Common Personal Loan Questions | Can You Take a Personal Loan in Singapore
Loans | Personal Loansby Priyadarshini 10 October 2022
Personal loans can also help you get through a short-term financial emergency by increasing your cash flow. For example, if you have credit card debt and are being charged at least 24% interest per year, consider consolidating it into a personal loan with a lower interest rate. This blog answers some of the most common personal loan questions.
Most Common Personal Loan Questions
How much money can you get with a Personal Loan?
You can borrow up to a maximum of $200,000 by borrowing 2-6 times your monthly income. The exact amount you can borrow is frequently determined by your credit history and other existing credit facilities.
Are you eligible for a Personal Loan?
Singaporeans, Permanent Residents, and foreigners are all eligible to apply for a personal loan, though the requirements vary by category. A personal loan is not available if your annual income is less than $20,000 per year. You must earn at least $20,000 per year if you are a Singaporean or PR. If your annual income is between $20,000 and $30,000, you should know that any loan you apply for will have a higher interest rate than Singaporeans and PRs earning $30,000 or more. To be eligible for a personal loan, foreigners must earn between $40,000 and $60,000 per year.
Revolving Loans vs. Term Loans
Personal loans are classified into two types: term loans and revolving loans.
Term loans have a fixed repayment period as well as fixed monthly installment payments. As a result, term loan interest rates are lower, but banks may charge a “processing fee” after the loan is approved.
A revolving loan is also known as a personal line of credit. You can use it whenever and wherever you want, just like a credit card, up to your credit limit. You only need to make the minimum payment of 2.5% or $50 per month, whichever is greater. However, due to the high level of flexibility, the interest rate on revolving loans can be 3-5 times that of the fixed rate.
Common Personal Loan Questions
How long can a personal loan be used for?
With such high-interest rates, revolving loans should be used as a last resort, such as in an emergency where you can’t use a credit card and you know you’ll be able to make the repayment as soon as possible. A revolving loan should not be considered for long-term repayment. Term loans can last from one to seven years. The longer the term, the lower your monthly payments, but the higher the interest rate.
How do I interpret the interest rate?
Banks will use terms like Effective Interest Rate (EIR) and Applied Interest Rate (AIR) to confuse you (AIR). Which one should you consider when deciding which type of loan to take out? The lower Applied Interest Rate is usually only used for marketing purposes. It’s deliberately kept low to entice you. So treat it as you would a woman who is overly made up. You don’t want to find out what she’s hiding.
The Effective Interest Rate is the more important of the two, and a good bank will tell you exactly what it includes. The EIR for the DBS Personal Loan, for example, includes a 1% processing fee. However, a lower EIR should not be the only deciding factor. Most banks offer lower interest rates for longer terms, but don’t be fooled: the total amount of interest you pay is still higher.