5 Things to Look Out for When Applying for a Personal Loan for the First Time

Personal loan Singapore

If you’re gearing up to apply for your first personal loan Singapore, congratulations! It’s an essential financial step, but before you dive in, let’s explore five crucial factors you should consider to make informed decisions and avoid any surprises down the road.

personal loan Singapore

Keep an Eye on the Interest Rate

When shopping for a personal loan, the interest rate is a key player. You’ll encounter two figures: the advertised rate and the Effective Interest Rate (EIR). While the advertised rate may seem appealing, it’s the EIR that tells the whole story by factoring in additional fees and charges. Remember, personal loan interest rates are often advertised for marketing purposes and may vary based on your creditworthiness.

Pro Tip: Look beyond the advertised rate and focus on the EIR to understand the true cost of borrowing.

Choose the Right Loan Tenure

Loan tenure, or the repayment duration, plays a pivotal role in shaping your monthly payments. Select a tenure wisely, considering your financial capacity. Shorter tenures mean higher monthly payments, while longer tenures result in lower monthly commitments. Use online calculators to find the sweet spot that aligns with your budget.

Pro Tip: Aim for a balance – manageable monthly payments with the shortest possible loan duration.

Be Aware of Fees and Charges

Personal loans often come with additional fees that impact your overall borrowing cost. Three common fees to watch out for include the admin fee (charged upon loan approval), late fees (for missed payments), and early repayment fees (if you pay off the loan before the agreed tenure). Understand these fees to avoid budgetary surprises.

Pro Tip: Be mindful of potential fee waivers and choose fee structures that align with your borrowing needs.

Monitor Your Credit Score

Your credit score is a crucial element in the loan application process. A good credit score can secure favorable interest rates, while a poor one may lead to higher rates or even loan rejection. Check your credit report before applying, addressing any issues to enhance your creditworthiness.

Pro Tip: Regularly monitor and improve your credit score to increase your chances of securing better loan terms.

Understand the Total Debt Servicing Ratio (TDSR)

The Total Debt Servicing Ratio (TDSR) measures your overall indebtedness and determines how much you can borrow. Ensure your monthly debt repayments, including the new loan, stay below 55% of your gross monthly income. Factor in existing debts like credit cards, car loans, and mortgages to make informed borrowing decisions.

Pro Tip: Pay off existing debts to create room within your TDSR and update your bank on income increases.

A Singapore citizen with a monthly income of S$2,500 seeking a S$10,000 personal loan over 3 years should carefully evaluate their budget, interest rates, and repayment capability before proceeding. With the help of this case below we provided some businesses name, their interest and EIR rates, and the total amount payable.

Bank Name
Interest Rate
EIR Rate
Processing Fee
Total Amount Payable
UOB Personal Loan
From 2.88%
From 5.43%
0%
S$10,864
Standard Chartered Cash One
From 3.48%
From 6.95%
S$ 0
S$11,044
HSBC Personal Loan
From 3.6%
From 6.5%
S$ 0
S$11,080
CIMB Personal Loan
From 3.38%
From 6.32%
S$ 0
S$11,014
GXS FlexiLoan
From 2.99%
From 5.67%
S$ 0
S$10,897
DBS Personal Loan
From 3.88%
From 7.9%
S$100
S$11,164

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