The Definitive Guide to Personal Loans in Singapore

January 16, 2024

We go through life, living one day after another, aspiring to fulfil either dreams we might have had as children, or to acquire material or intellectual possessions to make life more meaningful. There comes a time, however, when we fall prey to the unexpected, and a helping hand is needed to extricate ourselves from the difficulties we find ourselves in. More than often, this help takes shape in monetary form.

It is customary to seek help from friends and family, and when that’s not possible, the only recourse is to turn to financial institutions for help in the form of personal loans.

But what is a personal loan? Simply put, a personal loan is money obtained from a bank or money lender which you repay in monthly instalments.

In this definitive guide to personal loans in Singapore, we share some important things to consider before signing on the dotted line.

Your Purpose

There are multiple reasons to take out a personal loan, whether it's to pay for a medical expense, a house improvement, to finance a wedding, or to consolidate high-cost debts. It is always your choice where and when you spend it. But it doesn't hurt to consider whether it's worth your time and effort to get into something that could potentially cripple your financial well-being for months or even years.

Before taking that step, consider your monthly income as well as the urgency of your purpose.

Eligibility Criteria

Even if you’re ready and have all the right reasons to need a personal loan, you won’t be able to if you are not eligible to acquire one. In Singapore, you need to be no less than 21 to apply for a loan. Most banks also require an annual income of at least $30,000.

For those who don’t meet the income criteria, there are licensed moneylenders who can provide the same service.

It's a good idea to check with your bank or your preferred lending partner to ensure that you're qualified and aware of all necessary criteria for eligibility.

Interest rate

Interest rates vary by bank, but they typically range from 3 to 4%. You'll also see two figures: the Interest Rate and EIR (Effective Interest Rate).

The final interest rate after your application has been granted is referred to as the Interest Rate. It's mostly determined by your salary and the length of the loan. EIR, on the other hand, accurately reflects the cost of your loan. The processing fee and the loan payback schedule are already included in this rate.

The maximum interest licensed moneylenders can charge is 4% per month, regardless of the amount of the loan or your income, according to the Singapore Ministry of Law, and the maximum interest for late payment is also 4%.

Consider these factors when getting a personal loan, as interest rates will have a direct impact on how much you must budget monthly for other obligations.

Fees and Charges

When taking out a personal loan, the interest rate should not be the sole consideration. Other fees apply, such as annual fees, late payment fees, and, in some cases, prepayment fees.

A late payment fee will apply if you miss any payments or pay less than the fixed repayment amount by the due date. This is particularly important because lenders are strict when it comes to late payments. As for prepayment fees, it is the amount banks impose when you pay your loan in advance. At Friday Finance, we differentiate ourselves through our efforts to ensure the financial wellbeing of our borrowers. As an example we don’t charge fees when you pay your loan in advance. In fact, the earlier a payment is made the less interest incurred.

Amount of Loan

When determining a borrowing limit, banks evaluate various aspects, including your relationship with the bank, your credit score, and, most crucially, your monthly income. Some banks will give you up to eight or ten times your monthly salary, but these larger loans are often reserved for higher-income clients.

When it comes to secured loans (loans backed by collateral) the amount you can get is based on the value of your collateral. For unsecured loans, the amount is determined by the borrower's annual income and whether they are a permanent resident, citizen, or foreigner in Singapore.

Processing Time

Speed is a vital issue for many borrowers. When will your loan be accepted, and when will the funds arrive in your account? The method and time it takes to acquire funds may differ depending on the financial institution you choose. The rest of the process can take anything from days to weeks once the loan application and all supporting paperwork have been submitted. Generally, it takes less time to secure a personal loan from a licensed moneylender compared to a bank.

Loan Tenure

Understanding loan tenure can assist you in better managing your monthly payments and calculating the total cost of the loan.

While it may be tempting to choose a shorter loan term to avoid carrying a financial burden for as long as possible, keep in mind that a shorter loan term also entails a higher monthly payback.

A longer loan term, on the other hand, means you'll pay more in the end due to the higher interest rate, but it won't put you under as much stress because your monthly payments will be smaller.

Before determining which loan tenure is ideal for you, thoroughly weigh your options and account for your monthly expenses.

Lender Credibility

Some people often disregard checking the credibility of the financial institution they’re transacting with, but dealing with reputable and well-established lenders who provide complete transparency is essential for getting a personal loan.

Banks are common go-to options, but if you get a better deal with a moneylender, it is always a good idea to double-check their accreditation on the Singapore Ministry of Law’s list of Licensed Moneylenders before signing the contract.


Personal loans are useful financial tools for unexpected expenses. They can aid with the recovery from a financial catastrophe or the payment of hefty bills. Let Friday Finance relieve you of some of the worries of managing your finances. We are listed on the Singapore Ministry of Law's list of Licensed Moneylenders, and we provide safe loans at reasonable rates.

To begin reaching financial wellness, contact us today.