What to take note of when applying for a personal loan
Applying for a personal loan nowadays has become easier than ever. Most banks provide an online application process, after which your cash gets credited to your deposit account almost immediately.
However, what are the key factors you need to consider when getting a personal loan? Let us break it down for you.
Why should I apply for a loan?
This is perhaps the most important question for most people – whether you need to pay for medical expenses, buy a new gadget or finance your wedding, personal loans are a quick way to get money up front to pay for something you need now.
Am I eligible to apply for a loan?
Income, age and employment duration
With age comes responsibility. The minimum age requirement to get a personal loan in Singapore is 21. However, some banks might reject applicants who are above 65.
Another important factor is that your income needs to be at least $20,000 for Singaporeans and $40,000 for foreigners.
Lastly, the length of your employment could play a part in your eligibility for getting a loan, even though it might not be explicitly stated on the application requirements.
Credit score and TDSR
Your past will play an important role in your eligibility as well. If you have bad history of not paying your credit card bills on time or missing payments for your car or home loan, this will reflect in your credit score.
Similarly, any previous debt that you already have may limit your eligibility to get another loan. Introduced by MAS in 2013 the Total Debt Servicing Ratio (TDSR) is a metric that banks can freely obtain from MAS. The TDSR limits your total monthly debt repayments to 60% of your monthly income. So, if you earn $4,000 a month you can only have monthly debt repayments of up to $2,400.
Furthermore, your income will limit the total amount you can borrow. If you earn between $20,000 – $30,000 you can borrow up to 2x your monthly income. The maximum loan amount increases when you earn between $30,000 – $120,000 to 4x and can increase up to 8x when you earn more than $120,000 per year.
Which loan should I apply for?
When getting a personal loan, remember to consider these three things:
- Loan Tenor
- Interest rate
There are two options to consider:
- A line of credit with a higher interest rate but more flexibility or
- A term-loan where you pay a fixed amount monthly but enjoy lower interest rates.
In Singapore, there are about a dozen banks that provide personal loans, with varying interest rates and tenors ranging from 1 to 7 years for instalment loans. Interest rates vary from approximately 2% for a car loan to 20+% for lines of credit.
Before you decide on a personal loan, compare any incentives that banks are offering now as they could be very beneficial and substantial.
For example, did you know that POSB/DBS is offering a promotion that gives you up to $388 cashback, just by applying for a personal loan?
It could be worth your time to check out these offers to increase your total disbursed amount, for which you don’t need to pay any interest.
How quick am I able to receive the money after applying for a loan?
After your loan is approved, the money will usually be credited to your deposit account. This could take from a few seconds to a couple of days, and in some cases, it could take longer than a week.
If you need the cash fast, you should make sure to compare which bank credits your loan amount the quickest. POSB/DBS immediately disburses the money into your POSB or DBS account on approval of the loan, and you will have access to the money almost instantaneously.
Still unsure of which personal loan to apply for? Use the GoBear comparison tool to find out which personal loan you are eligible for, what promotions are running, how quickly you will get your money and other details!