5 Ways You Can Qualify For Low-interest Loans In Singapore

Low-interest loans certainly sound appealing if you need cash urgently. However, anyone who has tried borrowing money knows it is not easy to get a low-interest loan in Singapore.

You can obtain small loans with low interest by following some basic rules. Here, we share the five things you can do to qualify for the lowest interest rates possible.

What is a low-interest loan?

A low-interest loan is usually a business or personal loan that the lender charges at a competitive rate of interest.

The exact interest rate which the lender charges you is subjective as it is determined by factors such as your income and credit history. The better your credit history, the higher the chance of the lender offering you a lower interest rate.

Where can you get low-interest loans in Singapore?

Another important detail all borrowers should understand is there are two main sources where you can obtain a low-interest loan in Singapore – banks and licensed money lenders.

Banks

The most common bank loans in Singapore are home loans, personal loans, car loans, and education loans. Bank loan interest rates for personal loans generally vary between 3.5% and 10.8% per annum, depending on the term, the principal amount, and the borrower’s creditworthiness.

Bank loans with interest rates close to 3.5% per annum can be an attractive option for someone who wants to get a low-interest loan, especially if they can be coupled with other bank offers and deals.

Licensed money lenders

Licensed money lenders in Singapore are heavily regulated by the government. Strict controls around moneylending have created a competitive field for the benefit of borrowers. The most important of these controls is the cap on interest rates. Currently, the maximum interest that a licensed money lender can charge is 4% per month.

There are no lower limits set, but lenders may charge rates as low as 3% per month. This may dip even lower with promotional offers and deals for repeat customers. Some applicants may even be eligible for an interest-free loan.

Before licensed money lenders offer applicants these low rates, they have to check with a governing body called the Moneylenders Credit Bureau (MLCB), which stores data on borrowers’ loans and repayments with all licensed money lenders in Singapore.

5 ways you can qualify for low-interest loans in Singapore with licensed money lenders

Now that we understand the basics, let’s dive into the five things you can do to get small loans with low interest.

1. Maintain good credit

The single most important thing you can do to qualify for a low-interest loan in Singapore from a licensed moneylender or a bank is to maintain good credit.

This is different from keeping a good ‘credit score’. Credit scores are allocated by the Credit Bureau Singapore (CBS), and it is only relevant when you apply for loans from a bank or other major financial institutions.

The relevant agency when borrowing money from a licensed money lender in Singapore would be the Moneylenders Credit Bureau (MLCB). Lenders will submit your information to the MLCB to check your borrowing limit, existing outstanding loan principal amount with other money lenders, total payable amount, repayment records, and other information when you apply for a loan with them.

Note that while MLCB records are the main source of information for a licensed money lender, they may also consider your CBS credit score before approving your loan application.

Two simple rules to help you maintain good credit:

• Do not default on loan repayments.
• Make instalment payments in full and on time.

Borrowers with a history of loan defaults may not necessarily be refused a loan from a licensed money lender. However, they are more likely to be charged a higher interest rate as lenders may perceive that they have a higher risk of default.

2. Avoid taking multiple loans

When a licensed money lender in Singapore accesses your MLCB records, they can see the number and total value of all your existing unpaid loans. Multiple concurrent loans are an indication that a borrower is under increased financial stress. This often happens when they are taking loans to pay off existing loans to buy time.

Such loan applicants are at higher risk of defaulting and hence are unlikely to qualify for a low-interest loan.

Avoid taking on new debt until you have settled older ones. If you need assistance to juggle multiple loans, consider a debt consolidation loan.

3. Maintain a stable source of income

Lenders always consider your employment status when assessing a loan application. Consistent employment indicates a steady income flow and reassures lenders that the applicant is likely to repay their debts.

While a formal full-time job is the best option, lenders will also consider income from part-time and casual employment. The Covid-19 pandemic has also led to many lenders relaxing their borrowers’ employment criteria.

Click here to find out how much you can borrow based on your income.

4. Get a co-signer or guarantor

A co-signer or guarantor is someone who agrees to be responsible for repaying a loan. They do not receive any money from the loan but are legally responsible for its repayment if the borrower is unable to make repayment.

A co-signer with a good credit score can help you qualify for small loans with low interest and even other fee waivers.

However, do not treat a co-signer as a blank cheque. A default on your part will damage their credit score and likely create greater damage to your relationship with them. If anything, be stringent about repaying a co-signed loan and handle the debt responsibly.

5. Compare rates from different lenders

There is no one-size-fits-all ‘best’ loan. Different licensed money lenders and banks offer varying loan eligibility criteria and conditions using their own assessment methods. An applicant’s unique financial status, the reason for the loan, loan history, and other factors could lead to one lender offering lower rates than the other.

Your responsibility to yourself as a borrower is to compare quotes from as many licensed lenders and banks as possible. This goes beyond simply reading advertised rates. You must read the fine print to understand all the fees, penalties, and additional expenses that may apply.

Note that most lenders offer lower interest rates and a waiver of certain charges to regular customers.

Apply for a low-interest loan with Galaxy Credit

Galaxy Credit is the ideal place to get a low-interest loan in Singapore. We understand your financial concerns and are committed to offering the best rates and repayment schedules for your circumstances. Walk-in to our office or apply online with us!