Without a doubt, we are living in difficult times. During these financially challenging months, we have to do everything to spare some cash. One great thing to do this is to save money from our loans.
In this article, learn how to save money by finding the most competitive interest rate of personal loans in Singapore. Cut cost from your expensive loan payments each month by finding lower interest rate deals. And, think of it as a long-term investment, because believe us when we say that your loan interest rate can truly affect your finances for a long period of time.
When institutions lend cash, they are taking a risk as there is no certainty that they can have their money back. As a borrower, your goal is to minimize this risk so that you do not have to spend on high interest rates, fees, and charges. Here are three ways on how to lessen the risk in the eyes of the lenders. Try to attain one, if not all of them.
Improve Credit Score
In Singapore, lenders refer to the so-called credit score to measure the creditworthiness of borrowers. This credit score or credit rating is a point system that indicates the capability of an individual to repay a loan. Having a high credit score serves as an assurance to financial institutions that you can be trusted. If you want to persuade lending companies that the risk they are taking in lending you is low, you can improve your credit score.
There are multiple ways on how to improve your bad credit score. But, the principle here is to show that you are a good borrower. If you have a loan, settle your amount due on time, and pay the right amount. Also, you can limit your loans and credits to make sure that you can manage your finances efficiently.
Use collateral to secure loans
Apply for a so-called secure loan where you provide collateral. Collateral refers to any asset that the borrower pledges. If the borrowers fail to repay the loan, they could lose the collateral. By using collateral to secure loans, the borrower is minimizing the risk for the lender.
Choosing which asset to use collateral can be difficult because there is a real possibility that you can lose it. Loan experts and financial advisers often suggest that you choose an asset that you are willing to lose. Given this, it is best not to use your home or other valuable property as collateral.
Get a co-signer
A loan co-signer refers to another person who signs a contract agreeing that he or she has to settle the debt of a borrower. You can ask a family member or friend to be your co-signer. It is important that they understand the loan terms and agreements because they will be legally responsible if you fail to repay your loan.
Getting a co-signer can be a challenge. Even your close friends and family members might not want to sign a legally binding contract for your loan. If you wish to this route, you have to dedicate a lot of time to convince another person to enter into a loan contract with you.
To give you an idea of what to expect when applying for a personal loan to a bank in Singapore, here is a list of popular banks in the country. To know more about other loan deals and offers, you can check out other banks near you or look for lenders online. The rates of these financial institutions are just here to set your expectation about the interest of personal loans.
Interest rate: This bank offers its Cashlite Personal Instalment Loan with an annual interest of 3.5% and has a 6.6.% effective interest rate (EIR) for new loan customers. This loan is preferred by many for having one of the lower interest rate in banks in Singapore for new borrowers.
Loan amount: The minimum loan amount you can take is SGD 1,000.
In order to avail of this loan, you must be a Singapore citizen or a permanent resident with an annual income of SGD 30,000.
Interest rate: Here, they offer a so-called Standard Chartered CashOne Personal Loan, which has an annual interest of 3.48 % and has an effective interest rate of 7.99% per 1 year.
Loan amount: Borrowers can only apply for up to four times their income per month or a maximum of SGD 250,000. This loan is popular for offering fast transactions. For those who can fulfill the bank’s requirements, they can get their cash within 15 minutes after the loan is approved to any bank account the client has.
Interest rate: The personal loan they offer has an annual interest rate of 3.68% and has an EIR of 7.53% per year. In order to be qualified for loan approval, you must be a Singapore citizen or a permanent resident with an annual income of SGD 30,000.
Loan amount/ promo: While the loan interest is not as competitive as other loan companies, some customers prefer this offer because they have a cashback promo. If you loan a minimum amount of SGD 45,000, you are rewarded with a cashback of SGD 500.
Aside from these three companies, you can also check out the loan deals offered by other corporations like HSBC, Citibank, DBS, and many more. You can start your search from the lending businesses near you. Then read more sources online, so you are updated on the trends and latest news about loan and credit offers in Singapore.
Seeing the list of interest rates above, it is easy to think that banks are the best choice when it comes to applying for a personal loan in Singapore.
But, in reality, this is not the case. When you apply for a personal loan, you do not only have to think of interest rates. There are many other things to consider, including the length of the loan application process, the amount you can take from the loan, the repayment terms and tenures, fees and charges, and many more.
Also, it is important to remember that banks are not the only option when taking a personal loan. There are lending companies with easy and friendly loan application processes.
For one, Singapore has so-called licensed moneylenders who are private loan businesses offering various types of loans to Singapore citizens, permanent residents, and foreigners. In recent years, these licensed moneylenders have become popular with being quick in approving loans and asking fewer requirements from loan applicants.
Below, check out the different factors to consider when taking a personal loan. Also, read and compare how banks and licensed moneylenders are different when it comes to these factors. These will surely help you get a personal loan that fits your financial needs.
|Interest rate||6% per year||At most 4% per month|
|Approval speed and Loan requirements||Slower approval speed; more loan requirements||Faster approval speed; less loan requirements|
|Loan amount||Up to 4x monthly income||Up to 6x monthly income|
|Repayment tenure||1 year to 7 years||1 year or less|
|Processing fees and other charges||Processing fee, etc. (depends on the policy of the bank)||Late fee of SGD 60 or less per month and service of 10% of the principal of the loan|
Banks have an average interest rate of around 6% per year. As you can see above, some companies even have competitive rates as low as 3.4% annually.
Meanwhile, money lenders are only legally allowed to give an interest of up to 4% per month. Surely, a bank has lower interest rates than a licensed moneylender, but aside from this, there are other things to consider.
Both a bank and a licensed lender ask for the same basic qualifications and requirements like age (must be at least 18 or 21 years old and at most 65 years old), proof of residence, proof of income, etc.
But, overall, a bank asks for more requirements like credit rating, collateral, cash flow, detailed financial statements, and many more. In order to lessen their risk, they have to ensure that they only take clients capable of paying their loans.
Also, a bank often has a long and slow approval process because it has to take time to verify the documents submitted and ensure that the requirements are fulfilled. On the other hand, licensed moneylenders are known to have approved loans faster. Most of them have a type of loan called a quick cash loan where individuals only have to wait for less than an hour to wait for their cash.
Most banks in Singapore limit the maximum loan to four times the income of the applicant each month. Meanwhile, moneylenders have a maximum loan of six times the monthly income of the applicant if they are earning at least SGD 20,000 each year.
This means that if you are in need of a lot of money in an emergency situation, licensed moneylenders may be the right choice for you. Take note that lenders may decide to lend less money to individuals earning less based on the guidelines set by the government.
Banks have an average loan tenure of at least one year to 7 years. Meanwhile, moneylenders have a loan tenure of up to 12 months or less.
If you decide to settle your debt earlier than the agreed date, you can easily talk to the representatives of the moneylending business.
Having a shorter loan tenure could mean that you have to pay less interest. Surely, you would not want to spend 5 years or more just paying off a single loan. 3-year loan tenure is a perfect length for many individuals.
5. Processing fees and other charges
Aside from the interest rates, a bank would charge a processing fee as well as other charges when giving out a personal loan. To know the “actual cost” of your personal loan, it is best to refer to the so-called EIR or effective interest rates of a loan.
In the case of licensed moneylenders, they are only permitted by the Ministry of Law to impose certain fees and charges, which include a late payment fee of not more than SGD 60 each month, a service fee of 10% of the principal of the loan, and legal costs if a case is brought to court.
In some cases, lenders would run promos and deals where they waive fees and charges. For example, some lending companies would not charge new account holders, new credit cardholders, or first-time loan takers a processing fee for their transactions. Take advantage of these offerings as a way to save more money. Always be on the lookout for news and updates.
As you have read above, banking corporations are not your only options when applying for a personal loan. Licensed money lenders in the country can also offer lower interest rates and more friendly terms.
If you feel like your credit score is not enough or your income could not qualify you for a loan from Citibank, HSBC, or other big lending companies, why not apply to 365 Credit Solutions Pte Ltd.
We are a licensed money lending business that has provided help to a lot of Singaporeans in need of financial help. We have personal loans specifically made for individuals looking for low interest rates. You can contact us here to get more information about our credit products.