A glass tray holding a laptop, a small man, and bags of money presumably obtained from personal loans.

Factors to Keep in Mind while Applying for a Personal Loan in Singapore

9 min

It does not matter how financially sound you are!!

There always comes a time when life gets into some trouble and you need urgent cash to cover the unexpected expenses.

In those unpredictable timings, taking a  personal loan Singapore is an ideal choice to get rid of the problem in less time. 

However, you might be having many questions in mind or are confused about its overall process. Where to begin? Who is the licenced moneylender near me? How to know about the best rate in the market? 

These all are some of those questions whose answer you might need.  There is no doubt that personal loans always have some challenges. Even though, the problems start to arise when the day passes. For enjoying the maximum advantages from the personal loan, there is a dire need to know all the essential factors while applying for personal loans.  Before understanding all these fundamentals, we first need to know what personal loan is?

What is a Personal Loan?

Precisely, it is a short and unsecured loan Singapore that permits the users to get the loan amount without guaranteeing any security, like, cash or house.  

In return, this will raise interest rates, because if you end up defaulting on payments, neither the bank nor the money lender will be able to confiscate your property or assets.

Personal loan Types

Instalment/Term Loan

When it is about the personal term loan, the customers have to submit an approximate amount as a lump sum (upfront) that needs to be paid back on a monthly basis. As per the fixed monthly instalment loan in Singapore,  the loan time frame is of one to seven years.  It usually relies on how easily and early you can repay.

Line of Credit  (LOC)/Revolving Loan

The personal LOC offers one with the pre-approved funds to withdraw from when you require it. The customers only have to repay the interest on the duration and the amount they require to borrow. Even though there is no exact repayment period for this loan type, always remember that its interest rates are more. Hence, get the line of credit when you can guarantee that you can pay it back easily.

Balance transfer

This loan type enables the borrower to shift every outstanding loan among many financial institutions at one place at less interest rate and for better management. Some moneylenders provide a time period of more than a year and do not charge any interest.  This is usually used as a Debt consolidation method. 

Above, you came to know about the different personal loan types that are beneficial as per your requirements and the circumstances. In addition to all, you also have to know whether you are eligible to have a loan or not.

  • To get a personal loan Singapore, the borrower has to be 21 to 65 years old.
  • The annual salary for Singaporeans must be  $30,000 per annum and for foreigners, it has to be within $40,000 to $50,000 per annum.
  • Either the borrower is employed or have some income source. 
  • Additionally, the factors that find out if you can have a personal loan or not are credit score and Total Debt Servicing Ratio (TDSR).

How does Personal Loans Work?

While taking a personal loan, you get a round sum of funds which you require to repay on an appropriate time period. Many personal loans have fixed repayment periods and fixed interest rates.

It simply implies that notwithstanding the credit card debt, you have to repay the personal loan by fixing the set of the planned monthly repayment for some years. Many personal loans are amortized completely, that means the loan monthly instalments comprises the principal repayment and the interest charges. 

The amortized loans are easy with the pockets and it does not demand any sort of balloon payment in the completion of the loan term. To make it easy for you, below, we have given a table that shows how the personal loan of S$10,000 in three years fits in the different components.

Example loan Descriptions
Loan Amount $10,000
Loan terms  Three years
Flat interest rates 4.8%
Total monthly payment S$317.78
Monthly Principal repayment S$277.78
Monthly interest payment S$40

What to consider while applying for a Personal Loan in Singapore

Your Requirement

The first thing that you need to keep in mind while taking the personal loan is to know about your loan needs. Several get anxious about thinking of how they will use the loan amount; what they will purchase from the amount they have taken from the leading moneylender.

Either you want to buy the car or furniture or you want to pay off the outstanding debts that have more interest rates or you like to get some property. Even few like to use that money on purchasing the essential luxuries, like, for a trip abroad, jewellery or cruise etc.

What we meant here is that before getting started with the personal loan, it is essential to find out if taking a personal loan is of utmost importance or not. Of course, you do not want yourself to dig into more debts.

Monthly Income

It is advisable to check out the annual income before starting the process of applying for the personal loan Singapore. The reason behind this lies in the fact that the amount of salary you are receiving yearly determines the amount you can get with the personal loan. 

The basic rule is that the borrower who is earning approximately 30,000 income on an annual basis is eligible only if the income is four times more than the annual income. And, those whose earnings are less than 20,000 are eligible for less amount. 

The borrower with an annual income of 100,000 approximately can negotiate with the income more than four times. The Singaporeans with permanent or regular employment and are working for many years are more acceptable. 

Interest rates

While checking out the personal loan online, you might get more confused with several interest rates the moneylenders use to set the price of their loans. Usually, there are two types of interest rates that all came through, the nominal and the effective interest rate. You must have noticed that the first one is less than the last one.  

Do not forget to leverage the effective interest rate to measure the varied offers from the moneylenders. It is because of the reason that it considers the application fees and compounding periods. Also, it offers the best gauge when you are computing the interest rate of different providers. 

Even though, do not neglect the annual flat rate. It is helpful in calculating the amount that you have to pay back to the lenders. Therefore, check out if your monthly budgets can handle the loan instalment or not.

Terms flexibility

Taking a personal loan and servicing it are two different things. However, the aim is to repay the loan in less time and to fulfil all the terms and conditions; the circumstance might get changed in all the way. 

Like, an emergency can be there, you can lose the job, or to the maximum, there can be a drop in the economy. The flexible and reliable money lenders in singapore provide personal loans and have all the options that permit the borrowers to renegotiate the loan terms and conditions. The conditions could be – a lessening of the rate of the interest, the repayment period and a raise in the borrowed amount.

Fees and Charges

Have you ever checked out the ad that says that personal with 0% interest rates. The moneylenders are also the businesses, hence, it is tough to lend the fund with no charge. Alternatively, the fees can get paid in other ways, basically, from the processing or origination fee. 

Remember that this processing fee is generally deducted from the loan approved and basically, costs between 2 to 3% of the loan amount. The additional fees to check out includes the charges for late payment fees, loan tenor changes, early redemption or cancellation fee when you choose to pay off the loan before the expected time.

Credit Rating

It has become easier to get a fast loan credit from the moneylenders easily within the 24 hours. Besides, it is dependent on the presumption that you have a clear credit record and is not allowing the lenders to cancel the loan in any way. 

Hence, if you like to have an approval, then, assure to have minimal or no history of the bad credit score. It occurs when you do not send the applications in an appropriate time period and have not cleared any of the outstanding debts on a regular basis.

Less Tenure

Several moneylenders in Singapore ask you to have less time frame of 12 months when it is about the personal loan, also, when, you can pay back the $10,000 loan in six months. The reason behind this is that they receive the amount of interest fee from the borrower. Repaying earlier allows you to acquire the prepayment fee. Hence, those who are in need of personal loans have to check other options when they require funds.

Like; when you only need small funds, like, the $2000 to pay the hospital bill. This is not an economical choice to have a personal loan and repay it within one year. Even though leveraging the credit card is the better option, here. Consider the case, $2,000 is the total cost of personal loan for twelve months. 

The principal amount is $2000 with the processing fee of 2% at $40; the annual flat rate is 15% annually at $300. The monthly instalment is $ 192,  Total loan cost is $2,340; total cost of $2,000 with a credit card of three month time period. The principal amount is $2,000; annual Flat Rate: 25% per annum at $125. The late payment charges like $60 per month at $120; the monthly payment is $742, hence the total cost of the loan is $2,225.

Above, you can check that the cost of considering a credit card is less, however, that shows that you can pay back the huge monthly payment to clear the debts easily and quickly.

Wrapping Up

The idea of this write-up was to make you aware of those important considerations that you should look up while taking the personal loan. The need for a personal loan can occur at any point of time in life. Hence, at that time, it is prevalent to check out these vital measures. 

Be smart and choose the right moneylender!!

We hope that we are successful in clearing out our points and making you knowledgeable.

If in any case, you stuck somewhere, then, you can ask us in the comment section below.

Thanks for reading!!


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