With the economic impact of COVID-19, it is common for affected individuals experiencing loss of income to start seeking financial assistance such as securing personal loans with the lowest personal loan rates. If you happen to need emergency funds but do not want to borrow from friends or family, you can consider taking up a personal loan. Here are a few questions to consider before applying for one.
What are the requirements for a personal loan?
If you are looking to secure a personal loan from banks in Singapore, you have to take note of the requirements for eligibility.
Firstly, you have to be at least 21 years old with an annual income of at least S$20,000 a year. If you are a foreigner (with an employment pass of at least 12 months validity), you will need an income range of S$40,000 to S$60,000 a year. If you make much more than $30,000 a year, the interest fee might be much less for banks.
If you are choosing to secure a personal loan from a licensed money lender instead, the maximum amount that you can borrow depends on your annual income. For Singapore citizens and PR, If your annual income is below S$10,000, then you can only borrow up to S$3,000. If you’re a foreigner, S$500.
If your annual income is between S$10,000 to S$20,000, the maximum amount you can borrow is S$3,000 for Singapore citizens/PR and S$500 for foreigners residing in Singapore.
If your annual income is over S$20,000, then you can borrow up to 6 times your monthly income for both Singapore citizens/PR and foreigners residing in Singapore.
How do personal loan interest rates work?
Lenders make their decisions based on factors including credit records and other existing credit facilities. So in order for you to get the lowest personal loan rates, you need to build a strong credit report. Borrowers with high credit scores tend to get personal loan interest rates that are low, whether from banks or licensed money lenders.
When borrowing personal loans from banks in Singapore, they will typically label their interest rates as x%, which stands for a customised interest rate that you would only see once your application is approved. The interest rate is usually dependent on your credit score, loan amount and your loan tenure. What you should be looking at is the effective interest rates or EIR as it includes processing fees and your loan repayment schedule which is a true reflection of the cost of the loan.
When borrowing personal loans from licensed money lenders in Singapore, the money lender has to go through the terms and conditions of your loan such as loan tenure, interest rates, payment method before you sign the contract. A loan contract stating all the terms and conditions is required by law. The difference between signing up with licensed money lenders as opposed to banks is the quick turnaround time to get your funds at a reasonable loan tenure.
How to maintain my credit score?
Maintaining a good credit score is part and parcel of getting the lowest personal loan rates. Banks and other financial institutions can offer a lower interest rate for a loan if your credit score is high. Credit scores are indicators of the creditworthiness or the indication of the likelihood of a borrower paying their debt on time.
A great way to maintain it is to pay all your credit card bills and loans on time and in full. Once you have a good credit score, you can leverage this as a way to get low-interest rates for your future loans. You can find out more about your credit report and rating from the Credit Bureau Singapore or Singpost branches at a small fee.
You should also stop yourself from applying for too many loans at one go from various money lenders as this would only give you a lower credit rating and increase your overall debt threshold.
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