Living in Singapore is expensive, and sometimes, you may face a cash crunch. While a cash crunch can be overwhelming, there are various ways you can deal with it; and one of the most common ones is taking out a personal loan that helps you sustain until you are financially stable again.
Now, when taking out a loan in Singapore, you have two options—take a loan from a bank or money lender. To help you decide, here’s everything you need to know about bank and moneylender loans.
The amount of urgent money loan you require helps determine which lender you should choose because both have various advantages and disadvantages.
Usually, banks provide much higher loan amounts thanks to their investment ventures. You have higher chances of getting a loan from a bank if you have a steady stream of income. The bank would ideally give up to 10 times your monthly salary, making them appealing to most people. However, to get a substantial bank loan, you also need a good credit history.
On the other hand, moneylenders often have a smaller funding pool. Since these loans are unsecured, they can only give you up to 6 times your monthly salary. Plus, moneylenders also provide you with quick payday loans.
So, depending on your monthly income and urgent money loan expectations, you can decide which one—bank or moneylender—fits you best.
Loan Approval Speed
When you are facing a money crunch, the speed of approval may matter a lot. So, which one should you choose? Let’s look at both banks and moneylenders.
Banks are notorious for their lengthy approval processes, which may same more than a week in many cases. This is because banks have to review your employment and income, evaluate collateral, procure your financial performance history, and build a risk profile before releasing a loan to you.
On the other hand, moneylenders can release loans within a day in many cases. Some may even disburse the loan within the hour. As long as you have all the required documentation, you can get a loan from moneylenders quickly. Moneylenders do not require collateral, but they offer non-secured loans.
If you are short on time, moneylenders are the better choice for you to get loans immediately.
However, make sure you only borrow the loan from a licensed money lender and not from loan sharks that are not registered with the Ministry of Law. Always verify the license of the moneylender before making a move. Loan sharks not only have really high interest rates but if you fail to pay back the loan, they may harass and threaten you instead of using other legal routes of recovery.
Banks and moneylenders’ eligibility criteria are also quite different, with banks having stricter ones because they can offer high amounts of loans. Here’s what the eligibility requirements for both look like in Singapore.
To procure a bank loan, you need to be at least 21 years of age and a full-time employee. You also need various documents like NRIC photocopy, recent billing, employment certificate, three months of payslips, a two-year notice of assessment, 12-month CPF contribution history, and credit statements. You also need to have at least S$20,000 annual income.
On the other hand, to procure a loan from moneylenders, you don’t need much. You need to be 21 years of age and provide documents like an NRIC card, recent utility bills, employment letter, three months of payslips, and all the other supporting documents may be printed from Singpass.
For financial institutions, giving out loans can be pretty risky—what if the borrower absconds with the money or fails to repay the loan? So, they use your credit history to analyze your risk profile and ensure that they can trust you with the money. So, your credit score plays a significant role in how much loan you can get from the bank. If you have a second credit score, you can quickly get a loan from the bank.
But what happens when you don’t have enough credit history?
In that case, you can approach moneylenders. They don’t solely rely on your credit score; instead, they focus on your income-to-debt ratio.
So, if you have a good credit score, banks are the better choice, and if you don’t have a good credit score or lack a credit history, you should approach a moneylender.
Be it a bank or a moneylender, they will charge you interest for lending you the money. However, the amount of interest these institutions charge varies and depends on a lot of factors. Let’s take a look at them.
Most Singapore banks charge interest rates between 4% to 10% of the total loan amount, which is calculated based on your creditworthiness, financial performance, and other factors. Remember, the higher the credit score, the lower the interest rate.
On the other hand, you can expect an interest rate of 1% to 4% from moneylenders in most cases. Do remember that, like banks, the interest rates depend on your financial health and vary from lender to lender.
To get the best interest rate in town, we recommend you do a lot of research before choosing a lender of your choice. Read the fine print carefully, too. Some lenders charge compound interest rates, which turn out to be much higher than regular interest rates if your loan tenure is over 12 months.
Which One Should You Choose?
Now that we have compared banks and moneylenders’ features, you need to decide which one to choose. Ideally, as long as you borrow the loan from a licensed moneylender, you don’t have to worry about any illegality of the loan. So choose a moneylender or bank depending on your urgent money loan amount, eligibility, credit history, and appetite for interest.