into financial trouble by increasing your debt. Make sure you’ll be paying less with this new loan than you are currently forking out.
- Check if the lender providing your credit is licensed. Always make sure you are getting an unsecured personal loan from is a licensed lender. All providers must be licensed with the Ministry of Law; you can search through the Registry of Licensed Moneylenders via the MinLaw website.
- Fees and charges. Whenever possible, always do your best to avoid excessive fees and charges. The best way to do this is to make sure you do your research, ask questions and compare.
How you can apply for an unsecured personal loan
If you think that an unsecured personal loan is for you, all you need to do is use the comparison table above to compare your unsecured loan options. After browsing and finding a suitable loan, click “Go to site” to be directed to the lender’s website to start your application. To get an unsecured loan approved, you’ll need to meet a range of criteria set by the lenders, such as:
- You must be at least 21 years old.
- You must also have a good credit score and be able to provide proof that you can pay off the loan.
- You may be asked to provide copies of your payslips, bank account statements and other credit contracts.
- You’ll also need to provide your ID.