If you need money to resolve urgent situations or meet your goal for a particular period, say financing your wedding, getting a personal loan from a lender is one of the most popular options in Singapore.

What do you need to apply for a personal loan? This article will show you what documents you need to apply for the loan, and where you can apply.

But before then, it’s essential to learn about how a personal loan works, including its types and how much you can borrow.

What Is A Personal Loan And How Does It Work?

A personal loan is a type of unsecured loan that you can take from a bank or a licensed money lender to finance your needs.

By unsecured, we mean that the loan isn’t tied to collateral like your home. If you default on your loan repayment, the lender cannot seize your property, but it will hurt your credit score and make it difficult to get new loans.

This is different from a secured loan such as a mortgage loan, where your home is used as collateral for the loan and can be seized if you fail to pay back the loan.

So how does a personal loan work in Singapore?

When you take out a personal loan, you receive a lump sum of money upfront. This is called the loan principal. The majority of personal loans also come with fixed interest and a specified period for repayment.

Every month for the duration of the repayment period, you’re expected to pay back an instalment for the loan. This includes part of the principal and part of the interest making most personal loans fully amortized loans.

You can use personal loans for various purposes including:

  • Medical or family emergencies
  • Wedding
  • Honeymoon or vacation
  • Debt consolidation
  • Pay off credit card debts

Types Of Personal Loans In Singapore

In general, there are four types of personal loans available to you in Singapore depending on your needs.

  • Personal installment loan
  • Balance transfer
  • Credit line
  • Debt consolidation plan

Personal Installment Loan

This is the most common type of personal loan in Singapore and can be used for situations like weddings or emergencies. A lump sum is given to you upfront at a fixed interest rate. You’re required to repay the loan in instalments on a monthly basis.

Balance Transfer

This allows you to transfer your all outstanding balances such as credit card balances into one place or platform, so you can make a single payment each month, and can budget for your repayments better.

Credit Lines

A credit line is also known as a revolving line of credit. It allows you to take out money whenever you want.

You only pay interest on the amount of the loan, and for the duration the loan is outstanding. Once you have paid off the loan and interest, you aren’t charged until you choose to withdraw again.

How much you can withdraw from your credit line is usually based on your income, and is decided by the lender.

Debt Consolidation Plan (DCP)

This is similar to a balance transfer but allows you to consolidate all types of unsecured personal loans at a lower interest rate. This helps with managing multiple high-interest debts.

Unsecured loans excluded from a DCP include

  • Renovation loans
  • Joint loans
  • Education loans
  • Medical loans, and
  • Business loans.

How Much Can You Borrow?

Before you apply for a loan, it’s wise to ask the question “how much can loan can I get from a bank or money lender?”

This will help you determine if the loan can serve its purpose, and help you plan and budget for repaying the loan.

How much you can borrow depends on a couple of factors. Factors such as the type of loan, the purpose of the loan, and your ability to repay the loan based on your income will help lenders determine how much you can get.

For instance, most banks require Singaporeans and foreign residents to have a minimum of $30,000 as their annual income before they can advance you a loan. If you earn below $30,000 you may get a loan from a bank but at a higher interest rate.

On the flip side, foreigners need to earn between $40,000 to $60,000 annually before they can get a loan.

Money lenders allow you to borrow with less income. The table below shows how much you can borrow depending on your income for a licensed money lender like Lending Bee.

Annual Income Of BorrowerSingaporeans And Permanent ResidentsForeigners Residing In Singapore
Less than $10,000$3,000$500
At least $10,000 but less than $20,000$3,000$3,000
At least $20,0006x monthly income6x monthly income

Another major factor that determines how much you can get is the borrowing limit for all unsecured loans. Right now, this is capped at 12 times your monthly income.

So if you already have unsecured loans amounting to nine times your monthly income, the amount of personal loan you can borrow will only be three times.

However, even if you don’t have any outstanding unsecured loans, most lenders can only borrow you up to six times your monthly income for personal loans once you meet their requirements.

Pros And Cons Of Personal Loan

It’s advised you weigh out the pros and cons before applying for a loan in Singapore, and it’s no different for a personal loan. Below are some you should keep in mind.

Pros Of A Personal LoanCons Of A Personal Loan
  • Less strict requirements: personal loans don’t have strict requirements compared to secured loans.
  • High interest rates: Personal loans have high-interest rates than secured loans and some credit card loans.
  • Quick approval: Most personal loans can be approved and disbursed in a few days, with some in an hour (when dealing with a licensed moneylender).
  • Fixed interest rate: the interest rate of personal loans does not fluctuate, unlike credit cards where the interest rate might go up as your balance increases.
  • Unsecured loans: since personal loans are not secured, there is no risk of losing a valuable property like your home if you can’t pay back the loan.

What Documents Do You Need To Apply For A Loan?

Below are what you need to apply for a personal loan in Singapore. However, be aware that there might be other requirements, but these are the basic ones.

  1. Proof of identity: This can be your National Registration Identity Card (NRIC) or your passport as the case may be.
  2. Proof of income: This includes your CPF contribution statements for the last 12 months, the latest income tax assessment notice, the latest three months’ payslips, or bank statements.
  3. Proof of address: This includes documents confirming your address such as your utility bills.
  4. Employment details:  This includes your employment pass, job offer letter, and salary information. (This may be required if you just got a job)

What To Consider Before Applying for A Loan

Aside from weighing the pros and cons of a personal loan, here are some there factors to consider before applying for a loan.

  1. Interest rate: Shop around for the lowest interest rate personal loans in Singapore. However, a low-interest rate shouldn’t be the only thing you should consider.
  2. Loan tenure: Ensure the loan term is adequate for you to comfortably repay the loan. You don’t want a very long loan tenure as you might end up paying more interest, or a short one, as you might end up paying a higher monthly installment. Find the right tenure for you.
  3. Fees: Find out what fees are attached to the loan. Fees for late payment, early repayment, and cancellation. Ensure there are no hidden fees that can affect your total loan amount.
  4. Repayment plan: Have a plan for repaying the loan. Late repayment will lead to more debt (from late payment fees), and hurt your credit score (reducing your chances of getting loans in the future).

Get Low-Interest Personal Loans Today

Now you know what you need to apply for a personal loan, the next step is to find a reputable lender that offers low-interest personal loans in Singapore.

Lending Bee, a licensed Singapore money lender, can give you quick personal loans at low-interest rates in less than an hour.

Whether you need loans for family emergencies, weddings, vacations, or study expenses, you can get your personal loan disbursed the same day.

Simply contact us for further inquiries or apply online for a 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.