Personal loan in Singapore

What is a personal loan?

A personal loan is a loan taken by individuals from a bank or a non- banking financial company (such as credit Union, online lenders, moneylender, etc) to meet their personal needs.  It is provided based on employment history, income level, credit history, repayment capacity, etc. Unlike other loans, a personal loan is not secured against any asset. As it is unsecured and the borrowers do not have to put up collateral to get it, the lender, in case of a default, cannot seize anything you own. The interest rates on personal loans are higher than those on secured loans because of the greater risk associated when sanctioning them. However, defaulting on a personal loan is bad because it would reflect in the borrower’s credit report and cause problems when they wish to apply for credit cards or other loans in the future. A personal loan can be used for any need personal to the borrower such as; home furnishing, marriage, family vacation, child’s education, medical expenses or any other emergencies. The general criteria for a personal loan include borrower’s age, occupation, income, capacity to repay the loan and place of residence. The general terms that come with personal loans include:

  • The payment period (number of months or years to repay the loan)
  • The interest rate (what the lender charges you to finance the loan)
  • The monthly payment.

General Information about Personal Loan in Singapore:

Personal Loan in Singapore

In Singapore, there are no shortages of services that are willing to lend you money. Banks and money lenders have made personal loans extremely easy to get, with approval processes that sometimes last only a few hours and up to a day or two.  Any ordinary resident in Singapore may apply for personal loans from banks as long as you have a regular income from employment or you own a business in the country, good credit history and you are at least 21 years old. On the other hand, licensed money lenders target borrowers who have difficulties in acquiring loans from more conventional sources like banks because banks typically require a minimum annual income and some level of good credit history before a loan can be given. Banks and money lenders in Singapore frequently advertise personal loans with relatively low-interest rates to attract more customers. Also, the Ministry of Law provides a framework and regulations (Moneylender Act) by which moneylenders can operate in the country. It checks and balances the boundaries by which the moneylenders operate so that the rights and interests of the borrowers and the money lenders are protected.  Besides that, there is a register of licensed moneylenders that provide the public with a guide on who are the legal credit companies operating in the country. The Monetary Authority of Singapore (MAS) made a law that prevents borrowers from getting unsecured loans worth more than 12 times their monthly income. That means that if you earn $2000 monthly, you will not be able to borrow more than $28,000 through unsecured loans. 

Interest Rates and Terms

Banks and moneylender, offer unique features, interest, and terms to its potential customers. Banks focus on people with good credit and employment history because it is inaccessible to people who make less than $20,000 and lack a credible credit history. Their repayment period (terms) runs for usually 6 to 7 years and they tend to give about 2-6 times monthly salary up to S $200,000 and the speed rate of giving out the loans is usually from 15 hours – 2 days. The interest rate charged is 1% per month and tends to range from 3%- 7% per year with a high lending standard. Licensed money lenders on the other hand, because they are targeting customers that were forgone by banks, have distinct characteristics that serve the needs of a different set of customers. The biggest difference is the risk profile of the borrowers. This is because money lenders as smaller organizations than banks can’t risk giving a huge loan to someone with a very risky credit profile. They offer less than S$1,500 extremely fast (30 minutes – 1 hour) with a longer repayment term. The interest rate charged by money lenders is extremely high compared to banks because of the high risk involved. They charge 4% per month with a low lending standard.

Rules and Regulations for Banks and Licensed Moneylender (Borrowers’ Loan Amount Limit Capped, Interest Rate Capped Etc)

There are rules and regulations governing banks and licensed moneylenders in Singapore. For licensed moneylender,

  1. They cannot disclose any of your information as a follower. This can only be done with written consent from you.
  2. They can only charge a maximum interest of 4% per month on the amount borrowed.
  3. Once the loan is approved, they can charge an administrative fee upfront, capped at 10 % of the original loan amount, for legitimate costs such as securing credit reports.
  4. Late interest: for late payments, there is a maximum rate of 4% per month for each late month.
  5. A maximum of SGD60 per month for late repayment fee.
  6. The loan limit is $20,000 for borrowers whose annual income is less than $10,000 and 6 times monthly income for those whose annual income is at least $20,000 or above.
  7. The total amount of borrowing fees should not exceed the borrower’s principal amount
  8. They are required by law to state the Effective Interest Rate next to the advertised rate. The EIR should take into account processing and other fees as well as the details of your repayment schedule.
  9. Moneylenders must first obtain credit reports from the Moneylenders Credit Bureau (MLCB), which was set up in 2015. The report will highlight if the borrower has exceeded his or her cap, and this will be a deciding factor as to whether a loan is granted.

Financial Institutions (Banks):

  1. The age qualification is between is from 21-65 years to qualify for a loan.
  2. The borrower’s information is kept discreet.
  3. They are required by law to state the Effective Interest Rate next to the advertised rate. The EIR should take into account processing and other fees as well as the details of your repayment schedule.
  4. A minimum annual income of $20,000 and some level of good credit history are required before a loan can be given.
  5. Borrowers Loan amount limit is 6 times the current monthly salary.
  6. Required documents needed by the banks should be; proof of identity, proof of address and proof of income before the loan process starts.
  7. They can only charge a maximum interest of 1% per month  and within ( 3-7%) per annum on the amount borrowed
  8. Banks must first obtain credit reports from the Credit Bureau Singapore or Dp Credit Bureau, which was set up in 2015. The report will highlight if the borrower has exceeded his or her cap, and this will be a deciding factor as to whether a loan is granted.
  9. Financial institutions should conduct a fresh credit assessment before increasing a borrower’s credit limit.
  10. If a borrower’s debt on the unsecured credit facility is 60 days past due banks cannot grant further unsecured credit to that borrower or increase the borrower’s credit limits.

New/Amendments Laws And Regulation That Had Changes For The Past Few Years For Banks And Licensed Moneylender.

Several changes have taken place in rules and regulations for banks and licensed money lenders for the past few years. In 2009, there was a limit on how much an individual can borrow from a moneylender. The maximum moneylenders could give out was four months’ income if a borrower’s annual pay is $30,000 to $120,000, and two months’ income if his annual pay is $20,000 to $30,000. For those earning less than $20,000, the limit was $3,000. But there was no overall cap on the total amount an individual can borrow, collectively, from different lenders.  While for banks, borrowing limits for people whose unsecured debts are more than 12 months of their income for 90 days will be barred from getting more credit.

In 2012, lenders were required to use effective interest rates instead of nominal interest rates. This will ensure that borrowers know exactly how much interest they are to pay for a year. They are also not allowed to charge certain fees, such as payment for accepting a loan application. Borrowers, however, may still incur additional costs, such as late payment charges. For example, if a borrower opts for weekly repayment installments and defaults on payment for one month, he will face four late payment charges.

In 2015, The Moneylenders (Amendment) Bill, introduced by Senior Minister of State for Law, Indranee Rajah aims to improve and professionalize the money lending industry, by introducing better protection for borrowers and strengthening the regulatory framework surrounding the industry.  A series of earlier measures, such as imposing a 4 percent monthly interest rate on all borrowers, was implemented in May 2015. It also proposes an aggregate loan cap depending on income levels. Borrowers earning less than $20,000 a year will be able to borrow up to $3,000 no matter how many moneylenders they approach. Those earning above this amount annually may borrow up to six times their monthly income.  Also, the Law states that moneylenders must first obtain credit reports from the Moneylenders Credit Bureau (MLCB), which was set up in 2015. The report will highlight if the borrower has exceeded his or her cap, and this will be a deciding factor as to whether a loan is granted.

 

Applicable Parties to the new guidelines:

  • New applicants who are planning to take unsecured loans
  • Borrowers who were granted a loan before the new guidelines were out, specifically those who borrowed from June to September 2015. However, they are allowed to get a revised interest rate for their loans.
  • The guidelines do not apply to new businesses who were registered two years or more before the guidelines and if they have applied for loans during this period.

In 2018 to date, those borrowing from moneylenders will be subject to loan caps based on their income, the Ministry of Law said on Friday (Nov 16). The new regulations, first announced on Oct 4, were applied to Singapore citizens and permanent residents, as well as foreigners residing here. Singaporeans and PRs earning less than S$20,000 a year will be able to borrow up to S$3,000, no matter how many moneylenders they approach. Those earning above this amount may borrow up to six times their monthly income – which means someone earning S$48,000 a year could borrow up to S$24,000 from moneylenders. Foreigners will be subject to lower loan caps. A self-exclusion system for borrowers to opt-out from taking additional loans will also be put in place. Moneylenders are prohibited from lending to a person who has applied for self-exclusion. A regulatory framework has also been introduced for the Moneylenders Credit Bureau, which “places obligations” on the bureau and licensed moneylenders to keep borrowers’ data secure and confidential.

 

Recent News, Studies and Research

Recent news, studies, and research have been carried out in Singapore about personal loans. The most recent research about personal loan was done by Value Champion’s Study to compare rates and features of personal loans in Singapore.  To arrive at the best personal loan list for Singapore, they collected data on all the personal loans from over 20 major loan providers in Singapore Then, they created an algorithm that calculates how much a loan costs in dollar terms. This cost includes everything that a borrower ends up paying to the bank outside of the loan amount itself, which includes processing fees, administrative fees, and interest rates. They also took into account the benefits of promotions like fee waivers or cashback, which would decrease the total cost of a loan. They assume that each monthly installment is paid on time, therefore avoiding other penalties like late payments or early payments. However, Because these loans come with different costs depending on the size and duration of the loan and required minimum income, the cost is calculated for each duration range (1 to 5 years) and each principal amount. By mapping out each loan’s total costs at a different size, maturity, and income level, they were able to arrive that  POSB/DBS, OCBC, Citibank, Standard Chartered, Maybank, UOB offers the least cost to the borrowers.

Also according to recent news, the Ministry of Law of Singapore propounded that there are about 160 license money lender Singapore and about 7 under suspension for fraudulent acts.

 

 

In Singapore, there are no shortages of services that are willing to lend you money. Both banks and money lenders are willing to give out personal loans once their criteria are met by the borrower.
Did you know from a recent survey 82% of Singaporeans collect personal loans from both banks and money lenders?
Our sole priority is to work closely with people who want to get personal loans or have questions to ask about it.

Questions about how we can help? Want to talk about a personal loan?

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Frequently Asked Questions

ANS: you will have to be 21 and above, means of identification, a good credit and income history etc

ANS: Yes, a personal loan can be used to do anything personal to you.

ANS: yes you can get personal loans from money lenders and banks.

ANS: There is an updated list of licensed money lenders, so do well to check the registry before applying for a loan from them.

ANS: Yes, many lenders allow you to take out a second loan once you’ve paid part of your initial balance and established a history of on-time repayments.

ANS: NO. You need a good credit score to get a loan.

ANS: you can apply for a personal loan within 24 hours in banks and within 30 minute – 1 hour from money lenders. The speed also depends on the availability of your document.

ANS: you can cancel a personal loan application at any time before the loan you sign the loan agreement and the funds are dispersed.

ANS: Yes, a foreigner who is working, studying or living in Singapore can get a personal loan only if they meet the requirement for a personal loan. There is usually no big difference in the process of applying for a personal loan as a Singapore citizen.

ANS: All banks give personal loans, you will have to choose the one with the lowest Effective Interest Rate.

ANS: yes, a personal loan is an unsecured loan. This means loans made without collateral.