By MoneyBees
Work out a personal loan's monthly instalment, total interest and the EIR behind a flat rate, with the processing fee counted, and check the MAS borrowing limits for your income.
For a flat-rate loan, interest is the loan amount x the flat rate x the years. Add it to the loan and divide by the number of months. S$30,000 at 3.5% flat over 3 years is S$3,150 of interest and 36 instalments of S$920.83.
A flat rate charges interest on the original amount for the whole loan, even after you have repaid part of it. The EIR is the true yearly cost on what you still owe. MoneySense notes that for flat-rate loans the EIR is higher than the advertised rate. On a 3-year loan the EIR is roughly double the flat rate.
The fee is usually taken off the cash you receive, but you still repay the full loan. You pay the same instalments for less money, so the EIR goes up. A 1% fee on S$30,000 at 3.5% flat over 3 years takes the EIR from 6.80% to 7.53%.
Under MAS rules, you need an income of at least S$20,000 a year. One bank can lend up to 2 months' income if you earn under S$30,000 a year, or up to 4 months' income if you earn S$30,000 to under S$120,000. There is no MAS limit from S$120,000.
If your interest-bearing unsecured debt across all banks and card issuers stays above 12 times your monthly income for 3 months in a row, you cannot get new credit and your existing credit lines are suspended.
At most 4% interest a month, 4% a month in late interest on the overdue amount, an upfront fee of up to 10% of the loan and late fees of up to S$60 a month. All charges together cannot exceed the amount borrowed.
For Singapore citizens and PRs, up to S$3,000 in total across all moneylenders if you earn under S$20,000 a year, and up to 6 times your monthly income if you earn more. The cap does not apply to secured loans.
This page does not compare or recommend banks. Enter the flat rate or EIR and the fee from each offer you have, and compare the EIR and total cost here.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).