We know and understand how paiseh most of us are when borrowing money from friends and family. However, how can one overcome any financial difficulties that life throws at them when they are not financially stable? Well, there are various options, but perhaps one of the most common is personal loans.
Most banks in Singapore offer a wide range of personal loan packages. These loans are usually targeted at different people depending on parameters such as income, credit score, etc.
Personal loans are meant to offer borrowers financial relief when they cannot afford a situation or do not have the financial muscle the situation demands. It is important to note that while most loans have similar terms and requirements, they differ. Let us look at personal loans, what they are, and how they work to understand this financial tool better.
What Is a Personal Loan and How Does It Work?
A personal loan is a financial package that one can get from a bank or a licensed moneylender in Singapore. The bank issues a single-payment loan, and as soon as the funds are placed into the borrower’s bank account, the charged interest accumulates. The borrower is free to use the loan for whatever purpose they want.
Money lenders also provide personal loans. However, they offer different loan parameters to banks. The monthly interest rate is 1-4% with a loan tenure of up to 1 year and a maximum loan quantum of 6x the borrower’s monthly salary.
Best Personal Loans in Singapore
To compare the personal loans offered by the different banking institutions in Singapore, let us take an example of a borrower with a monthly income of $2,500. The borrower is looking for a personal loan of $10,000 and wants to repay it in 2 years. Let us use these to compare the various loan parameters to determine which bank is the best for personal loans in Singapore.
|Bank||Effective Interest Rate (EIR)||Interest Rate||Processing Charges/Fees||Monthly Loan Repayments (For a $10,000 loan over 2 years)|
|OCBC Personal Loan (ExtraCash)||12.11%||5.42%||$100||$462|
|POSB Personal Loan||8.2%||3.88%||$100||$449|
|DBS Personal Loan||8.2%||3.88%||$100||$449|
|CitiBank Quick Cash Personal Loan||6.5%||3.46%||No||$446|
|Standard Chartered CashOne Personal Loan||8.64%||3.84%||$199 for the first year||$446|
|UOB Personal Loan||6.4%||3.4%||No||$445|
|HSBC Personal Loan||6%||3.2%||No||$443|
HSBC has the market’s best available personal loan option. However, you can see that the difference between it and others is not that much, especially considering that the loan tenures looked at above were 2 years. Additionally, the bank also offers personal loans to both members and non-members.
1. HSBC Personal Loan – Lowest Interest Rate
This is a great personal loan package for any permanent residents or Singaporeans with an annual income of more than $30,000. It is the best industry offer for anyone who can qualify for this personal loan.
One of the main things that stand out is that the bank gives an actual interest rate of 3.2%, which is the lowest in the market. In addition, they do not charge any personal loan processing fee, and the effective interest rate is 6%, the lowest in the market.
Suppose the borrower is a member and they meet all the requirements and eligibility criteria. Their loan can be approved quickly, mainly if they apply for a lower personal loan quantum. The process can take a week if one applies for a larger loan, i.e., $100,000 and above.
It is important to note that this loan is available to both members and non-members of the banks and that the loan tenure can be up to 7 years. However, depending on the borrower, the personal loan interest rates, loan tenure, and amount allowed, as each application might differ from another.
2. UOB Personal Loan – Instant Approval for Members
The loan option is available to permanent residents and citizens aged between 21 and 65. Like the personal loan option from HSBC, this one is available only to borrowers with an annual income of $30,000 and above.
One of this loan package’s significant draws is instant approval for a loan if a member applies online.
The borrower has the option of a flat and fixed interest rate of 3.4% or an effective interest rate between 6.22% and 6.42%. The maximum loan tenure is 5 years, with the 3 years tenure having the highest exclusive interest rate.
Unlike the HSBC personal loan, which is open to all that meet the criteria, this loan option is only for UOB CashPlus and existing UOB Credit Card accounts. If one is not an existing member, one can still apply for this loan package; however, one will be required to get a CashPlus or Credit card membership.
3. Standard Chartered CashOne Personal Loan – Quick Loan Approval for Citizens, PRs, and Foreigners
One main factor that makes this loan option attractive to many people is that the annual income eligibility criteria are set lower, at $20,000 for permanent residents and citizens and $60,000 for foreign borrowers. Due to this, many more people can qualify for the CashOne personal loan from this bank compared to any other options discussed above.
Once the loan has been approved, the banks will charge processing fees of $199 for the first years and no charges for subsequent years. However, whenever you fail to meet the monthly loan repayment schedule, you will be charged a penalty of $50 for the late or failed payment that year.
Due to loan administrative fees charged for the first year, the loan option might be better for those seeking larger loans. For example, if you applied for a $10,000 loan, you would have paid a fee of 1.99% of the principal loan amount. However, if you apply for a larger loan, say $20,000 and above, the fees would be less than 1%.
The interest rate on this loan begins at 3.48% with an EIR of 10% or more. However, this should not worry you as each loan application is different, and these rates might change. Look at the comparison table below to see the average rates by the bank.
The personal loan package is available to anyone aged between 21 and 65, a citizen or permanent resident of Singapore, or a foreigner as long as they have a Singapore Employment Pass.
Furthermore, the loan is available for both members and non-members of the bank. Additionally, anyone meeting the eligibility criteria can complete the approved loan disbursement in about 15 minutes. All one has to do is sign in using their SingPass account and apply for the personal loan online.
4. CitiBank Quick Cash Personal Loan – Personal Loan for New and Existing Members
Citibank’s personal loan package has two options. One is for new customers, which attracts an interest rate of 3.46%, and the other is for existing customers, with a loan interest rate of 4.82%.
A critical feature for members is knowing in advance if the bank has approved them and whether or not they qualify for the loan. They have to log in using the banking app, apply for the loan, and get instant approval if they have already been prequalified for the personal loan by the bank.
Additionally, members can get a personal loan with zero interest and 3.5% processing fees if they apply for a long tenure of under 1 year. However, although this happens, it is not common for individuals with excellent credit history and payback capabilities.
The maximum loan tenor is 5 years, with an interest rate of 3.48%, an EIR rate of 6.5%, and no processing fees.
The loan is available to citizens and permanent residents of the country with an annual income of $30,000 or above. Also, the applicant has to be between 21 and 65 years.
5. DBS Personal Loan – Instant Personal Loans for Pre-Approved Members
This personal loan is only available to current DBS customers.
One of the personal loans on the market that caters to people with a low annual income. Rather than having the minimum required annual income of $30,000, the bank lowered this requirement to $20,000. Provided you are currently using a DBS credit card or a DBS Cashline, or if one’s income is presently credited into a DBS account, one can receive the cash released immediately.
The bank offers rates that start at 2.88%. A 1% handling charge is added, making the least potential EIR approximately 5.79%. Loan terms range from one to five years.
Singaporean citizens, permanent residents, and foreigners with DBS credit card or Cashline accounts are eligible for the DBS personal loan. Applicants must be between the ages of 21 and 75 and have a minimum annual salary of $20,000.
Alternatives to Personal Loan
Personal loans are not the only financial package available on the market. Some alternatives are explained below:
1. Term Loan
This loan option allows the borrower to access a loan with a preset repayment plan. One of the main advantages of this type of loan is that the borrower has to pay the loan according to their capability, making it more convenient.
Also, they tend to have lower interest rates in Singapore than personal loans.
2. Line of Credit
Banks mostly offer this type of credit line loan in Singapore. Most of these loans have flexible terms. The banks extend an amount the borrower can take as a lump sum or in smaller payments. One thing about the loans is that they have low-interest rates; however, when one fails to meet their repayment obligation, the rate can be astronomical.
The borrower can access more funds after paying the initial amount allocated. It is more of revolving Credit, similar to credit card debt.
Licensed Moneylender’s Payday and Personal Loan
|Minimum Income Requirement||Eligibility||Loan Tenure||Loan Amount||Loan Monthly Interest Rate|
|Payday Loan||$2,000||18 years and above||Until the next payday, or 1 month||Up to matching your monthly salary||1-4%|
|Personal Loan||$2,000||18 years or above||Maximum of 12 months||Up to 6 times your monthly salary||1-4%|
Most licensed moneylenders regulated by the Ministry of Law, by the Registry of Moneylenders offer these two options in Singapore.
For the payday loan, the borrower is given an advance on his salary under the condition that they must pay the amount back immediately after their salary comes in. In most cases, the amount allocated under this loan scheme can be small, considering that it has to be lower than the borrower’s monthly income.
Personal loans, on the other hand, are slightly different. The borrower has access to up to six times their monthly salary. One thing that is true about moneylender loans compared to banks is that they have somewhat higher interest rates on their loans. However, this is understandable given that they have lenient requirements and, in most cases, process loans faster than banks, especially for new members.
Tips for Choosing the Best Personal Loan
While we understand that personal loans are among great financial products to help you whenever you face a financial situation that you cannot handle, it is still important to remind you that debt is not something to take lightly. While most personal loans do not require collateral, they can still affect your financial situation if you default.
To avoid all this, you must choose a personal loan option that you are comfortable with. Below are some tips to help you choose the best personal loan option for your needs
- Do You Need a Loan: Perhaps one of the most overlooked factors is whether or not one needs a personal loan. As a rule of thumb, always ensure that you handle any financial difficulties with your savings or reserves if it makes sense. This will make the whole process a lot cheaper than using a loan.
- Researching the Options Available: Just because you are banking with a specific institution does not automatically mean that personal loan packages are best. While this might be true in some cases, in others, it is not. Ensure you do your market research well to determine the best packages available.
- Interest Rate: One of the most important factors to keep an eye on when comparing different loan options is the interest rates. While most banks offer rates that range closely, there are best rates if you look closely enough. Having a loan with a lower interest rate means you will have to pay less interest accrued on top of the principal personal loan amount.
- Loan Processing Fees: Choosing a loan with very little processing fees is essential. This way, you will get the most out of your loan.
- Monthly Loan Repayments: Once the loan is approved and the funds disbursed, the borrower is expected to start meeting the monthly payment obligations. As such, one should ensure that they take a loan with a payment plan they can comfortably afford. An excellent way to do this is to ensure this is to take a loan where the monthly repayment does not exceed 30% of your total salary.
- Processing Time: Institutions of lending have a different timeline for processing and approving personal loans. This can be quick, especially for existing bank members already prequalified. On the other hand, most licensed money lenders in Singapore process the loans on the same day.
- Eligibility Criteria: Before applying for a personal loan, you must first check to ensure that you meet all the requirements and eligibility criteria. This will save you the time of applying for a loan and then getting turned down because you did not qualify.
While each of these factors and others is very important, it is essential to note that one should not only look at one aspect but rather a combination of all these to choose the best personal loan package for their needs.
1. Which bank is best for taking personal loan?
The best bank for a personal loan is HSBC. The bank has the most favourable personal loan terms in the industry.
2. Which bank provides personal loans easily?
DBS and Standard Chartered banks are the easiest to allocate and disburse applicants’ loans.
3. Which bank has the lowest interest rate for personal loan?
HSBS personal loan package has the lowest interest rates on the market. The bank offers an interest rate of 3.6% and an EIR of 6%. These are the lowest rates currently available for a personal loan on the market. All these, coupled with the fact that the bank does not charge any loan processing fees, make HSBC the best option for anyone looking for a personal bank loan.
4. Which bank provides the fastest loan?
Most banks provide loans quickly, especially if a member is applying for a smaller loan. That said, Standard Chartered has the quickest approval for members, which is around 15 minutes when they apply online.
5. What is the difference between the interest rate and EIR?
The interest rate is the simplest to understand and calculate of these two types of rates. For example, when a borrower gets $20,000 for a tenure of 1 year with a rate of 5%, then the interest on the loan will be $20,000 X 0.05, equating to $1000. With the same terms but a tenure of two years, the interest becomes $1000 x 2, equating to $2,000.
The EIR (effective interest rate) is more complicated since it includes other loan costs, such as processing fees. In addition, the EIR accounts for all the payment schedules, the funds going towards the principal amount, and interest from each repayment made.
Finding a personal loan package from most banks should not be a difficult task. Most banks have offers that look the same but are slightly different regarding parameters such as terms, eligibility, tenure, and others. Here are a few take away to get you started searching for the best personal loan for your needs:
- Most banks will process and disburse loans relatively quickly for members, mainly when they apply for smaller loans.
- HSBC offers the best bank for personal loan as of writing.
- Other banks, for example, Standard Chartered, do not only offer personal loans to permanent residents and citizens but also foreigners with a Singapore Employment Pass.
- Licensed moneylenders can be a good alternative, mainly because they do not require membership to award loans. Additionally, they have favourable requirements that most people can qualify for.
While one can get a loan from a bank, they tend to have stricter eligibility requirements. One alternative is to seek a personal loan from a licensed money lender with a more lenient requirement and process the loan the same day, such as A1 Credit. A1 Credit is a registered moneylender that provides various loan options to meet your needs. Contact A1 Credit today to get a quotation for the loan you are looking for.