Taking out a personal loan in Singapore is one of the most popular options if you’re in financial distress, and need funds to settle your bills. However, the question is “how much personal loan can I take?”
Knowing how much you can take will help you determine the right amount to borrow and gauge if you can repay the loan.
Before you get a personal loan, read on to understand how much you can take, if you can take multiple loans, what to consider before you take out the loan, and where you can apply for the loan.
What Is A Personal Loan?
A personal loan is an unsecured loan that can be used for whatever you want. By unsecured, we mean the loan isn’t bound to an asset such as your car or home. If you fail to repay the loan, the lender cannot seize your assets.
However, failing to repay the loan will negatively impact your credit score, and worsen your chances of securing another loan.
How does a personal loan work in Singapore? Glad you asked!
When your personal loan application is approved, the lump sum of the loan amount is paid to your bank account or given to you as cash.
The loan has a fixed interest rate and a fixed repayment period. Personal loans are amortized, meaning you have to pay back both the interest and the loan amount.
Each month, spanning through the repayment period which can be up to five years, you’re required to pay back an installment that includes some part of the interest and principal.
Be aware that fees such as processing fees can also be incurred at the time of application. In most cases, the loan amount you get after approval is the original loan amount minus fees or charges.
Let’s take a practical example.
Mr Koen wants to take out a loan for $15,000. The fixed interest rate for the loan is 4.7%, the repayment period is 5 years, and the processing fee is 2%.
The following table shows the total loan amount and his monthly installment.
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What Can A Personal Be Used For?
When it comes to personal loans, you’re not required to justify the purpose of the loan.
Say for instance you took out a personal loan for the purpose of your wedding and ended up using it to pay off your student loan, you haven’t done anything wrong.
Some of the followings are purposes a personal loan can be used for.
1. Emergency Situations
Situations such as medical or family emergencies may require cash that is not readily available. A personal loan can be taken to resolve those situations.
If you’re looking forward to getting married but you’re short of funds. You can take out a personal loan to make your dream wedding a reality.
3. Study Fees/Study Loans
You can take out a personal loan to pay for your schooling expenses, or repay your student loan if for whatever reason you’re unable to pay back the loan.
4. Credit Card debts
If you’re finding it difficult to repay your credit card debts, you can apply for a personal loan to settle the debt. Although this is not advisable in the long run as it will only lead to more debt.
5. Debt Consolidation
If you have multiple debts at high-interest rates, you can take out a low-interest personal loan to consolidate your debt, reduce your monthly installment, and make repaying the loan easier.
A personal loan can be taken out for any situation. However, be disciplined enough to use the loan for what it was intended so you don’t end up with unnecessary debt.
How Much Personal Loan Can I Take?
When it comes to the question of how much personal loan you can take, it really depends on a couple of factors such as the purpose of your loan, your ability to repay the loan, and the loan type.
For unsecured personal loans, you might be able to take out up to 6 times your monthly income. Whereas, if you take out a secured personal loan, it’s how much you can take will depend on the value of your collateral.
Another factor that can affect how much personal loan you can take is the borrowing limit for unsecured loans. As of 1 Jun 2019, the Monetary Authority of Singapore (MAS) has capped the maximum unsecured loan an individual can borrow to 12 times their monthly income.
This includes all unsecured loans such as personal loans, education loans, renovation loans, and credit card lines and debts.
So if you want to take a personal loan, and you have already borrowed unsecured loans up to 10 times your monthly income, you’ll only be given a loan amount that is two times your monthly income.
If you have maxed out the limit, you won’t be able to borrow.
Lenders might also look at the following to determine how much low-interest personal loan you can take.
- The purpose of the loan: the riskier the loan, the lower the amount. Lenders might be willing to advance you more for medical emergencies than a vacation trip.
- Income and credit history: if you have a stable income, and a good credit history, you might get a higher personal loan amount.
- Debt to income ratio: the more debt you have, the lower the amount lenders might be willing to give you. The reverse is the case if you have less debt.
Do You Qualify For A Personal Loan?
Not everyone will qualify for a personal loan. Although qualifying criteria may vary from lender to lender, the following are the basic criteria to qualify for the best personal loans in Singapore.
- Must be a Singaporean, permanent resident, or foreigner
- Between 21-60 years of age
- Singaporeans or PRs must earn above $20,000
- Foreigners must earn at least $40,000 to $60,000
Lenders may also require that you have a stable income, and show proof of employment for at least 1 year. They might also check your credit history, and ensure you meet a certain rating to qualify for a personal loan.
Can You Take Multiple Personal Loans?
Technically, you can take out multiple personal loans. However, it’s still going to depend on the borrowing cap for unsecured loans required by MAS which is 12 times of your monthly income.
Remember that banks and other FIs might be willing to give you two to six times of your monthly income for personal loans.
So, say Mr Koen has a monthly income of $6,000, and he doesn’t have any outstanding unsecured debt. He might be able to get personal loans up to $36,000.
He could choose to take this out as six loans of $6,000, or two loans of $18,000 depending on how much a lender is willing to advance to him at a point in time considering other variables.
In summary, you can take out multiple personal loans provided you haven’t reached the limit required by MAS.
What To Consider
Even as you plan to take out the best personal loan available, consider the following before you apply and after you apply.
1. Interest Rates
Each lender will have varying interest rates for their personal loans. Shop around and go with a lender that has the lowest interest rate for personal loans in Singapore. This way the cost of the loan is reduced.
2. Loan Tenure
This is the length of the repayment period. Go for a loan tenure that is just adequate for you to repay the loan.
A long loan tenure might mean you pay more in the long run. Some lenders might have minimum loan tenures, and fees for early repayment — find out what those are.
3. Fees And Charges
Find out what fees and charges are associated with the loan. Most lenders will charge a processing fee which is usually 2-3% of the loan amount. However, other fees might be present such as late payment fees, cancellation fees, and early repayment fees.
4. How You Intend To Pay Back The Loan
You must be able to afford and repay the loan you’re borrowing, as failure to repay will only lead to more debts. Ensure you have a stable income, and you don’t have multiple debts you’re servicing.
5. Other Alternatives
What other alternatives are there for the purpose of the personal loan you’re trying to take? For instance, instead of taking out a loan to renovate your house, you can get a renovation loan instead. Likewise for a study loan.
Where To Apply
Banks and licensed money lenders are best for personal loans in Singapore.
Banks have stricter requirements than moneylenders and will require you to have a good credit score before they can advance you a loan. Approval times may also be delayed when you borrow from banks. However, you might get a higher loan amount compared to money lenders.
Licensed Money Lenders
Money lenders can give some of the best loans in Singapore because of their more relaxed requirements and faster approval times.
The rejection rate is also lower, and you can get shorter repayment periods compared to banks. So you pay a lower amount of interest in the long run.
In addition, you can also borrow even if your income is less than the “at least $20,000” requirement by some banks. However, in general, you might get a lower loan amount compared to when you borrow from banks.
Get The Best Personal Loan For Your Needs Today
How much personal loan can I take in Singapore? You have your answer above. It all depends on the loan type, the purpose of the loan, and other factors lenders will consider.
If you’re looking to take out the best lowest-interest personal loan in Singapore, Lending Bee have you covered.
With easy application requirements and fast approval time, you can get your personal loan in less than an hour.Get started today by contacting us to learn more, or apply online for a personal loan.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.