Personal instalment loans

An instalment personal loan is an amount of money you borrow for a purpose of your choice (e.g. home renovation, purchasing furniture or technology, holiday, car purchase) and repay in equal monthly instalments over the course of the repayment period (loan tenure or loan tenor).

If you manage your loan responsibly by meeting all the repayments on time, it should have a positive effect on your credit score. The positive effect will be particularly noticeable if you use the instalment personal loan as a means of consolidating your debts by using the cash from your new loan to pay off your old debts, leaving you with a single, manageable payment, possibly at a lower overall interest rate.

The maximum amount you can borrow is stipulated by the lender in terms of a multiple of your monthly salary (e.g.four times your monthly salary. But you shouldn’t automatically apply for the maximum loan amount. Work out what your actual needs are (e.g. the likely total cost of your planned renovations, or the sum of your existing debts for debt consolidation) and apply for this amount only, to reduce your monthly repayments and the total amount of interest you will pay.

Repayment periods of between one and seven years are generally available. The longer the repayment period, the smaller your monthly repayment will be, but the more interest you will pay in total. Try to choose the shortest repayment period you can manage, where you will still be able to afford the monthly repayment.

The cash paid to you upfront when you take out an instalment personal loan can be used for any purpose you choose and will be paid into your personal bank account. Special purpose loans, like education, new car, used car, balance transfer, debt consolidation or renovation loans, are offered by lenders to borrowers who intend to use the cash for the stated purpose and the cash will often be disbursed to the third party providing the goods or services rather than direct to the borrower. These special purpose loans often have lower interest rates, so if you have one of these purposes in mind you might be better off applying for a loan type specifically intended to cover it.

The good news is that the eligibility requirements are often easier to meet than the requirements for a specific purpose loan. Some specific purpose loans, for example, are closed to foreigners, or may have more stringent income requirements.

Typical eligibility requirements for an instalment personal loan are:

• Be at least 21 years old and under 65
• If a Singaporean, earn an annual income of at least $20,000 or $30,000, depending on the lender
• If a foreigner, earn a higher annual income (e.g. $45,000 to $60,000, depending on the lender)

No. Instalment personal loans are usually unsecured, unless the loan amount is particularly large (e.g. over $100,000).

Most banks will accept applications from foreigners, although there may be higher eligibility requirements in terms of income and documentation.

If you have all the required documentation ready to hand (identification documents, proof of income, proof of residential address) and have a reasonable credit score, approval in principle can be as fast as one minute to one hour (depending on the lender) with the cash appearing in your bank account the next day.

Apply using MyInfo for the quickest turnaround.

If the bank needs to follow up on something in your documentation or credit report, it could take longer for your loan to be approved.