Most of us take help from family and friends when we are facing financial setbacks. But did you know, you can instead take a personal loan to fulfill your immediate cash needs? These urgent needs could be funding your education, paying off your wedding expenses, renovating your home, or many other countless reasons.

A personal loan is a lump sum borrowing from a bank or financial institution which is repaid over a fixed term. But not anyone can obtain a personal loan if he/she doesn’t meet the eligibility criteria set by most banks and certified money lenders.

Let us walk you through what conditions you must be fulfilling to apply for a personal loan.

What is a personal loan and in how many forms it is available in Singapore?

A personal loan is an option to relieve yourself from the financial burdens of the short term. If you or any of your family members have met with a medical emergency, you could get a personal loan to pay the expensive medical bills.

Apart from funding your immediate cash needs, a personal loan can also be used for consolidated credit card loans if you have a lot of them.

How does a personal loan work? Well, all you need to do is shop around as many options as you can in the market and select the most suitable one. Interest rate, principal amount, and loan terms are the three main factors of a personal loan you must analyze before making any decision.

There are many forms of personal loans available in Singapore. You can choose what suits you best.

• Installment loans– This is similar to any other loan. Under an installment loan, you will be offered a lump sum amount at the initiation. You will need to pay it in installments over a set period in the agreement. Most Singaporeans avail of installment loans for situations needing a large amount of cash such as medical emergencies or weddings.
• Line of credit– This method allows you to draw as much amount as you want at any time of the loan period. The maximum amount that can be drawn and the loan duration is decided at the beginning itself. Since the personal line of credit carries a higher rate of interest comparatively, you must be careful while utilizing the money.
• Debt consolidation– It is a plan under which you can borrow a loan to pay off your other loans. It allows you to transfer all other outstanding unsecured loans in one place and consolidates all the debt balance to form a new loan. This method is mostly used for budgeting and managing your total debt in a more efficient way.
• Balance transfer– It’s just a type of consolidation plan which transfers your balances from your debts or many cards from one to another loan carrying a lower interest rate. Banks that provide a grace period of 6 to 12 months usually balance transfer facilities without charging any interest for it.

Click here to read Who is eligible for DCP in Singapore

What are the criteria and conditions to apply for a personal loan?

Depending upon the citizenship, age, and income level, the eligibility criteria to apply for a personal loan differs from person to person. Not only this, but criteria may also vary from bank to bank as they have their own set of standards. Do note that every lender evaluates the application on the basis of the applicant’s credit score. So you must maintain a healthy credit score to avoid rejections from banks.

Singaporeans and permanent residents have different sets of conditions from foreign applicants. To speak of generality, you need to be at least 21 years of age to apply for a personal loan. Even if you fulfill every other condition, if you are below 21, you will be disqualified to apply for it until you become 21.

In general, the eligibility condition can be checked with the following table-

Eligibility criteria	Banks	Financial institutions/ licensed money lenders
Age limit	21 to 65 years old generally.	21 to 65 years old generally.
Minimum annual salary requirement for Singapore citizens and PRs	At least $30,000	May require less than $10,000.
Minimum annual salary requirement for foreigners	The salary range must fall between $40,000 and $60,000.	May require less than $10,000.

Please note that the age limit may vary from bank to bank. Some of the banks also allow senior citizens of up to 75 years of age to apply for a personal loan or some may reduce this limit to 55 years.

• Borrowing from a bank– Banks do have stricter criteria than any typical financial institution. For  Singapore citizens and permanent residents, banks have set salary criteria low as compared to foreigners who want to apply for a personal loan. If you are a citizen of Singapore or live here permanently, you must have a $30,000 per annum salary to apply for the loan. Whereas a foreigner needs to have his/her salary falling between $40k and $60k.
• Borrowing from a money lender– If you don’t fit the bank’s criteria, you still have the option to apply to licensed money lenders and financial institutions. They have more lenient criteria in general. Before applying to a money lender, you must check whether the lender falls in the list of licensed money lenders issued by the Ministry of Law (MinLaw website). Even if your salary is less than $10k annually, you can apply to these lenders. All you need is to go through the loan terms, repayment schedule, interest rates, and any additional fees if applicable.

How much can you borrow?

Even if the annual salary is less than 30k and 40k respectively for citizens/PR and foreigners, you can still borrow a personal loan. Let’s again understand the quantum limit from a table-

Annual Salary	Singapore Citizens and PRs	Foreigners
$30,000 or more	6X of the monthly salary	Not applicable
$40,000 – $60,000	6X of the monthly salary	6X of the monthly salary
Less than $20,000 but up to $30,000 and $40,000 respectively	$3,000	$3,000
Less than $10,000 but up to $20,000	$500	$500

What are the documents required to apply for a personal loan?

All lenders ask you to submit the necessary documents when applying for a personal loan. Without these documents, your applicant can’t get processed. Here’s the list of documents you must have to acquire the lowest interest-rate personal loan in Singapore:

• Document of identity– Banks and financial institutions will ask you to furnish a copy of your identification card. You can provide your NRIC or Employment pass. These two documents help the lender confirm your legal and eligibility status.
• Income proof– As discussed earlier, the quantum of the loan depends upon your salary per annum. It is mandatory to give income statements to the bank to qualify for the loan. These documents may include the following-
• The contribution statements of your CPF account.
• Latest pay slip. (Digital)
• The recent notice of assessment from income tax.
• Bank statement of at least 6 months reflecting salary credit into your account
• Any other income document as may be specifically prescribed by the bank or financial institution.
• Documents of your employment– Apart from your CPF statements and employment pass, a lender may ask for your letter of offer, employment contract details, and other details of the salary.
• Residential proof– You need to furnish proof of your address. It can include the utility bills and residential address.

What can you do if you are disqualified for a personal loan in Singapore?

For reasons such as a bad credit score, or a lower salary, you may be disqualified to get a personal loan. However, there are other things you can do-

• Improve your credit score– To increase your chances to get approval for not only a personal loan but other loans as well, you should improve your credit score. You should pay your credit card bills on time, try to reduce your DTI, and avoid applying for too many loans at one time.
• Borrow from your relatives and friends– If the amount you are looking for is low and reasonable, you can ask your friends or relatives. This way, you can save a lot of time it takes in a typical personal loan application.
• Apply to a licensed money lender– If banks have denied your loan application, you may knock on the door of money lenders in such a case. Remember that a licensed money lender generally determines a high-interest rate as compared to any bank. If you really require a cash injection, this might be a good alternative to do so.
• Go for secured loan options– Under a secured loan option, you will have to provide collateral in the form of either your property or savings account. Any asset you own may also secure your loan amount. If you don’t meet the criteria for a personal loan, you can opt for secured loans which also carry lower interest rates in comparison with personal loan interest rates.

_{Still have doubts about a personal loan application? Reach out to us. LoanBuddy compares different loan options of different bankers and gives an unbiased suggestion.}

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