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How overdraft works in Singapore

Say goodbye to overdrawn account fees and have a convenient line of credit attached to your transaction account.

Updated

Fact checked

An overdraft facility can be useful if your account occasionally slips into the red. It’s a line of credit that you can add to an everyday transaction account. Once you exhaust your available funds, you’ll be able to access an additional credit limit.

Find out how these accounts work in our guide below.

How does a personal overdraft facility work?

Personal overdraft facilities are a type of short-term credit linked to your everyday transaction account. You may withdraw cash or send cheques from this account up till a set overdraft limit. Overdraft funds will only be accessed when the other funds in your account have been used up. Depending on your bank provider, you may pay fees on your overdraft account like interest charges and set-up fees.

Since overdrafts are a “revolving line of credit”, you may continuously deposit and withdraw money, as long as your outstanding total is within the overdraft limit. Should you exceed this limit, your account “goes into excess”, which is a signal for you to repay the amount owed. If you fail to do so, you may face costly charges.

What types of overdraft facilities are available?

Secured overdraft facilities

  • You commit an asset to the bank as collateral. This could include bank deposits, property, or shares.
  • If you can’t repay your debt, the bank has the right to sell your assets to recover the amount you owe.

    Unsecured overdraft facilities

    • You do not have to commit any collateral.
    • If you earn at least $30,000 a year, you may be granted an unsecured credit of up to 4x your monthly income. This includes the combined credit on your credit cards and other unsecured credit facilities.

      Fees and charges involved

      Here are some common types of fees you may encounter with both secured and unsecured overdraft facilities.

      • Interest charges. Interest fees are calculated, on a daily basis, on the amount of overdraft you’ve used. These costs are chargeable each month.
      • Penalty interest charges. This refers to the interest payable on the amount gone into excess.
      • Chequebook fees. Banks may charge fees related to issuing chequebooks.
      • Returned chequebook fees. A cheque will be returned to you should your account go into excess. In this case, the bank charges an interest fee on the excess amount.

      Compare overdraft facilities and personal lines of credit

      Providers offering overdraft facilities in Singapore

      There is a range of providers offering both personal and business overdraft facilities in Singapore. Here are a few you may wish to consider.

      • Citibank. Citibank’s Overdraft Facilities, which can be used in USD or SGD, may be used for both personal and business needs.
      • Standard Chartered. Standard Chartered’s Business Overdraft offers a revolving line of credit up to $300,000 with no collateral required.
      • Bank of China. Available to individuals aged 21-65, Bank of China’s secured overdraft facilities offer flexible repayment schemes.
      • DBS. DBS offers secured and unsecured overdraft facilities that you can apply for easily online, using Singpass MyInfo.
      • UOB. UOB’s overdraft facility is available to businesses looking to boost their cash flow without the stress of a fixed tenure and fixed repayment amounts.

      If you’d prefer a personal line of credit, consider the providers we’ve compared in the table below.

      DBS Personal Loan

      DBS Personal Loan

      From

      3.88 % p.a.

      rate

      • 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.

      • Get an interest rate as low as 3.88% (7.56% EIR)
      • Borrow from S$500 up to 10x your monthly salary
      • Near-instant loan approval for existing DBS customers
      Go to site
      Promoted
      Name Product Interest Rate From Loan Amount Processing Fee
      DBS Personal Loan
      3.88%

      EIR: 7.56%

      S$500 – Up to 10x your monthly salary
      1% processing fee
      Apply today and receive an interest rate from 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
      3.88%

      EIR: 7.56%

      S$500 – Up to 10x your monthly salary
      Based on your personal credit and income profile
      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.
      Standard Chartered CashOne Personal Loan
      3.88%

      EIR: 7.67%

      S$1,000 – Up to 4x your monthly salary, subject to a cap of S$250,000
      S$0
      Apply by 31 August 2020 to receive Cashback equivalent to 50% of your first month's instalment loan amount. T&Cs apply.
      UOB Personal Loan
      3.68%

      EIR: 7.21%

      S$1,000 – Up to 95% of your available credit limit
      1% processing fee
      Receive an interest rate of 3.68% including quick cash approval and affordable repayments.
      Citi Quick Cash Loan
      4.55%

      EIR: 8.5%

      S$1,000 – S$100,000
      S$0
      Get cash starting at 4.55% p.a. (EIR 8.5% p.a.) on a 36-month loan tenure. The interest you pay varies upon factors such as your credit score.
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      Compare up to 4 providers

      How do I find the best personal overdraft facility for me?

      As with any financial choice you make, you should compare personal overdraft facilities to get the best possible deal. You’ll also want to pick the best loan for your personal financial situation.

      • Do you already have an account with the lender? You will need to have a transaction account with the provider to get a personal overdraft facility. If you don’t have an account yet, you will need to first set one up.
      • How much will it cost? Fees to look out for include upfront fees such as establishment fees and ongoing fees in the form of monthly or annual fees.
      • What interest rate will you be charged? Since a personal overdraft facility is an unsecured loan, variable interest rates generally apply. Most banks only ask that you pay interest on the money you use, but you’ll still want to find the best interest rate available.
      • Minimum requirements. Some lenders may set a minimum requirement for how much your personal overdraft loan should be. Compare your options so you don’t take out a higher credit limit than you need.
      • Application process. If you’re the type of person that is looking for a simple enrolment process, you’ll want to examine all of your options to find the simplest one for you.

      Weigh up the pros and cons before you apply

      • You can avoid overdrawn account fees. If you find your account dipping into the red too often, an overdraft facility will safeguard you against overdrawn account fees (up to your credit limit).
      • 24-hour access. With most personal overdraft facilities, you’ll have 24-hour access to your account, and most providers will give you a debit card for convenient spending and ATM withdrawals
      • You only pay for what you use. You’re only charged interest for what you’re using, helping you to save.
      • Joint borrowing. Some overdraft facilities allow for joint borrowers, who shoulder the liabilities together.
      • The account comes with interest. Like any unsecured loan, personal overdraft facilities come with interest rates. These rates will vary from lender to lender, so it’s important to compare your options to get the best deal.
      • Fees and charges can vary. There are also fees and charges attached to personal overdraft facilities. This can be anything from enrolment fees to account-keeping fees.

      Is there anything you should avoid?

      • Overusing the account. Sometimes people overuse their personal overdraft facilities just because it is conveniently attached to their transaction account. If you apply for and get a personal overdraft facility, you should make sure you use it only when it’s necessary. Most personal overdraft facilities only charge interest on the money you use, so make sure to use only what you need and you can save yourself interest payments.
      • Taking the first loan you see. Make sure to compare personal overdraft facilities based on the applied fees and charges, the interest rates, and any requirements in order to get the best deal that suits your personal situation.
      • Going into excess. If you withdraw beyond your overdraft limit, your account will go into “excess”. The bank could decide to halt or recall all your overdraft services, which not only worsens your credit score but gives leverage to the bank to request for immediate repayment of your overdraft funds.

      How you can apply

      Once you compare the personal overdraft facilities available, you can start the application process. Each bank or lender will have its own application process and eligibility criteria.

      Generally, to open a personal overdraft facility you must meet the following requirements:

      • Be a Singapore citizen or permanent resident with a valid Singapore address.
      • Be 21 or older.
      • Pass a credit evaluation to determine if you can afford the loan. That means the lender may require information regarding your employment and income as well as personal assets.

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