Getting A Personal Loan In Singapore? Here’s How To Secure One With The Lowest Interest Rate

Written by Shannon Wong on April 26, 2024

Key Takeaways

When selecting a personal loan in Singapore, assessing interest rates is crucial, as a lower rate reduces the repayment amount significantly. Key considerations include comparing loans from banks and licensed moneylenders, understanding the impact of one’s credit score and annual income on loan terms, and the additional costs like processing fees. Properly managed, personal loans from reputable sources can effectively meet larger financial needs with structured repayment plans.

When considering a personal loan in Singapore, one of the most critical aspects to examine is the interest rate. A lower interest rate can significantly reduce the total amount you have to repay over the life of the loan, making it a vital factor in your financial planning.

This guide aims to provide you with a comprehensive overview of securing a personal loan with the most favourable terms. We will also delve into the differences between borrowing from banks and licensed moneylenders, highlight the importance of your annual income and credit score, and offer tips on securing the best possible interest rates.

So, make sure to read till the end.

Key Terms Explained: Preparing for Your Personal Loan

Before diving into the specifics of the best bank loans available in Singapore, it’s crucial to have a solid understanding of the terms associated with it.

Here’s a simplified breakdown of key terms:

Interest Rate

Banks typically advertise interest rates starting from a certain percentage per annum. However, the actual rate you receive is tailored to your specific situation and depends on several factors:

  • Your credit history and score.
  • The amount you wish to borrow.
  • The duration of your loan.

Effective Interest Rate (EIR)

The EIR provides a more comprehensive and accurate view of borrowing costs because it includes additional factors such as processing fees and the payment schedule.

As a result, the EIR will generally be higher than the flat advertised interest rate, offering a true reflection of the loan’s cost.

It’s important to understand that a higher EIR means you’ll be paying more in interest over the life of the loan.

Processing Fees

Often the overlooked cost of a loan, processing fees, sometimes referred to as administrative fees, can significantly affect the overall cost of borrowing. These fees typically range from 1% to 2% of the total loan amount.

It’s crucial to note that these fees are subtracted from the principal amount at the start. For instance, if you’re approved for a S$20,000 loan with a 1% processing fee, you’ll actually receive S$19,800.

Understanding these details can help you manage the terms of your personal loan more effectively, ensuring you select the option that aligns best with your financial needs.

What Are the Best Bank Loans In Singapore?

In Singapore, several banks offer personal loans, each with its own set of terms and conditions. The best bank loan for you depends on several factors, including your annual income, the amount you wish to borrow, and your credit score.

Bank Loans: The Basics

Bank loans in Singapore are predominantly affected by your annual income. It influences not only the amount you can borrow but also the interest rate applied to your loan.

Generally, banks provide loans ranging from four to ten times your monthly income. High earners are often more likely to be approved for larger loan amounts due to the perceived lower risk of defaulting.

Comparing Top Banks

Finding the right personal loan in Singapore can be a daunting task with so many options available. To simplify your search, here’s a rundown of the top bank loans, their starting interest rates, and additional fees to consider as of March 2024:

  1. UOB Personal Loan

Interest rate: 2.88% (EIR 5.43%)

Processing fee: 0%

Eligibility: Minimum income for Singapore Citizen/PR is $30,000; must be a UOB Credit Card/CashPlus customer

  1. Standard Chartered CashOne

Interest rate: 2.88% (EIR 5.84%)

Processing fee: 0%

Eligibility: Minimum income for Singapore Citizen/PR is $20,000; for foreigners, it’s $60,000

  1. Trust Instant Loan

Interest rate: 2.87% (EIR 5.41%)

Processing fee: 0%

Eligibility: Minimum income for Singapore Citizen/PR is $30,000; for foreigners, it’s $60,000

  1. GXS FlexiLoan

Interest rate: 2.99% (EIR 5.65%)

Processing fee: 0%

Eligibility: Minimum income for Singapore Citizen/PR is $20,000

  1. CIMB Personal Loan

Interest rate: 3.38% (EIR 6.38%)

Processing fee: 0%

Eligibility: Minimum income for Singapore Citizen/PR is $20,000

  1. Citibank Quick Cash (New Customers)

Interest rate: 3.45% (EIR 6.5%)

Processing fee: 0%

Eligibility: Minimum income for Singaporean/PR is $30,000; for foreigners, it’s $42,000. Rates apply to new Citi customers only.

  1. DBS/POSB Personal Loan

Interest rate: 3.88% (EIR 7.9%)

Processing fee: 1%

Eligibility: Minimum income for Singapore Citizen/PR is $20,000; existing DBS/POSB customers only.

  1. HSBC Personal Loan

Interest rate: 3.6% (EIR 6.5%)

Processing fee: 1%

Eligibility: Minimum income for Singaporean/PR is $30,000 for salaried workers, $40,000 for self-employed or commission-based workers; for foreigners, it’s $40,000.

Banks vs. Moneylenders: Which Is Cheaper?

When looking to secure a personal loan in Singapore, you’ll soon find yourself at a crossroads: deciding whether to borrow from a bank or go with a licensed moneylender.

This decision is crucial, not just in terms of interest rates but also considering the broader implications on your financial health and flexibility.

Understanding the Core Differences

At the heart of the choice between banks and licensed moneylenders are the terms of lending, which include interest rates, loan amounts, and the speed of processing.

Banks are known for their stringent eligibility criteria, which often include a high credit score, stable income, and sometimes, collateral. On the flip side, banks tend to offer lower interest rates and higher loan amounts, making them an attractive option for those who qualify.

Licensed moneylenders, regulated by Singapore’s Ministry of Law, serve a different market segment. They are often more accessible, especially to individuals with lower credit scores or those needing quick cash.

The trade-off, however, comes in the form of higher interest rates and smaller loan caps.

Analysing Cost Implications

  • Interest Rates: Banks generally offer interest rates ranging from 3.5% to 8.5% per annum, depending on various factors including loan amount, tenure, and borrower’s creditworthiness. Moneylenders, by regulation, cannot charge more than 4% per month, which can accumulate significantly over a year.
  • Loan Amounts and Tenure: Banks can lend you up to ten times your monthly salary, with loan tenures extending up to seven years, offering flexibility in repayment. Moneylenders offer shorter loan tenures, which means higher monthly repayments.
  • Processing Time: Banks take a longer time to process loans, which might not be ideal for urgent needs. Licensed moneylenders, on the other hand, can process loans much faster, sometimes within the same day.

Considering your financial journey and the quest for the best personal loan terms, 1AP Capital stands ready to assist. We specialise in offering personalised loan solutions to individuals, ensuring a fit that complements your unique financial scenario. Explore how we can support your financial goals and streamline your loan acquisition process. Discover your loan options with 1AP Capital today, and take a step towards financial clarity and peace of mind.

What Is The Interest That Licensed Moneylenders Charge?

While licensed moneylenders can provide faster approvals and less stringent credit checks, they do come with higher interest rates compared to banks.

Licensed moneylenders in Singapore are permitted to charge a maximum interest rate of 4% per month, regardless of the loan type or the borrower’s income level.

This cap is a safeguard put in place by the Ministry of Law to protect borrowers from exorbitant fees. However, even at this rate, the cost of borrowing can add up quickly, especially for longer loan terms or if the loan is not repaid on time.

Calculation of Interest

The interest charged on a loan from a licensed moneylender is calculated based on the remaining principal amount. This means that as you make repayments, the portion of your payment that goes towards the principal will reduce the base on which future interest payments are calculated.

Here’s a simple illustration: if you borrow S$10,000 and have repaid S$4,000, the interest will only be calculated on the remaining S$6,000.

Late Payment Interest

For loans repaid late, licensed money lenders can charge up to an additional 4% per month on the overdue amount. It’s crucial to note that this late interest can only be charged on the amount that is late, not the total outstanding loan.

What Other Fees To Expect With Licensed Moneylenders?

When borrowing from licensed moneylenders in Singapore, it’s crucial to be aware of all possible fees that could be applied to your loan, in addition to the interest rates.

Understanding these fees will give you a clearer picture of the total cost of borrowing and help you avoid any surprises down the line.

Regulatory Caps on Fees

The Ministry of Law has set clear guidelines to protect borrowers from excessive charges. Here’s a breakdown of the fees licensed moneylenders can legally charge:

  • Late Repayment Fee: For each month of late repayment on the loan, moneylenders can charge a fee not exceeding S$60. This fee is intended to encourage timely payments and is capped to prevent undue burdens on borrowers.
  • Loan Approval Fee: Upon granting the loan, a fee not exceeding 10% of the principal of the loan can be charged. This fee covers the administrative costs involved in processing the loan application.
  • Legal Costs: If a dispute over the loan contract ends up in court, and the moneylender is awarded a judgement, the borrower may be required to cover the moneylender’s legal costs. The court will determine the exact amount.

Impact of Fees on Total Loan Cost

These fees, while regulated, can add significantly to the total cost of borrowing, especially if you encounter difficulties with repayment. So, it’s important to factor in these potential fees when calculating the affordability of a loan from a licensed moneylender.

Best Tips To Secure The Lowest Interest Rates From Licensed Moneylenders

Securing a personal loan with the most favourable terms, especially concerning interest rates, requires a strategic approach.

Here are essential tips to help you get the best possible deal.

Improve Your Credit Score

A high credit score is indicative of good financial health and responsible credit management, making you a low-risk borrower in the eyes of lenders. Here’s how you can improve your score:

  • Timely Payments: Ensure all your bills and existing loan repayments are made on time. Late payments can negatively impact your credit score.
  • Debt Management: Keep your debt levels low. High amounts of outstanding debt can lower your score.
  • Credit History: A longer credit history can contribute positively to your score. However, this doesn’t mean you should open unnecessary credit lines.

Opt for Secured Loans

Secured loans often come with lower interest rates than unsecured loans because they pose less risk to the lender. If you have assets like property, a car, or valuable jewellery, consider using them as collateral. Remember, the downside is the risk of losing your assets if you fail to repay the loan.

Shop Around and Compare Offers

Not all moneylenders offer the same interest rates and terms. Spend time researching and comparing different licensed moneylenders:

  • Interest Rates: Look for the lowest annual percentage rate (APR) available.
  • Fees: Be mindful of additional fees that could increase the cost of your loan.
  • Loan Terms: Longer loan terms might mean lower monthly payments but could result in higher overall interest payments. Find a balance that suits your financial situation.

Negotiate with Moneylenders

Don’t hesitate to negotiate the terms of your loan. Some moneylenders might be willing to adjust their rates or terms, especially if you have a strong credit score or existing relationship with them. It never hurts to ask.

Read the Fine Print

Before signing any contract, thoroughly review all the terms and conditions. Ensure you understand the interest rate, repayment schedule, and any fees associated with late payments or early loan settlement.

Your Path to a Favourable Personal Loan

All in all, securing a personal loan in Singapore at a competitive interest rate is a strategic process that involves understanding your options and being informed about regulations. It’s about making an informed decision that aligns with your financial health and goals.

If you’re looking for a personal loan in Singapore and want terms that match your financial situation, 1AP Capital is here to help. We offer a range of loan solutions tailored to meet the needs of individuals like you.

Whether you’re addressing sudden financial needs or preparing for a major purchase, our team is dedicated to offering you a seamless and supportive borrowing experience.

Start your journey toward financial flexibility by applying for a loan with us today. Let 1AP Capital be your partner in securing a loan that meets your needs, without compromising your financial future.

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