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5 Things You Should Know About Personal Loan Interest Rates in Singapore

No Singaporean has gone through their lives without using a personal loan as additional financing for a time-sensitive investment or expense.

Truthfully, all personal loan interest rates increase yearly. They start at 3.5% and often end with an enormous 11% due to the yearly interest rate increases. Most Singaporeans use the interest rate as their primary factor for comparison.

However, personal loans have other features that significantly affect the final interest amount over the principal. The loan’s tenor, fixed monthly amount and payment period, and the minimum amount you can borrow all matter significantly in finding outstanding personal loans in the country.

Best Personal Loans in Singapore

Here are the best interest rates coming from Singapore’s financial institutions. The values we’ve listed on this table are subject to change without any notice. Take note of them below.

Personal LoanEffective Interest RateProcessing Fee
HSBC Personal Loan3.7% to 3.8% (EIR: 7%)None
Citibank Quick CashStarting at 3.99% (EIR: 7.5%)None
POSB/DBS Personal LoanStarting From 3.88% (EIR: 7.56%)1%
Standard Chartered CashOne3.88% (EIR from 7.67%)Waived
UOB Personal Loan3.88% (EIR from 7.67%)1%
OCBC Cash-on-Installments3.68% (EIR from 7.21%)1%
Hong Leong Bank Personal LoanFrom 3.88% (EIR: 8.78%1.5% or SGD $100
OCBC ExtraCash Loan5.42% (EIR: 10.96%)2% or SGD $200

It’s easy to get confused by the terms we’ve listed on this table. Here are some explanations about each term we think is not too common knowledge for most borrowers:

  • Effective Interest Rate (EIR)

A loan’s EIR is the closely-estimated, and mostly-accurate interest rate borrowers can receive. This rate includes the processing fees and regular loan payment schedules, which play a tremendous role in the final interest rate you’ll use throughout the loan tenor.

  • Processing Fee

Most personal loans Singapore providers include are deducted from your loan’s principal. An SGD 10,000 personal loan will have a 1% processing fee, equivalent to 1%. Truthfully, it seems negligible for most borrowers, but it does give banks a tremendous profit, especially if you consider the hundreds of thousands of Singaporeans borrowing daily.

  • Interest Rates

Every borrower is familiar with the interest rate figures. However, it can be confusing when you read “starts from x%.”
Here is an explanation: banks and financial institutions calculate interest rates using the borrower’s risk profile to ease your confusion. These institutions work with Credit Bureau Singapore to learn about the credit history, risk grade, and score of potential borrowers.

Additionally, the loan monthly repayment or tenor and prospective loan amount require further calculation. The final interest rate you’ll see, which can be higher than the starting figure the lender advertised, is the culmination of all data and calculations that lower your defaulting risk.

Which Details Should You Greatly Consider When Applying for a Personal Loan?

When you’re applying for a personal loan, make sure you consider the following details to find the best one for you.

  • Loan Tenure

Most banks and financial institutions refer to this as the personal loan tenor alternatively. This figure is the length of time you have to pay back the complete loan principal plus interest.

Truthfully, it sounds convenient to extend your loan payments for the longest time possible. However, per annum/ yearly interest rate increases added to your regular payment amounts become heftier than the previous year.

Therefore, choose the right length and minimize the added interest for your financing.

  • Fixed Monthly Payment Period and Amount

Most banks and financial institutions calculate the fixed monthly payment period and amount by dividing the number of months with the total loan principal. The principal remains consistent throughout the loan tenure.

However, banks will add a significant interest rate value to your monthly principal payments. You will incur penalty fees if you fail to pay for your fixed monthly payment period. In Singapore, only banks can compound penalty fees with your interest.

  • Interest Rates Excluding Late Fees and Penalties

It’s good advice to consider products with the lowest rates. In doing so, you have a lower principal plus interest total payment by the tenure’s end.

However, most financial products start with very low or even zero interest, which are advantageous if you can pay your loan within the low-interest timespan. Most banks will raise personal loan rates incrementally per year by the third year until the loan tenure’s final year.

  • Minimum Loan Amount

Business owners might need SGD30,000 to scale their business with new equipment and facilities. However, you might not need something as high as SGD30,000 and the high per annum interests you’ll deal with during your regular loan payment.

Sometimes, a minimum loan amount below your outstanding value with semi high interests is a better choice than those with low interests but only offers business loan-high amounts that are too excessive in both quantity and liabilities you’ll need to answer to.

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How Do I Make It Easy To Find The Best Personal Loan in Singapore?

It’s daunting to know that you have so many choices for financing in Singapore. However, it doesn’t have to be challenging to find the perfect one for you. Here are a few ways to make it easy to choose the best personal loan interest rates and other financing in the country that’s suitable for all your needs.

  • Total Cost of Loan Including Annual Interests

Take note of both the loan principal and annual interest rates. The loan principal is the total loan amount you can receive during its payout. The per annum interests increase your actual monthly payments every year. Make the necessary calculations before you finalize your application.

Also don’t forget to take into consideration your minimum annual income, your minimum annual income will help you give an idea if you pay back the loan amount properly depending on your total annual income conceived.

Many Singaporeans have been caught by the overwhelming total of their annual interests by the loan tenure’s end. By making the right calculations beforehand, you can avoid all this trouble in the process.

  • Monthly Payments

You’ll need to deal with your monthly payments regularly. Your failure to pay back the required sum adds loan penalty fees to your next regular payment. If you neglect them, those amounts add up, making them near impossible to pay back if you don’t take action to pay them ultimately.

  • Income-to-Debt (or Expenses) Ratio

To know if you can pay for your loan’s regular payments, take inventory of your income to debt (or expenses, if you don’t have any active loans yet) ratio. If your costs eat up more than 40% of your monthly income, put off applying for a personal loan until you have the means to increase your income.

Frequently Asked Questions

Here are a few questions and difficulties that most Singapore borrowers have when applying for a loan.

1. What Are The Different Types of Loans Available in Singapore?

Singapore financial institutions, including licensed moneylenders, offer personal, business, foreigner, and payday loans. In some cases, banks and other financial institutions can create a tailor-made loan, especially for borrowers who have excellent credit standing with the bank or financial institution they plan to work with.

2. Are There Good Alternatives to Personal Loans?

Specialized loans, which cater to particular situations, are better choices than just general-purpose personal loans.

For example, a payday loan has a high-interest rate and is an unsecured loan. However, it can provide borrowers immediate financial relief until their income arrives. Payday borrowers pay the full loan amount, which is equivalent to their regular pay by the next month.

3. Are Personal Loans Useful for Car Purchases?

Yes, they are. However, if the terms for in-house or bank car financing is better than the available personal loan, use the latter instead.

4. Can I Finance My Honeymoon Using Credit Cards or Personal Loans?

Yes, you can. Truthfully, many financial institutions in Singapore offer honeymoon loans, which they’ve specifically made for couples who want to borrow money for their honeymoon but lack or are short on funding.

5. Are Term Loans Better Than Credit Lines?

It depends on your financial objectives. A revolving line of credit is useful if you need immediate cash for sudden emergencies. However, mismanaged lines of credit can plunge you into deep debt.

Term loans are outstanding when you have one clear financial objective. However, they’re not as flexible as lines of credit when you need instant cash.

Use Loan Comparison Websites to Make It Easy Finding The Best Rate Personal Loan For You

Loan comparison websites – Instant Loan, can help you find the perfect financing for your needs. Check out our websites to find the best rate personal loan that’s perfect for you!

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