How To Choose The Right Money Lender For Your Personal Loans?

Everyone faces some degree of financial uncertainty in their lives, some more often than others. The most common solution for most of us is to obtain a personal loan in Singapore. This can be in the form of a casual arrangement with a friend or relative or a formal loan from a bank or licensed money lender.

Formal loans come with specific criteria for repayment, including the additional cost of interest above the loan principal, processing or administrative fees, and a loan repayment period (i.e. loan tenure) where the borrower has to continually make repayments until the loan is paid off.

Curious? Read on to learn more about everything you need to know about personal loans in Singapore, what you should look out for and how to make the best choice for your needs.

What is a personal loan?

When it comes to personal loans, an individual borrows a sum of money for a specified period at a fixed interest rate and pays a fixed monthly payment throughout the loan tenure.

What can you use a personal loan for?

A personal loan can be used for anything you desire, and there is no need to disclose what you would be using the loan for.

You can use the personal loan to pay for things like your electricity and water bills, debts previously acquired, or unforeseen expenses like vehicle repair costs or a loved one’s medical bills.

While personal loans should ideally be taken only to fund real, pressing needs when one lacks cash on hand, some people use personal loans to fund their dream wedding or a vacation of a lifetime.

Unsecured personal loans vs secured personal loans

There are secured personal loans, but unsecured personal loans are the ones most commonly used.

Secured personal loans will require some collateral for security on the part of the lender, whether in the form of a cash deposit or some other asset (e.g. jewellery, car, home). Unsecured personal loans, on the other hand, do not require any collateral.

Consequently, it only makes sense that interest rates on secured personal loans are lower compared to unsecured personal loans since lenders carry higher risk should non-payment occur and they do not have the borrower’s collateral to fall back on.

How much can you borrow on a personal loan?

The amount of money lent to a borrower shall depend on the lending institution as well as other considerations like the duration of the loan, your credit history and income, and sometimes, your relationship with the lender.

For personal loans from banks, borrowers can borrow up to 4X – 6X monthly income if they meet the minimum income requirement and earn less than $120,000 per year. If they earn $120,000 or more per year, most banks in Singapore allow them to borrow up to 10X monthly income.

For personal loans from licensed money lenders in Singapore, how much you can borrow is also dependent on your income. You can expect to borrow up to 6X monthly income if you earn at least $20,000 per year regardless of whether you’re a Singaporean, Permanent Resident, or Foreigner.

Why is it important to compare personal loan interest rates?

The short answer to that question is — so you don’t throw away your hard-earned money. If your interest rate is higher, your cost of borrowing will naturally be higher. The reverse is true.

It pays to compare personal loan interest rates. Remember, a seemingly minuscule difference of just 0.1% can snowball into a significant amount throughout the loan.

What affects your personal loan interest rates?

Apart from where you would be getting the personal loan from, interest rates can vary pretty drastically. Foremost, they are not static and depend on several criteria.

The first of these is the prevailing economic environment; interest rates are usually lower during a recession and higher during an economic boom.

An applicant’s financial standing, level of debt, employment status, credit score, and recent financial history all affect the interest rates on a loan, too.

Before applying for a loan, you should also consider whether a loan from a bank or licensed money lender is the better option for you. If you are facing financial problems, a fast cash loan can help you ride through a rough period.

Personal loan interest rates charged by licensed money lenders in Singapore

The typical interest rate charged by licensed money lenders varies between 1% and 4% per month. This upper limit of 4% is a figure set by the Ministry of Law.

However, a licensed money lender is allowed to charge an additional late interest rate of 4% per month on overdue payments. They may also impose a late repayment penalty fee, capped at $60 per month. A processing fee of up to 10% may also be imposed when you take up the loan.

These are some factors that may affect interest rates offered to borrowers:

• Credit score – based on the current and recent financial history of the applicant
• Income – a higher income generally indicates a lower-risk applicant
• Credit utilisation with other lenders – every person is given a debt limit and the closer to that limit they get, the higher the risk

How are licensed money lenders’ interest rates calculated?

Licensed money lenders do not use a flat rate method to calculate interest. Instead, they apply the reducing balance method. While the calculations may be simpler with a flat rate, the reducing balance method saves you money.

Let us consider an example where a borrower takes a $3,000 loan to be repaid in 3 months.

With a 1% p.a. flat interest rate calculation

• Month 1 – Beginning balance amount: $3,000; Interest: $2.50; Principal paid: $1,000
• Month 2 – Beginning balance amount: $2,000; Interest: $2.50; Principal paid: $1,000
• Month 3 – Beginning balance amount: $1,000; Interest: $2.50; Principal paid: $1,000

The total amount paid over 3 months is $3,007.50, including interest amounting to $7.50.

With a 1% p.a. reducing balance calculation

• Month 1 – Beginning balance amount: $3,000.00; Interest: $2.50; Principal paid: $999.17
• Month 2 – Beginning balance amount: $2,000.83; Interest: $1.67; Principal paid: $1,000.00
• Month 3 – Beginning balance amount: $1,001.83; Interest: $0.83; Principal paid: $1,000.84

The total amount paid over 3 months is $3,005.00, including interest amounting to $5.00.

All else equal, the borrower would have paid 50% more interest using the flat rate method.

What are the personal loan interest rates charged by banks?

Bank loan interest rates generally range from 3% to 6.5% per annum on paper. After including fixed charges, processing fees, and other miscellaneous expenses, the effective interest rate (EIR) may rise to between 5.7% and 14.7% p.a.

As with all loans, you should consider the fine print and not just the advertised rates. The most important piece of information you need is the EIR as it tells you your true cost of borrowing.

Effective interest rate (EIR)

The effective interest rate (EIR) gives you a more accurate impression of the cost of your loan than just the advertised rate. It factors in costs such as processing or administrative fees.

Let us again consider an example where a borrower takes a $3,000 loan. The interest rate is 10% p.a. but there is a bank processing fee of 1%.

The total amount to be repaid = Principal + Interest + Processing fee = $3,000 + $300 + $30 = $3,330

The EIR here is 11% despite the advertised interest rate of 10%.

Things to consider before taking a loan from banks or licensed money lenders in Singapore

Loans can be a wonderful tool for financial independence if you make good use of them. Otherwise, they can become a source of additional financial stress instead.

Always be aware of the additional costs of a loan. These may include:

• Late payment interest rates
• Late payment penalty charges
• Administrative fees or processing fees

There are also other factors to consider:

Your credit history

Banks typically immediately refuse a loan to anyone with a poor credit rating. Licensed money lenders, on the flip side, are more lenient in this regard. Licensed money lenders are more willing to offer loans to borrowers with poor credit.

However, loans from licensed money lenders are more expensive compared to those offered by banks. Therefore, if you can, always try to obtain a bank loan first.

The credibility of the lender

Not all licensed money lenders are the same. Some offer greater flexibility and better terms than others. It’s important to choose the right money lender for yourself. Do your research and read up on their reviews online.

Conclusion

Scrutinise and digest all the fine print on anything you read, sign, or might sign with a bank or licensed money lender. Ask questions about anything you do not understand whether it be the jargon used, loan repayment schedule, or total interest chargeable.

We understand that choosing the right personal loan and comparing rates can be time-consuming and confusing if you aren’t the most familiar with such concepts. This is why we are here to help.

Reach out to us today to enquire about personal loans with 96bm Credit. Our friendly loan officers will get all your queries answered in no time.

In times of financial need, we may take loans to help us overcome various cash flow needs. A popular type of loan is an unsecured loan. This includes personal loans, business loans, and more.

Here, we will share with you everything you need to know about unsecured loans in Singapore – read on to find out!

What is an unsecured loan and how do unsecured loans work?

An unsecured loan is a loan that does not require collateral. If we compare unsecured loans with secured loans, the biggest difference between a secured loan and an unsecured loan is the penalty when you default on your loan.

Secured loans require you to use a high-value asset (such as property, vehicles, etc) as collateral. If you default on your loan, the lender can seize your asset and sell it to cover their losses.

On the other hand, unsecured loans don’t require collateral. If you default on your loan, your credit score will be adversely impacted. This would likely lower your chances of getting future loans approved.

Unsecured loans in Singapore also tend to have higher interest rates, lower loan amounts, and a shorter loan tenure as compared to secured loans.

Unsecured loans’ interest rates – flat or reducing

Unsecured loans’ interest rates are either flat or reducing (monthly rest).

For flat rates, interest payments are based on the original loan principal. This means that you pay the same monthly interest throughout the tenure, even as your outstanding loan gets lesser.

For monthly rest, the monthly interest is calculated based on your loan’s outstanding balance. This means that your interest reduces every time you make a payment.

What are the types of unsecured loans?

Here are four types of unsecured loans offered by banks and licensed money lenders:

1. Personal loans

Personal loans are versatile – they do not come with restrictions on what you can use them for. You can use them for various small and large expenses like paying off urgent expenses, bills, wedding expenses, surgeries, vacations, etc.

2. Study loans

Study loans provide you with the funds you need to further your studies. They are great for financing your tertiary education. They are typically interest-free while you are studying and you can start repaying your study loan after you have graduated.

3. Renovation loans

If you’re looking to renovate your house, renovation loans would be able to help you ease your cash flow, so you don’t need to make a huge dent in your savings in one go. You will need to prove that you are the owner of the house or a family member of the owner. This loan can only be used for renovation works.

4. Business loans

It is common for SME owners to look for business financing. Business loans can help you finance that extra inventory purchase or expand your business. To be eligible for an unsecured business term loan, your company must be incorporated in Singapore and generally has to be in operation for at least two years.

What are the advantages and disadvantages of unsecured loans?

Advantages:

1. Legal

It is perfectly legal in Singapore to obtain an unsecured loan.

2. No collateral required

You don’t have to worry about losing your assets backed as collateral should you be unable to repay the loan. The lender will instead consider your credit history and salary to ensure that you are capable of repaying the loan extended to you.

3. The fast and easy application process

Compared to traditional banks, licensed money lenders provide a fast and easy application process for small unsecured loans as well as bigger ones. Licensed money lenders could be a viable, legal loan option for those looking for fast cash loans.

Disadvantages:

1. Smaller loan amount

As unsecured loans are not backed by collateral, lenders will tend to minimise their risk by offering a smaller loan amount as compared to secured loans.

2. Higher interest

Due to the higher risk borne by lenders, you will have to pay a higher interest rate as compared to secured loans.

Where and how you can apply for an unsecured loan in Singapore

1. Applying for an unsecured loan with banks

Banks offer interest rates of 3% per annum onwards for unsecured loans and would typically conduct a stringent inspection of your credit history before approval.

Before you apply, ensure that you are eligible. If you are a Singapore citizen or Permanent Resident, have a minimum annual income of $20,000, are between 21 to 65 years old, and have a good credit history, you should be able to qualify for an unsecured loan.

Set up a meeting with your bank, and remember to bring the required documents like your IC, proof of income, and other documents that your bank may require.

2. Applying for an unsecured loan with licensed money lenders

Licensed money lenders offer unsecured loans in Singapore with competitive interest rates ranging from 1-4% a month, as well as a streamlined application process.

Find out more about your eligibility, documents required as well as loan limits here.

Tips to get the best unsecured loan in Singapore

Here is what you can do to get the best unsecured loans:

1. Maintain a good credit score

Because of the lack of collateral, banks and licensed money lenders will carefully consider your credit history and borrowing history with other lenders to ensure you can repay the loan.

Maintaining a good credit score may even lower the interest rates, and increase the loan amount and loan tenure offered to you.

To get a good credit score, always repay your loans consistently in full and on time.

2. Maintain employment

As long as you are employed with a steady source of income, even if your employment is of an informal or freelance nature, you will have a higher chance of getting an unsecured loan.

Looking for unsecured loans with low interest rates?

96bm Credit offers the best unsecured loans with competitive rates and loan terms. Apply for a loan with us now. Need advice? Feel free to contact us — our friendly loan officers are more than happy to help.

Housewives are the backbone of any community, but their efforts are seldom recognised beyond the household. Because of that, it can be very difficult for them to get a personal loan in Singapore.

If you are a housewife with an amazing business idea or you just need to clear some debt, read on to learn how you can get a legal loan safely and quickly in Singapore.

Can a housewife get a loan in Singapore?

It is hard for housewives to get a loan from banks because major lenders generally do not view the average housewife as a reliable debtor.

The main reason is that housewives often cannot provide a formal record to demonstrate income. Unfair as it is, fresh graduates in their first job can get a loan more easily than a housewife who has been managing their family finances for decades.

However, there are some ways around this. Housewives usually receive money from their spouses even if the amount varies from month to month. If they can show bank records of regular monthly deposits, licensed money lenders may be willing to consider it as proof of a steady income.

Another way is to get a co-signer for the best loan in Singapore that lenders offer. Licensed money lenders prefer this arrangement because it spreads the risk to someone with established creditworthiness.

One thing that every housewife should avoid is borrowing money from loan sharks. Unlicensed money lenders find easy prey among housewives who do not qualify for loans from banks and licensed money lenders. However, the consequences of being indebted to these dangerous people are simply not worth it. Avoid them at all costs.

Let’s take a closer look at some of the best ways housewives in Singapore can qualify for legitimate loans without compromising on their safety.

Best ways for a housewife to secure a loan

1. Through a co-signer

A co-signer is someone who agrees to be responsible for repaying a loan even if they do not receive the money from the loan. Most co-signers are often close friends and family. For a housewife, that may be her husband, son or daughter, and/or a sibling.

In this case, the lender will perform a credit check on the co-signer instead of/as well as the actual applicant (the housewife). This credit report will determine the maximum loan principal, the length of the loan term, and the interest rate charged.

2. Secured loan

A secured loan is approved based on an asset placed as collateral with the lender. This may be a vehicle or jewellery. The principal of the loan will match or be slightly less than the value of the pledged asset.

Secured loans are a convenient way to obtain a large amount of cash against something that the applicant does not use often. However, it can be unwise because the borrower risks forfeiting the entire collateral even if they miss just a few payments.

3. Informal income

Some housewives earn additional income from a small home-based business while some receive dividends, annuity payouts or interest from fixed or regular deposits. Additionally, they often receive an amount monthly from family members who work to support the household.

It is a good idea to not deal in cash but to have all such money deposited into a bank account. This creates a paper trail that can be useful when applying for a loan. Lenders will compare the incoming amount against the expenditure. It will give them a good idea of how much the housewife can afford to repay.

What are the loans available to homemakers in Singapore?

Almost all good licensed money lenders in Singapore will be willing to extend a loan to a housewife. In most cases, the loan will be one of the three that we touched on above: a co-signed loan, a secured loan, or a loan based on informal income.

96bm Credit offers all three types of loans mentioned above, as well as other personal loans for housewives. If you are unsure about which one(s) you can qualify for, speak to us now. Our team of expert loan professionals will assess your requirements and eligibility immediately at no cost.