Monthly loans are useful for emergency cash situations and consolidating high-interest debts such as credit card debts. It can also help you cushion your savings for the right purposes. Still, there are many things to consider, like the type of monthly installment loan and the costs involved.
Whether you are wondering if a monthly loan in Singapore could suit you or perhaps are looking into other financing options, we’ll help you find the best fit.
What is a Monthly Loan?
A monthly loan is a general term for loans that you can repay monthly over a set period. For each monthly payment, the borrower repays a portion of the loan’s principal amount, corresponding interest charges, and other fees.
The main variables of a monthly loan are the loan amount, loan term, and the lender’s interest rate. Other variables include processing fees, late payment fees, and early repayment fees.
Examples of monthly installment loans include:
- Personal loans
- Foreigner loans
- Payday loans
At a Glance: Monthly Loan Vs. Other Financing Options
| Particular | Monthly Loan | Credit Card | Home Equity Loan | Business Loan |
|---|---|---|---|---|
|
Purpose |
Can be used for any purpose including unexpected medical bills or home repairs |
Can be used for any purpose |
Ideally for home improvement but may also be used for other purposes |
As additional working capital, purchase of inventory, advertising expenses |
|
Loan Amount |
Licensed moneylenders: Up to six times your monthly income Banks: Up to ten times your monthly salary |
Depends on the allowed credit limit or available credit |
Up to 80% of your home’s equity minus unpaid mortgage balances |
Licensed moneylenders: Up to S$200,000 Banks: S$300,000 up, may depend on annual revenue |
|
Interest Rate |
Licensed moneylenders: 1% to 4% per month Banks: 3% to 7% p.a. |
Average annual percentage rate (APR) may range from 15% to 28% |
Being a secured loan, it comes with lower interest rates starting from 1% p.a. |
Licensed moneylenders: 5% to 15% per month Banks: 3.5% to 7% p.a. |
|
Repayment Terms |
Licensed moneylenders: Up to 12 months Banks: 6 months to 5 years |
You can pay the minimum amount due or pay more than the required amount before the due dates |
5 to 30 years |
Licensed moneylenders: Up to 24 months Banks: 3 to 5 years |
|
Eligibility Requirements |
Licensed moneylenders: Minimum monthly income of S$1,500 SCs/PRs and
S$2,000 per month for foreigners
Banks: Minimum annual income of $20,000 for SC/PRs S$40,000 for foreigners |
At least S$30,000 minimum annual income |
Own a private property in Singapore with at least 20% equity |
Singapore-registered businesses with at least 30% shares owned by Singaporeans/PRs |
|
Processing Time |
Licensed moneylenders: Within the day
Banks: a few business days or up to a week |
You may apply online and wait for a few days to get approved. Once your credit card is active, you can use your available credits anytime. |
Two to four weeks |
Licensed moneylenders: Within the day
Banks: Up to two weeks |
|
Other Fees |
Licensed moneylenders: one-time processing fee not exceeding 10% of the principal amount, late payment fee not exceeding S$60 per month
Banks: processing fees, late payment fees, early repayment fees |
Late payment fees |
Late payment fees, legal fees, early repayment fees |
Licensed moneylenders: No processing fee
Banks: Origination fees at around 4% to 5% of the loan amount |
Essentially, monthly loans are quicker to avail as you can almost instant approval and get your cash in as fast as one day. They are also more flexible in terms of use and are ideal for emergency cash needs. They also come with lower interest rates, flexible repayment terms, and less stringent credit assessment than other financing options.
How Much is a S$50,000 Loan Per Month?
Let’s say you want to take a monthly loan of S$50,000 with the following details:
Interest rate: 1% per month
Loan Tenure: 12 months
Processing Fee: 10%
Here’s how you can compute for your monthly installments:
| Formula | Computation | |
|---|---|---|
|
Processing Fee (10%) |
Loan Amount x 10% |
S$50,000 x 0.10 = S$5,000 |
|
Total Loan Amount |
Principal Amount + Processing Fee |
S$50,000 + S$5,000 = S%55,0000 |
|
Monthly Interest Rate (1%) |
Total Loan Amount x 1% |
S$55,000 x .01 = S$550 |
|
Total Interest (12 months) |
Monthly Interest Rate x 12 |
S$550 x 12 = S$6,600 |
|
Total Amount Payable |
Total Loan Amount + Total Interest |
S$55,000 + S$6,600 = S$61,600 |
|
Monthly Repayments (rounded off to the nearest centavo) |
Total Amount Payable / 12 |
S$61,600 / 12 = S$5,133.33 |
Therefore, your monthly installment for the S$50,000 loan with 1% per month interest rate and 12 months repayment schedule, with a processing fee of 10%, would be around S$5,133.33.
Note that the loan fees may vary from one lender to another to a maximum of 10% of the loan amount. If you intend to borrow money soon, checking with your lender regarding their specific processing fee policy is recommended. You may also use the lender’s personal loan calculator to get accurate results.
Can You Get a 3-Month Loan in Singapore?
The possibility of getting a 3-month loan may depend on the lender’s terms and conditions and other factors like credit score, income, and employment status. While most lenders offer short-term loans ranging from 1 to 12 months, a 3-month loan may not be available to all lenders.
Moreover, the shorter the term, the higher the interest rate and monthly repayment. It is best to shop around and compare the terms and conditions of different lenders before making a decision.
Closing
While monthly loans are helpful, applying blindly for a loan when you find yourself cash-strapped is never a good idea. You must always put careful consideration into essential factors like the loan purpose and your repayment ability. Additionally, doing diligent research and comparing your options is always best to find the best rates and terms.
Key Takeaways:
- While monthly loans offer flexibility and ease of repayment, they may come with higher interest rates and fees compared to longer-termed financing options.
- When comparing options, it is essential to consider the total cost of borrowing, including interest rates, fees, and other charges.
- Other financing options, such as business loans, home loans, and home equity loans may come with lower interest rates and fees but require collateral and stringent credit checks.
