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365 Credit Solutions Pte Ltd is a licensed moneylender (License No. 20/2021) listed in the Registry of Moneylenders, under the Ministry of Law in Singapore.

Personal Loan Vs. Bridging Loan: The Perfect HDB Upgrade Financing

Personal Loan Vs. Bridging Loan

Home loans feel like they should be a basic lesson that education institutions should adopt as an extracurricular course. Anyone familiar with home loans can easily find their repayment figures for the first five years. However, only some Singaporeans fully understand bridging loans.

Some Singaporeans believe that a bridging loan is like a home loan. However, bridging loans have smaller loan amounts compared to mortgages. On the other hand, some borrowers think a bridging loan offers the same amounts as personal loans.

Bridging loans give borrowers capital to buy a new property. They use their soon-to-be-sold property as loan equity. Borrowers can commit to payment schedules and pay their loan with their property’s sale. Learn more about bridging loans in this fully detailed post.

Major Differences Between a Personal and Bridging Loan

A bank bridging loan allows you to save time and commit to property buying schedules. The bank will provide you a bridging loan using your property’s sellable equity. Therefore, you can use this capital to pay the HDB property seller. 

Keep in mind that some financial products are not compatible with HDB purchases. Consult closely with your bank’s representatives to learn more.

A personal loan is a six-month-salary financial product that you can use for anything, such as bridge loans. Banks and financial institutions will use your personal equity and income as a basis for your financing. However, a bridging loan and personal loan have varying terms and conditions, tenures, and other details.

Let’s take a closer look at them below.

Bridging Loans

Types

Bridging loans have two types of ways to repay the financing:

Capitalised Interest Bridging Loan

You can find this payment method convenient if you prefer paying your mortgages first and paying the interest in a lump sum later. If you do this, you avoid paying for two loans. However, you might be overwhelmed by the high interest on your loan repayment by the loan term’s end.

In addition, banks might impose higher bride loan interest rates because they’re taking a higher risk waiting for you to sell your old property and obtain your sales proceeds.

Simultaneous Repayment Bridging Loan

Banks will have you pay simultaneously for your bridge loan and its interest rate. Most banks impose a lower interest rate for simultaneous repayment bridging loan borrowers because they have a higher risk of losing the capital you’ll use to purchase your new house. However, paying for two loans simultaneously to purchase a new property can get quickly overwhelming.

Singapore’s temporary bridging loan programme for businesses has similar payment methods. Many businesses conveniently liquidated their businesses and received enough capital for their effective digital transformation.

Monthly Repayments

Banks will require you to pay regular repayments monthly plus interest rates. For example, an S $18,000 bridging loan means you’ll be paying a base amount of S $3,000 per month for a six-month loan tenure.

Make sure you sell your existing home at a value closest to your bridging loan amount. If you do this, you can effectively pay for your new property’s purchase price completely with the sale proceeds. However, keep a “plan B” budget strategy handy for added repayments just in case.

Interest Rate

Bridging loans are high-risk loans with exorbitant 4-6% interest rates. However, they can help you save time and make purchasing commitments essential for your new property. Therefore, borrowers must always keep in mind that a bridge loan is a short-term loan with risky high interest.

Loan Amount

Most banks offer bridging loans equivalent to six months of your monthly salary or the property’s down payment value. On the other hand, banks can provide you bridging loan packages equivalent to the possible sales proceeds you can get upon selling your old property.

Most HDB property purchase down payment requirements are about S $18,000-S $30,000. The amount depends on the property you’re planning to purchase. On the other hand, both banks and licensed moneylenders can go beyond S $30,000. They can even go higher than S $200,000 for highly-qualified borrowers.

Loan Tenure

Bridging loan tenures depend on your bank. On average, borrowers have six months to pay back their bridging loans. Some banks might provide you with long-term payments stretching so far as a year. The repayment period is enough to have a property buyer and finish the sale for most transactions.

It’s wise to pay back your loan and interest completely before the loan tenure’s last day. Borrowers who fail to do so will face high penalty charges and compound interest. Penalties and compounded interest depend on your lender.

Risk

Borrowers of bridging loans should know that they’re taking a higher risk level with bridging loan products. All banks will use your sellable and to-be-purchased property as collateral. Once banks do this, they have enough equity to grant you a high-amount loan to purchase your new HDB flat.

In addition, a bridging loan isn’t a personal loan because it can grant you amounts that go beyond your six-month salary total. Furthermore, banks take a larger risk with bridging loan borrowers.

Compatible Situations

Loans are useful if you need to fill a time gap and need cash on hand. A bridging loan’s purpose is to give you cash on hand to take advantage of a property for sale. You get this cash before you sell your old house. Therefore, a bridging loan is compatible with homebuyers looking to purchase a property before selling their old house.

Personal Loans

Monthly Repayments

You have a fixed monthly repayment amount and interest rate for personal loans because you can only borrow six months of your salary. An S $18,000 personal loan will have you pay S $1,500 monthly plus the total annual percentage rate for a one-year loan tenure.

Interest Rate

Most personal loans have a 6% annual percentage rate. However, it can go as high as 36% in Singapore. These financial products have a longer loan tenure than bridging finance but a possibly higher interest rate.

Loan Amount

Most banks and financial institutions grant you up to six months of your income. A bridge loan grants you enough for a down payment plus your first mortgage payment.

Loan Tenure

Personal loans have a longer loan tenure than a bridge loan. You can pay your entire loan plus interest within one year.

Risk

Personal loans focus on general-purpose financing. Therefore, you can use it to pay for anything. Banks will use your income and job stability as a basis for the loan amount you can borrow. However, the high-interest rates per year give the same risk level as a bridge loan.

Compatible Situations

Personal financing is useful for medical emergencies, sudden unemployment, missed salaries, and even debt consolidation.

Here’s a handy comparison chart to keep with you when deciding between personal and bridging loans. We used the data from the example loan amount above.

(Note: We used S $18,000 as a loan amount to serve as a basis for monthly repayments)

Bridging Loans Personal Loans
Monthly Repayments S $3,000 per month (for a 6-month loan tenure) S $,1,500 per month
Interest Rate 4-5% 3.6%
Loan Amount Depends on property value 6x your monthly salary
Loan Tenure 1-6 months 12-60 months (depending on banks)

The Perfect Financing: A Case-By-Case Decision

Bridge loans are perfect if you need immediate financing approval. Banks virtually guarantee same-day bridging finance release because you’re using your home as collateral.

A personal loan is an unsecured financing. Its approval period depends on your credit score and reputation with your chosen bank. Plus, six months of your salary might not be enough to pay for your prospective property’s required initial payment.

Therefore, the perfect financing depends on your situation and financial capabilities.

What Requirements Must I Fulfill to Borrow Personal and Bridging Loans?

Here are the requirements most banks and licensed moneylenders will ask for both personal and bridging finance. Keep in mind that established financial institutions are stringent about their credit score requirements. Therefore, they can reject or approve your application depending on your credit score alone.

Licensed moneylenders offer bridging finance options for their borrowers, too. However, 365 Credit Solutions and other licensed moneylenders won’t require you to have excellent credit scores to use their services.

Eligibility

  • 18 Years of Age and Above
  • S $1,500 Minimum Monthly Salary (S $2,000 for foreigners)

Singaporean Locals & PRs

  • Identity Card / NRIC
  • Proof of residence (utility bill, a letter addressed to you, and or tenancy agreement)
  • Proof of employment (certificate of employment if your job is less than 3 months)
  • Recent 3 months payslip

Foreign Workers

  • Passport​
  • Work permit / S-Pass / Employment pass
  • Proof of residence (utility bill or tenancy agreement)
  • Proof of employment (certificate of employment if your job is less than 3 months)
  • Recent 3 months payslip
  • Proof of income (bank or account statement)

The Top 3 Bank Bridging Loans You’ll Find in Singapore Today

If you’re looking to use Singaporean bank bridging loans, here are three excellent choices.

DBS Bridging Loan Standard Chartered’s HDB Bridging Loan UOB HDB Home Loan 365 Credit Solutions
Interest rate Prime rate 3M Sibor + 2% p.a. 4% to 5% 1-4%
Tenure Up to 6 months Up to 6 months Up to 6 months 1 month (or until you’ve finished property construction)
Property type All property types HDB HDB All Property Types

Singapore Offers You The Best Financial Tools To Upgrade Your HDB Property

Here are some points you must remember:

  • Bridging loans are high-interest, short-term loans perfect for having capital before selling your property and paying initial home buying costs
  • Personal loans are perfect for adequate-interest, one-year loans if six months of your income is enough for your prospective property’s starting costs.
  • You can only use bridging loans to raise initial capital before selling your property.
  • There’s a risk you’ll cover part of your bridging loan if you don’t sell within your estimated old house selling price.
  • Banks and licensed moneylenders offer bridging loans.

If you have yet to find a reliable licensed moneylender for bridging finance, you can always count on us at 365 Credit Solutions. Apply for a bridging loan that you can claim on the same day!

About 365 Credit Solutions

365 Credit Solutions Pte Ltd is an established licensed moneylender since 2010 (formerly known as FLS Credit and Fu Lu Shou Credit), accredited by the Registry of Moneylenders in Singapore. We specialize in providing personal, payday, bridging, foreigner, business loans to Singaporeans & Foreigners working in Singapore.

 

Our mission is to help make taking a loan a simpler, more understandable process, and to educate our customers about their loan options in the event of an urgent need.

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