Legal Loan Limits in Singapore | Things To Know for Taking Loans Singapore

by Priyadarshini 23 March 2023

Financial security can be achieved by having a debt-free profile. While it is not easy to be debt-free, we tell you about all the legal loan limits in Singapore. This is where having a good understanding of loans and their respective limits comes in handy.

There are two types of loans primarily. Loans that are secured versus loans that are unsecured. It is critical that you understand the distinction between secured and unsecured loans. Unsecured loans do not require you to offer anything valuable as collateral; secured loans do. For the latter, you can borrow the money outright after your lender evaluates your financial situation, income, credit history, and other factors.

Legal Loan Limits in Singapore

Because the lender assumes more risk when making unsecured loans to borrowers, interest rates are typically much higher than those associated with secured loans. Typical unsecured loans include:

  • Credit cards
  • Personal loans
  • Education loans
  • Credit lines

Singapore’s Unsecured Loans Regulations limit the total amount you can borrow for unsecured loans to a maximum of 12X your monthly income. Before you go out and celebrate, keep in mind that there are safeguards in place to prevent borrowers from incurring too much debt. Unsecured loans must also be factored into the calculation of your TDSR.

Because there are so many different types of unsecured loans available to consumers — personal loans, education loans, renovation loans, credit cards, credit lines, and so on — it’s critical to understand that each loan has its own set of restrictions.

Home loans and car loans are common secured loans in Singapore.

Legal Loan Limits in Singapore

Total Debt Servicing Ratio (TDSR)

The total debt service ratio (TDSR) is a lending metric used by lenders to determine a borrower’s ability to repay a property-related loan. The TDSR is calculated for any loan used to purchase a property, any loan secured by a property, and any refinancing of such loans. Property loans are long-term and typically large liabilities for individuals and households, so TDSR is required.

A borrower’s TDSR must be 55% for the purchase of properties where the Option to Purchase is granted on or after 16 December 2021, as set by the Monetary Authority of Singapore (MAS) to ensure borrowers do not over-leverage when it comes to property purchases.

Loan-To-Value (LTV) (LTV)

LTV is the loan amount expressed as a percentage of the property’s value. In addition, the LTV limit is the maximum amount an individual can borrow for a home loan based on the loan tenure, borrower’s age, borrower’s existing loans, and whether the borrower is a shell company. The maximum LTV for HDB Concessionary Loans has been reduced to 80% for resale applications received by HDB after September 30, 2022.

Keep in mind that the amount of downpayment required when signing the Agreement for Lease for flats purchased directly from HDB remains the same — 10%. This must be paid in cash, through your CPF Ordinary Account (CPF OA), or a combination of the two. The maximum LTV for bank loans is 75%. The remaining 20% can be paid in cash or through your CPF OA, but a minimum of 5% must be paid in cash.

MSR is the percentage of a borrower’s gross monthly income that goes towards repaying all of their property loans, including the loan under consideration. The maximum MSR permitted is 30%. Another thing to keep in mind? MSR is only applicable to HDB flats and ECs.

Loan Term

Considering purchasing an HDB flat? You can finance your home with an HDB Concessionary Loan or a bank loan. Loan terms are limited to 25 years and 30 years, respectively. Buying an EC or a private residence? According to MAS regulations, your only option for financing your EC or private property is a bank loan with a maximum loan tenure of 30 years or 35 years.

Car Loans

The maximum loan term for financing a vehicle is 7 years, regardless of whether the vehicle is new or used. Your maximum LTV varies depending on the vehicle’s open market value (OMV).

  • A vehicle with an OMV of $20,000: maximum LTV is 70%
  • Maximum LTV for a vehicle with an OMV greater than $20,000 is 60%.
  • Keep in mind that LTV refers to the loan amount expressed as a percentage of the vehicle’s purchase price (including taxes and COE).

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