Urgent financial emergencies come in many forms, from medical fees to study loans to a sudden car breakdown. Personal loans in Singapore are a great way to tackle such problems, in addition to helping you achieve your life goals and protecting your finances during emergencies.
Here, we will explore what a personal loan is, why you should take a personal loan from licensed money lenders instead of banks, and how you can apply for one.
Personal loans can be used for almost any personal expenses – from downpayment for your home, funerals, wedding expenses, tertiary education to unexpected bills such as emergency medical fees or car repairs.
Licensed money lenders in Singapore offer personal loans that have low interest rates and a streamlined and friendly process. First-time borrowers might need to have the right expectations before taking a loan, as it also comes with a maximum loan cap, interest rates, late fees and other charges.
When it comes to borrowing, we have a few options – such as banks, licensed money lenders or close personal contacts. Between banks and licensed money lenders, there are many reasons why you should favour taking a personal loan from licensed money lenders instead of banks:
In the face of financial emergencies, speed is key when it comes to getting different types of personal loans, such as fast cash loans, approved. Licensed money lenders are able to approve your loan on the same day, usually in less than 30 minutes. In contrast, banks may take up to 2 weeks.
This is because licensed money lenders benefit from having less red tape and less strict credit checks. Thus, regardless of whether you need payday loans or urgent cash loans, licensed money lenders can get you your cash faster than banks.
Licensed money lenders offer higher approval chances than banks due to less stringent requirements. For instance, banks may reject your loan if you have a bad credit history, have no stable income or earn less than $20,000 a year. On the other hand, licensed money lenders simply require you to be employed and not have a history of defaulting payment to money lenders to approve your loan.
Furthermore, if you have a bad credit history with banks, you can still get approval with licensed money lenders. This is because money lenders will not check your credit history through the Credit Bureau Singapore (CBS), which records your credit history with banks. (Some tips on how to improve your credit score here.)
Instead, money lenders will check your loan details with other money lenders through the Moneylenders Credit Bureau (MLCB), which shows borrowers’ existing outstanding loan principal amount with other money lenders, total payable amount, repayment records and borrowers’ borrowing limit.
Though money lenders offer both secured and unsecured loans, it’s easy to get loan approval for unsecured short term loans with money lenders. This way, your assets like house or car will not be at risk should you default on your repayment.
Licensed money lenders are better than banks for short-term urgent loans because of the faster approval process and higher loan approval rate. For example, if you just need a payday loan that you can repay in one month’s time when your source of funds comes in, and just need a small loan to ease your cash flow, it is less of a hassle to borrow from licensed money lenders.
On the other hand, if you need a larger loan amount with longer repayment periods, banks might be the better choice as banks generally offer a longer repayment period (up to 5 years) at lower interest rates of 3.5-11% per annum, compared to money lenders’ interest rates of 1-4% per month (up to 48% per annum).
Who is eligible to take a personal loan SG from licensed money lenders and what are the loan limits?
According to the Ministry of Law, Singaporeans and Permanent Residents (PRs) may obtain loans of any amount when applying for secured loans.
However, for unsecured loans, Singaporeans and PRs may only borrow up to $3,000 if their annual income is less than $20,000, and up to 6 times the monthly income if their annual income is more than $20,000.
Foreigners residing in Singapore may borrow up to $500 if their income is lower than $10,000, up to $3,000 if between $10,000 and $20,000, and up to six times the monthly income if more than $20,0000.
Remember to have the following documents ready when applying for personal loans from licensed money lenders:
For Employed and Self-Employed Singaporeans and PRs:
- CPF Contribution Statements or IRAS Notice of Assessment (NOA)
- Proof of income, such as latest 3 months’ payslips, bank statements, invoices or any other official income statements
For Foreigners residing in Singapore:
- Employment pass
- Proof of home address such as tenancy agreement or proof of billing address
- Proof of income, such as latest payslips (past 3 months)
- Complete the online application form.
- Wait for a call from the money lender’s loan officer to confirm the loan. You will be asked to drop by their office for verification.
- Bring all necessary documents when you visit the money lender’s office. This step is compulsory when borrowing from licensed money lenders.
- Read the loan contract carefully before signing it. It is important that you understand all the loan terms such as interest rates, loan tenure and other charges before committing to it.
- Receive your loan through bank transfer or via cash on the spot.
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