5 best personal loans in Singapore with lowest interest rates (2022)

Personal loan	Interest rate	Processing fee	Monthly repayment
HSBC Personal Loan	3.2% (EIR: 6%)	0%	$304
UOB Personal Loan	3.4% (EIR 6.42%)	0%	$306
Standard Chartered CashOne	3.48% (EIR: 7.99%)	0%	$307
Citibank Quick Cash (New Customers)	3.45% (EIR: 6.5%)	0%	$307
DBS/ POSB Personal Loan	3.88% (EIR 7.9%)	$100	$310

Not mentioned in this table is OCBC’s ExtraCash personal loan which brings you up to 5.43 per cent interest rate (EIR 11.47 per cent) amounting to $323 monthly repayment with a $100 processing fee.

What do interest rate, EIR and processing fees mean?

There’s quite a bit of jargon here, so let’s go through some questions that may have come up.

Interest rates: Notice a whole bunch of interest rates along the lines of “from X per cent”? That’s because personal loans are pretty dynamic as they all depend on (a) who you are, (b) how much you want to borrow and (c) for how long. Banks often personalise your interest rate when you submit an application, so, typically, you’ll see the final interest rate only after your application is approved.

EIR: EIR stands for Effective Interest Rate, and it is a more accurate reflection of the cost of borrowing because it also takes into consideration the other fees (like processing fee; see next point) and loan repayment schedule.

Processing fee: This is the main hidden cost of personal loans and is worth highlighting. The processing fee is deducted from the principal, meaning, for a $10,000 loan with a $100 (or 1 per cent) processing fee, you get only $9,900 in cash. As a borrower, you might not “feel” it, but it does eat into your funds and increase the cost of borrowing.

Now, let’s walk through the five personal loan packages highlighted.

1. HSBC Personal Loan

HSBC’s personal loan is open to Singaporeans and PRs with an annual income of $30,000 and above. If you qualify for it, HSBC actually offers some of the most competitive interest rates at the moment.

The bank is currently advertising promotional interest rates starting from 3.2 per cent, which works out to an EIR of 6 per cent, and zero processing fees. Remember, however, that actual interest rates will vary from person to person. Loan tenures ranging from one to seven years are available.

On the downside, while smaller loans can get approved quite quickly, processing of applications for bigger loans (say, $100,000 and over) might take some time, possibly more than a week. Still, if you can wait, it’s worth it for the low interest rates.

2. UOB Personal Loan

UOB’s personal loan is only open to existing UOB credit card or CashPlus customers who are Singaporeans, PRs aged 21 to 65. You’ll also need to earn at least $30,000 a year. If you’re not an existing UOB customer, you’ll still be able to apply for this UOB Personal Loan… but you’ll have to get a UOB credit card or CashPlus along with it.

The flat interest rate is fixed at 3.4 per cent while EIR ranges from 6.36 per cent to 6.42 per cent. Loan tenures stretch from one to five years, with the highest EIR at three years.

If you’re an existing UOB customer, you can get instant approval when you apply for your personal loan online.

3. Standard Chartered CashOne

Standard Chartered CashOne personal loan is open to Singapore Citizens, PRs and foreigners with a Singapore Employment Pass aged 21 to 65. The minimum annual income requirements are $20,000 for Singaporeans and PRs and $60,000 for foreigners.

You can apply for this personal loan online by signing in through SingPass and receive your loan disbursement within 15 minutes. There’s no need to be an existing Standard Chartered customer to get this personal loan.

So, it’s fast, but is it also cheap? Standard Chartered charges an initial annual fee of $199 (deducted from your approved loan). From the second year onwards, you won’t have to pay anymore processing fees — UNLESS you miss any instalments, in which case you will pay $50 for that year.

Because of the $199 fee, CashOne is more worthwhile if you’re taking out a big loan. A $10,000 loan would mean you’d be paying a fee worth 1.99% of your principal amount.

Interest rates are being advertised as starting from 3.48%, working out to an EIR of 7.99% and above. In reality, interest rates are personalised, so yours might differ from this example.

4. Citibank Quick Cash (new customers)

This 3.46 per cent Citibank Quick Cash is only available to customers who are completely new to Citibank loans. If you already have a Citibank loan, Quick Cash gives you 4.55 per cent instead, at $316 per month.

Just log into the Citi Mobile App, key in the amount of cash you need and you can get the funds instantly.

The loan is open to Singapore Citizens and PRs aged 21 to 65 with a minimum annual income of $30,000. However, you don’t need to worry about these requirements if you’re an existing customer, you would already have been vetted previously by Citibank.

You can get 3.56 per cent interest rate on Citibank’s personal loan with a shorter one-year tenure, zero processing fee, and a fixed EIR of 6.5 per cent. 

If you intend to drag your loan repayment longer up to five years, interest rates will be 3.48 per cent per annum, with no processing fees, and you pay an EIR of 6.5 per cent.

That said, don’t take our word for it. Rates are customised, so what you get might not be exactly the same as the above examples.

5. DBS/ POSB Personal Loan

DBS’s personal loan is only open to existing DBS customers. If you already have DBS Cashline or a DBS credit card or currently credit your salary into a DBS or POSB deposit account, you can get the cash disbursed instantly.

The loan is open to Singaporeans and PRs, as well as foreigners with DBS Cashline or credit card accounts. You must be aged 21 to 75 years with a minimum annual income of $30,000 — one of the lowest income requirements among banks.

DBS’s personal loan promises interest rates as low as 3.88 per cent. There is a processing fee of 1 per cent, bringing the lowest possible EIR to 7.56 per cent. Loan tenures of 1 to 5 years are available.

As usual, these are the lowest possible rates and the actual interest rate depends on what DBS is prepared to extend to you. The maximum possible EIR is 20.01 per cent.

Interest rate vs effective interest rate (EIR) — what does it all mean?!

Most banks will show you two percentages on their personal loans. The lower one is annual interest rate and it will be in a huge font on their marketing materials, e.g. “Personal loan at just 5 per cent p.a.!!!” Somewhere in the vicinity you should find subtle grey text stating something like “(EIR: 12.5 per cent)”. That’s the higher effective interest rate or EIR.

Annual interest rate is easy to calculate. If you borrow $10,000 at 5 per cent p.a. for one year, you pay the bank $500 in interest. Borrow it for two years, and you pay $500 x two years = $1,000 in interest. And so on.

EIR (effective interest rate) is much more complicated as it also takes into account any processing fees (e.g. 2% of the loan) plus your repayment schedule.

For example, if you borrow $10,000 and repay it in full at the end of one year, you would have $10,000 to play with all year. You’ll be “rich” the whole year. But if you have to repay your $10,000 in monthly instalments, you’ll be rich the first month, then slightly poorer and poorer with every passing month as the amount of money dwindles. Everything else being equal, the EIR of the first loan is lower than that of the second.

It also takes into consideration how much of your monthly loan repayment goes to returning the borrowed money and how much goes to paying off interest.

Which personal loan should you opt for?

If you’re just looking for the cheapest personal loan, the HSBC Personal Loan is a good bet. That said, if you don’t get offered the lowest advertised interest rates, you might want to compare with what the other banks are willing to offer you.

If you need the cash ASAP, the fastest options are DBS Personal Loan (for existing DBS customers), and Standard Chartered CashOne.

And if your profile makes it hard to get a bank loan (such as if you’re self-employed and don’t have income documents for the last two years), Friday Finance is your best bet — just try to pay off that loan as fast as possible to save on interest.

Whatever personal loan package you choose, opt for the smallest loan amount and shortest term you can comfortably manage. This would keep your interest payments to a minimum.

Term loan vs credit line — which should you choose?

While researching personal loans, you might have come across many different loan types, some of which do not seem to fit what we described above.

We usually recommend these loans because they have much lower interest rates. You can pay back slowly and steadily at a pace comfortable to your financial situation.

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Many banks also offer a personal line of credit — sometimes called a credit line, revolving loan, or even “flexible repayment loan”.

This is pre-approved amount of money you can cash out in part or whole, but you need to repay it ASAP or else face sky-high interest rates. Don’t fall for it unless you’re absolutely confident you can pay the money back immediately.

These days, most banks base their personal loans on either your personal line of credit or credit card limit. So you will need either a credit card or credit line to get the loan. However, it is still considered a term loan if it comes with a structured repayment plan.

But before you sign up, understand that your credit cards with this bank will be as good as dead because you’ll have effectively “spent” your credit on a cash loan.

Being in debt is not fun…

But it can be prevented. If you must, take out a loan and channel all your energies into paying it off. In the meantime, re-examine your income and budget, making a note of everything you spend on, so you won’t have to resort to loans again.

Ideally, you should draw up a budget that gives you enough leeway to set aside some cash for the future without starving to death.

You should also build up an emergency fund worth a few months’ expenses so you can dip into it when unexpected expenses arise instead of getting into debt.

It’s also a good idea to know what types of insurance you need. We recommend hospitalisation insurance at a bare minimum, and life insurance if you have dependents. Being sufficiently insured ensures that you don’t get hit with huge bills if the unexpected happens.

This article was first published in MoneySmart.