Representation of man applying for loan pwalking across wooden block with post-covid-19

Applying for a Loan in Post-pandemic Singapore

6 min

As a city-state, Singapore can be especially vulnerable to volatility in the global market. However, Singapore has fared well in the face of the global COVID-19 pandemic.

We are one of the few countries outside of oil exporting nations that can boast of a healthy surplus of reserves. Singapore’s diverse economy has also helped it stay resilient with the large electronics and medical manufacturing sectors doing well in times of COVID.

The current situation

In terms of ‘business-as-usual’, Singapore has lifted all restrictions and is even open to tourism. Singapore even held the Formula 1 race after three years in 2022 with a record 302,000 people attending.

The matter of concern is increasing inflation. This is not unique to Singapore, with rising energy costs and supply-chain disruptions affecting countries across the globe.

There is also an increasing number of well-to-do foreigners who are moving to Singapore, which also contributes to an increase in the cost of living. This has also translated to higher interest rates charged by major banks on home loans.

With so many changes in the economy in Singapore, it is important to understand what you need to keep in mind when you apply for a loan.

Why apply for a loan now?

For anyone who wants to create a secondary income or open a business, there is no time like the present to apply for a loan. With the number of changes that have taken place after the pandemic, there are opportunities as well as challenges that you might want to explore to see if there are hidden ideas for a business.

Business loans can help you kick off your entrepreneurial dreams. If you are looking at supplementary income for driving for Grab or Gojek, for example, you could look at an affordable car with a Grab/Gojek loan.

If you find yourself in a cash crunch and need better cash flow, you may be tempted to use your credit card for a cash advance since it seems like the easiest and only option you know of.

Personal loans and emergency loans however are better suited to such situations and attract a lower interest rate. Exploring loans and their interest rates instead of using credit cards for a cash advance when in urgent need of money is highly recommended.

Another thing to note is that while the Singapore government has always been extremely business-friendly, it is currently even more so. There are a variety of active government schemes aimed at boosting self-reliance, including employee wage subsidies and low-interest loans.

Things to keep in mind before you apply for a loan in Singapore

Infographic on key considerations before applying for a loan

A loan is a responsibility that you should not take lightly. The consequences of mismanaging your finances with borrowed money can affect your credit score. It affects your ability to apply for future loans, the interest rate you are charged, and the terms you get.

Before you apply for a loan, ask yourself these questions and answer them honestly:

How much do I need?

It may be tempting to get an especially large loan if the rates are attractive, but don’t go overboard. Additional debt is meaningless if you are only going to stash the money away in an account. Create a detailed business plan or personal budget and estimate the amount you need accurately.

How long will I have to pay it back?

This is one of the first questions that you should ask because the lender will ask you the same thing. Your business plan should take into account the rate at which you expect to make a profit. This will help you obtain a lower rate because you will be able to pay the loan off faster.

How much will I pay in interest?

All licensed moneylenders in Singapore will give you reducing interest loans. This means that you will pay a fixed interest rate against the remaining loan principal every month. To understand how a reducing interest loan works, let’s compare it with a flat interest loan. Let’s assume that we take a 6-month loan with an interest rate of 2% per month and a loan amount of $5,000.

Reducing Interest Loan:

Month Monthly Repayment Monthly Interest Monthly


Closing Principal Balance
1 892.63 100 792.63 4,207.37
2 892.63 84.15 808.48 3,398.89
3 892.63 67.98 824.65 2,574.24
4 892.63 51.48 841.15 1,733.09
5 892.63 34.66 857.97 875.12
6 892.63 17.5 875.12 0

Total Interest Paid: $100 + $84.15 + $67.98 + $51.48 + $34.66 + $17.5 = $355.77

Flat Interest Loan:

For a flat interest loan, the interest is calculated on the initial loan amount throughout the loan period. The interest remains the same.

Month Monthly Repayment Monthly Interest Monthly


Closing Principal Balance
1 933.33 100.00 833.33 4,166.67
2 933.33 100.00 833.33 3,333.34
3 933.33 100.00 833.33 2,500.01
4 933.33 100.00 833.33 1,666.68
5 933.33 100.00 833.33 833.35
6 933.33 100.00 833.33 0

Total Interest Paid: $100 x 6 months = $600

As you can see, with the reducing interest loan, the total interest paid is $355.77, while with the flat interest loan, the total interest paid is $600. The reducing interest loan results in lower overall interest payments compared to the flat interest loan.

Can I afford the monthly payment?

The entrepreneurial spirit is admirable, but it’s crucial not to let it overshadow practicality. When starting a business, it’s important to consider the initial phase as a period of catching up and establishing your venture. During this time, it’s common to have little to no income. It’s essential to factor this into your plan and carefully assess your financial situation.

Whether it’s a business loan or any other type of loan, take into account all your regular expenses and budget for emergencies. Once you have accounted for these expenses, evaluate how much you can afford to allocate towards loan repayment. Consider what amount is feasible and realistic given your current financial circumstances.

Are there any additional fees associated with the loan?

Loans not only incur interest charges but also come with various fees. These fees typically include administrative charges for processing the loan application, as well as penalties for late or missed payments.

The cumulative fees can significantly impact the total amount payable. Make sure you have a clear understanding of the total sum that needs to be repaid.

Do I have a good enough credit score?

Your credit score determines whether you get a loan from a bank at all. Once you do, it affects the maximum that you can borrow as well as the interest rate.

If your credit score is low, you may have to wait for it to improve so you can get better loan terms. The alternative is to get a co-signer or to explore your options with a licensed moneylender. The latter only needs proof of your employment and monthly income to extend a loan. As long as those are in order, the credit score may not be a dealbreaker.

Here’s a nifty checklist of things to keep in mind before you apply for a loan in Singapore:

  • How much do I need?
  • How long will I have to pay it back?
  • How much will I have to pay in interest?
  • Can I afford the monthly payments?
  • Are there any additional fees associated with the loan?
  • Do I have a good enough credit score?

Be cautious of the loans you take up during this time. The world is still reeling from a major recession and inflation. This means that you need to be smart about money and apply for loans that help you improve your financial situation and support your growth plans.

Get in touch with CashDirect. Our experienced financial experts can walk you through the loan options that best suit your needs. Understand your financial options to be better informed about how to plan your future.


The information provided on our website is for educational and informational purposes only and is not intended to be a substitute for legal or financial advice. While we try to ensure that information on this website is accurate, we do not warrant that the information will be free from error. We shall not be liable for any loss or damage that may arise from the use of this website.

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