What Do You Need To Apply For A Personal Loan In Singapore?
Applying for a personal loan in Singapore can seem daunting, especially if you’re unsure what the process entails or what documents you need to provide. However, you are not alone in this.
One in every five people in Singapore turns to financial assistance in the form of personal loans to meet their various needs. Whether it is to cover unexpected expenses, consolidate debt, or fund a big purchase, a personal loan can provide a much-needed financial boost.
In this article, we’ll take a closer look at a personal loan, the different types available in Singapore, how much you can borrow, and what you need to apply for a personal loan.
By the end, you’ll better understand the process and feel more confident about taking the next step towards securing the financial assistance you need.
What Is A Personal Loan And How Does It Work?
A personal loan is a loan you can take from a financial institution to fulfil your personal financial needs.
It is unsecured, meaning it does not require any collateral, and the funds can be used for various purposes, such as paying for education, buying a car, paying off debt, and more. Personal loans in Singapore typically come with a repayment tenure of one to seven years.
How a personal loan works is fairly simple. You can apply for a personal loan online or at a bank branch, and you’ll be required to provide documentation, including proof of income and identity.
The bank will then assess your creditworthiness and offer you a loan based on your credit history and ability to repay the loan.
The loan amount, interest rate, and repayment tenure will be specified in a loan agreement, which you must sign before the funds are disbursed.
Types Of Personal Loans In Singapore
When it comes to personal loans, it’s essential to understand the different types available in Singapore.
Understanding the different types of personal loans can help you pick the best loan that fits your financial needs. The following are the most common types of personal loans in Singapore:
- Personal instalment loan
- Credit line
- Balance transfer
- Debt consolidation loan
Personal Instalment Loan
A personal instalment loan provides a lump sum of cash that you repay in equal payments over a fixed tenure.
Credit Line
A credit line is a flexible loan option that gives you access to credit when you need it. You can withdraw money as per your requirement, up to a certain limit, and pay interest only on the amount you withdraw.
Balance Transfer
A balance transfer loan is a type of loan that allows you to transfer high-interest debt from multiple credit cards to one low-interest loan.
Debt Consolidation Loan
A debt consolidation loan helps you consolidate multiple debts into one manageable monthly repayment.
The table below provides a quick comparison of these common types of personal loans in Singapore. When choosing a personal loan, it is crucial to consider your financial needs and eligibility.
| Loan Type | Provider | Fees | Loan Amount | Interest Rate | Loan Tenure |
|---|---|---|---|---|---|
| Personal Instalment Loan | Banks | One-time processing fee between 0% – 5% (Banks) | Up to 10x monthly salary (Banks) | Between 3.7% – 7% p.a. (Banks) | Between 1 – 7 years (Banks) |
| Personal Instalment Loan | Licensed Money Lenders | One-time processing fee of up to 10% deducted upfront from each loan (Licensed Money Lenders) | Up to 6x monthly salary (Licensed Money Lenders) | Up to 4% per month (Licensed Money Lenders) | Flexible (Licensed Money Lenders) |
| Personal Line of Credit | Banks | Annual fee between $60 –$120 | Up to 2x monthly salary | Between 18% – 22% p.a. | No fixed tenure |
| Balance Transfer | Banks | One-time processing fee between 1% – 5% of balance transfer amount | Up to 4x monthly salary | Interest-free for a limited time, 17% – 28% interest rate after | Between 3 – 18 months |
| Debt Consolidation Plan | Banks | One-time processing fee between 0% – 3% of loan amount | Up to 18x monthly salary | Between 3.18% – 12% p.a. | Between 1 – 10 years |
How Much Can You Borrow?
Your maximum loan amount in Singapore depends on your annual income and citizenship. For personal loan applicants, banks typically require a minimum annual income of $30,000. For those earning less than $30,000, personal loans are still available but with a higher interest rate. The minimum annual income requirement for foreigners is between $40,000 to $60,000.
Singapore citizens or permanent residents with an annual income below $10,000 can borrow up to $3,000. Foreigners in the same income bracket can borrow up to $500. For that earning between $10,000 and $20,000, the maximum loan amount is $3,000. For that earning above $20,000, the maximum loan amount is equivalent to 6 times their monthly income.
Here is a table showing the maximum loan amount you can borrow based on your annual income and citizenship.
| Annual Income | Singapore citizens/PR | Foreigners In Singapore |
|---|---|---|
| Below $10,000 | $3,000 | $500 |
| $10,000-$20,000 | $3,000 | $3,000 |
| $20,000 & above | 6x monthly income | 6x monthly income |
What Documents Do You Need To Apply For A Loan?
1. Identity Documents
To apply for a personal loan, you must provide a government-issued document to verify your identity.
- NRIC (Singapore Citizen/Permanent Resident)
- Passport (Foreigner)
- Employment/Work Pass (Foreigner)
2. Income Proof
To apply for a personal loan, you must provide a government-issued document to verify your identity.
- NRIC (Singapore Citizen/Permanent Resident)
- Passport (Foreigner)
- Employment/Work Pass (Foreigner)
3. Employment Evidence
To apply for a personal loan, you must provide a government-issued document to verify your identity.
- NRIC (Singapore Citizen/Permanent Resident)
- Passport (Foreigner)
- Employment/Work Pass (Foreigner)
4. Proof of Residence
These documents help establish your current residential address and are typically used to verify your identity.
- Utility bills
- Bank statements
- Rent agreement/ tenancy contract
5. Other Supporting Documents
Some documents that may be required to support your personal loan application include proof of education and credit history.
- Personal loan repayment statement/ credit card statement
- Proof of billing (utility bill/ telephone bill with applicant’s name and address)
Note: The above list is not exhaustive, and the lender may require additional documents during the loan application process.
What To Consider Before Applying For A Loan
When applying for a personal loan, it’s important to consider several key factors to ensure you make the best financial decision. Here are some of the things you should consider before taking out a loan:
1. Loan Amount
Consider the amount you need to borrow and if it is feasible for your current financial situation. You should also compare the interest rates and loan terms offered by different lenders to ensure you get the best deal.
2. Repayment Terms
Be aware of the repayment terms and monthly payments, including the interest rate and duration of the loan. Choosing a loan with a manageable repayment plan that does not put too much strain on your finances is important.
3. Credit Score
Your credit score is crucial in getting a loan approved, so check it before applying. Improving your credit score can also help you get a better interest rate on your loan.
4. Financial Stability
Consider your current financial stability and make sure you have enough disposable income to make your loan payments on time. You should also be aware of any unexpected expenses that may arise and how they could affect your ability to repay your loan.
5. Lenders
Last and probably most important, research different lenders and compare their interest rates, loan terms, and repayment options. Choose a lender that fits your financial needs and has a good reputation.
Ready To Apply For Your Personal Loan?
With so many options for personal loans out there, it can be hard to know where to start.
The process can seem overwhelming, from navigating confusing interest rates to worrying about meeting eligibility criteria.
But do not worry. Horison Credit is here to help. Our team of experts is here to guide you every step of the way, ensuring that you receive the loan amount you need at a competitive interest rate.
Do not let the stress of finding a personal loan keep you up at night. Contact us now to learn more about how we can help. Apply for your loan today and see how easy the process can be.
