Consider the following statistic published by the Monetary Authority of Singapore (as on August 2016) relating to consumer loans (personal loans fall under this category): the total amount of consumer loans (not including car loans, credit cards and share financing) stood at S$38,014.3 million! Yep, we live in a consumerist society!
Ok, lets explore a few aspects of personal loans that just might include a few insider tips on getting yourself the best personal loan available:
Why are Personal Loans so Popular?
- Because they are unsecured – they don’t require any collateral. You don’t need to pledge your house, your car, your blue-chip holdings or your family jewels.
- Their interest rates don’t pack the punch that credit card (another unsecured loan product) interest rates do.
- Because you have the freedom to do what you want with the loan proceeds – whether that is getting some useful appliances for your home or blowing it away on a junket to Phuket.
How do I Nail that Juicy Personal Loan?
Now, that we’ve done with the obvious, lets get down to the essentials:
Get your Credit in Good Standing
Don’t know your credit score yet? There are currently two consumer credit bureaus in Singapore, namely Credit Bureau (Singapore) Pte Ltd and DP Credit Bureau Pte Ltd, recognised by MAS to collect and disclose borrower credit information to their members.
Apply to one of them and check your actual credit score. Then try and understand whether it is good enough or not. If not, research on what needs to be done to repair your credit score. The MoneySENSE website (http://www.moneysense.gov.sg/) spearheaded by the Financial Education Steering Committee (FESC) which in turn is chaired by the Monetary Authority of Singapore (MAS), is a great place to start.
Are your Finances in Order?
Did you know that the MAS works closely with government agencies to implement policies to encourage financial prudence among Singaporean households*? For example, the maximum amount of unsecured borrowings (and this includes personal loans) by any individual is generally capped at 4 months’ income per lender. This is regardless of whether he borrows from a financial institution regulated by MAS, or a moneylender regulated by MinLaw.
Are you Eligible?
Assuming that you’ve gone successfully past the first two steps, you will need to check whether you are actually eligible for that personal loan. For example, Citibank expects you (Singaporean/PR) to have a minimum annual income of S$30,000.
Start Shopping Around
Don’t just automatically assume that the lowest interest rate loan wins. Sometimes, other factors may matter. Tenure, for instance. You may want a longer tenured loan. While some banks give you loans of up to 5 years, HSBC provides you with the longest tenure – 7 years.
Also, start messing around with loan calculators and keep visiting third-party websites where you can get to compare loans from different banks; you just might dig yourself up a personal loan gold nugget.
View previous discussions on Pros and Cons of Personal Loans for a broader outlook.
*Reply to Parliamentary Question on Singapore’s Household Debt Ratio