How To Qualify For Low-Interest Personal Loans in Singapore

Low-interest personal 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, especially one with the lowest personal loan interest rate.

You can, however, try to shoot for the lowest interest rate personal loan in Singapore by determining whether you’d like to borrow from banks or licensed money lenders in Singapore with the lowest interest rates and following some basic rules.

Here, we share the necessary information you need about low-interest personal loans and the five things you can do to qualify for the lowest personal loan interest rates possible.

What is a low-interest loan?

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

The exact interest rate which the loan provider charges a borrower 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 loan provider offering you a lower interest rate.

Where can you get low-interest personal loans?

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

Banks

The most common bank loans in Singapore are personal loans, home loans, car loans, and education loans. Bank loan interest rates for personal loans generally vary and change from time to time. As of time of writing, the interest rates start from between 1.90% and 5.42% per annum, depending on the borrower’s income, loan tenure, the principal amount, and the borrower’s creditworthiness.

In case you didn’t already know, banks are very stringent when it comes to their credit checks on borrowers’ credit reports with the Credit Bureau Singapore (CBS).

Bank loans with interest rates close to 1.90% per annum can be an attractive option for someone looking to snag one of the lowest personal loan interest rates, especially if these low-interest personal loans can be coupled with other bank offers and deals.

Licensed lenders

Licensed lenders in Singapore are heavily regulated by the Ministry of Law’s Registry of Moneylenders. 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 lender can charge on all types of personal loans is 4% per month.

There are no lower limits set, but lenders may charge rates as low as 1%, 2% or 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 from the lowest interest rate money lenders in Singapore.

Before licensed lenders can offer applicants these attractively low interest rates, they have to first check with a governing body called the Moneylenders Credit Bureau (MLCB), which stores data on borrowers’ loans and repayment history with all licensed lenders in Singapore. This is done through the Loan Information Report.

What are the requirements for a low-interest personal loan?

Banks

If you are looking to get a personal loan from a major bank, take note of their eligibility requirements.

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 a Work Pass of at least 12 months validity), you will need to earn an income range of S$40,000 to S$60,000 a year.

Secondly, you’ll need to have a solid credit score with good repayment history to boot.

If you make a decent amount of money and have proven yourself to be a financially responsible borrower —as corroborated by your good credit score— banks are more likely to extend their lowest personal loan interest rates to you.

Licensed lenders

The requirements to get a low-interest personal loan from a licensed lender is pretty straightforward. All you need is the application form (which you can fill out online), plus other supporting documents that include:

• NRIC
• Proof of income for the preceding 3 months prior to loan application (e.g. payslips, commission statements, bank statements)
• Income tax statements or CPF contribution statements

These supporting documents are required of foreigners:

• Original valid Work Pass
• Passport
• Proof of income for the preceding 3 months prior to loan application (e.g. payslips)
• Proof of home address (e.g. rental agreement, utility bill, mobile phone bill)

Note: There is no minimum income requirement you need to meet when it comes to loans from licensed lenders.

5 ways to qualify for low-interest personal loans in Singapore

Now that we understand the basics, let’s dive into the five things you can do to get the lowest interest rate personal loan in Singapore possible.

1. Maintain good credit

The single most important thing you can do to qualify for a low-interest personal loan from a licensed lender 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 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.

Do bear in mind that although MLCB records are considered the primary source of information for a legal lender, your CBS credit score may also be taken into consideration before they approve your loan application.

Below, you’ll discover two simple rules to ensure good credit is maintained:

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

Individuals who have had a history of defaulting on their loans may not necessarily be declined a loan from a legal lender. But there’s a greater chance of being offered a higher interest rate as lenders may deem such individuals to have a higher propensity of loan default.

2. Avoid taking multiple loans

When a licensed lender 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 personal 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, which increases their chances of getting a low-interest rate personal loan.

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.

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 low-interest rate personal loans 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 your debt responsibly.

5. Compare rates from different lenders

There is no one-size-fits-all ‘best’ loan — banks and licensed money lenders’ interest rates differ from one to another. Different licensed 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.

It’ll be worth the effort to get their loan quotes and packages for comparison purposes if your ultimate aim is to borrow from one of the lowest interest rate money lenders in Singapore!

Why consider borrowing from money lenders?

Like it or not, bank loans aren’t created for everyone. With their slew of strict eligibility and income requirements, many may not qualify for the lower-interest rate loans from banks.

If and when you find yourself in such a situation, legal lenders can be a great alternative loan provider to look at for your fund needs — licensed lenders’ loans are highly accessible and through and through legal.

Even though the interest rates that they can offer to borrowers are relatively higher compared to banks’, their rendition of low-interest personal loans in Singapore —coupled with speedy loan application, processing and disbursement— can be an absolute godsend to people in need of urgent funding.

How much can you borrow from the lowest interest rate money lender in Singapore?

If you are going for a personal loan from a licensed lender, the maximum amount you can borrow on an unsecured loan across all licensed lenders at any one time depends on your annual salary.

Based on the Ministry of Law’s guide to borrowing from money lenders, you can only borrow up to S$3,000 if your annual income is below S$20,000, and if you happen to be a Singapore Citizen or PR. You may borrow up to 6 times your monthly salary if you earn S$20,000 or more annually.

Are you a foreigner living and working in Singapore? If so, the maximum amount you can borrow at any one time is S$500 if you earn less than S$10,000 a year, and S$3,000 if you make at least S$10,000 but less than S$20,000 a year. You may borrow up to 6 times your monthly salary if you earn S$20,000 or more a year.

Here’s a quick glance at the summarised information for your perusal:

Galaxy Credit offers accessible, competitive personal loans

Looking for some of the lowest interest rate personal loans offered by money lenders? Galaxy Credit can help. We are a licensed loan company in Singapore with years of experience offering accessible, low-interest personal loans.

As one of the best licensed money lenders in Singapore, we make the effort to understand your financial concerns and are committed to offering the best rates and repayment schedules for your circumstances. Contact us for more information or apply online with us anytime you’re ready!

About the Author

Nikki T

Hello! I’m Nikki and I nitpick through all the boring financial data and jargon so you don’t have to!