Taking Out Personal Loans In Singapore: Yay Or Nay?

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Time to gain control of your finances? Check out our list of personal loans in Singapore.

Following suit with the rest of the world, people in debt are now turning to personal loans in Singapore. It’s easy to charge charge charge to your credit cards, but when spending goes haywire and debt isn’t managed, you end up with huge stacks of letters from banks and credit card companies on your desk. If this is you, don’t panic – we might have a solution for you.

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Personal loans in Singapore: A good way to manage debt?

personal loans in Singapore

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The benefits to taking out personal loans in Singapore to pay off credit card debt are numerous. They mainly focus on having a lower interest rate than the credit card or cards.

In the long run, you can save thousands paying off the principal amount when the interest is lower – after all, it is compound interest, so it continues to build over time. The typical interest rate on credit cards in Singapore is 25% APR. You can also take out credit cards that let you withdraw cash advances (something like a debit card), and these rates skyrocket to 26%-27%.

Here’s the difference in numbers for you. Imagine you have an outstanding loan of S$1,000.00 and your credit card is charging a 25% APR interest rate. After three years, the total amount to repay is a whopping S$1,953.13! Compare that to a personal loan you take out with a fixed interest rate of 6%, and you’re only looking at repaying S$1,191.02. No need to reach for your calculator, because I can tell you in those three years, you’ll have saved S$762.11 just by paying a personal loan instead of the debt from a credit card!

As exciting as that sounds, it’s still a monetary obligation. If your spending habits are impulsive and undisciplined, no matter what type of repayment plan you put in place, you will still struggle to pay off the debt.

How do I take out personal loans in Singapore?

personal loans in Singapore

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Since the introduction of Debt Consolidation Plans (DCP), many Singaporeans have benefitted from this repayment scheme and have managed to get their finances in order. Many banks offer these DCPs at varying rates.

To be eligible, you need to be a Singapore citizen of permanent resident and earn between S$20,000 and below S$120,000 per annum with net personal asset of less than S$2 million. Any outstanding balances on credit cards and unsecured credit facilities must exceed 12X your monthly income.

DCPs usually come with a one-time processing fee and a flat interest rate, and can last anywhere between one to ten years. We’ve picked some of the best plans out there with the most attractive promotions at the moment.

Which Debt Consolidation Plans are best for me?

personal loans in Singapore

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1. POSB & DBS Debt Consolidation Plan

Balance to income ratio: 12x

Interest rate: As low as 3.98% p.a.

Loan tenure: 1-8 years

Promotion: S$1,200 Cash back for new customers. S$2,000-S$3,000 Cash back when reconsolidating loans

Processing fee: S$99

Late payment fee: S$90

This is a great plan to consider if you can secure lowest rate. The cashback for new customers is attractive, as well as the reconsolidation! However, just be cautious as the new interest rate isn’t fixed – note the wording “as low as”.

 

2. HSBC Debt Consolidation Plan

Balance to income ration: 12x

Interest rate: As low as 4% (1-7 years), 5.7% (8-10) p.a.

Loan tenure: 1-10 years

Promotion: S$100 cash back

Processing fee: S$88 or 1% – waived for online application

Late payment fee: S$75

This is our pick for the best DCP at the moment. Mainly due to the waived processing fee. The fixed rate is great if you want to pay it back in a shorter time span. We would consider HSBC’s DCP as the most affordable option for the general public.

 

3 .Maybank Debt Consolidation Plan

Balance to income ratio: 12x monthly income

Interest rate:As low as 4.2% p.a.

Loan tenure: 1-10 years

Promotion: S$388

Processing fee: Not stated

Late payment fee: 5% of monthly minimum repayment or S$80

Maybank’s plan is a decent choice if you can’t secure financing elsewhere. Again, be cautious of the wording as you’re not guaranteed the lowest interest rate. If you are, it might be a great deal for you!

 

4. CIMB Bank Debt Consolidation Plan

Balance to income ratio: 12x monthly income

Interest rate: As low as 2.77% p.a.

Loan tenure: 1-8 years

Promotion

Processing fee: 1% of loan amount

Late payment fee: S$100

Similar to Maybank, this is another good option if you can’t secure financing a DCP at other banks. Although the interest rate is the lowest in the bunch, the caveat still stands – it’s not guaranteed.

 

5. Credit Counselling Singapore (CCS) Debt Management Programme

Debt size: minimum S$10,000

Interest rate: Lower than financial institutions

Loan tenure: 5-10 years

Processing fee: S$88 or 1% – waived for online application

Late payment fee: 5% of monthly minimum repayment or S$80

The CCS is a non-government financial institution that offers the next best alternative if you aren’t eligible for a DCP. Thankfully, it is open to all nationalities. However, only outstanding debts with financial institutions are considered.

 

Do you think using personal loans in Singapore is a good idea to manage your debt? Leave a comment!

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Written by

Vinnie Wong