Cost of Loans in Singapore

Singapore is an economy hub. There are so many individuals who want to work and live in one of the cleanest countries in the world until they actually get to live on it.

With the country’s high cost of living, it can be hard to keep up with the demands of one’s needs versus what one wants to achieve. For many individuals, there are so many ways that they can survive and one of these ways is by obtaining a loan.

Before we go ahead and tell some of the pros and cons about each type, here is a short run down on the types of loans that you can get in Singapore:

  • First, you can try the Residential Home Loan. With only an interest of 1.6 to 2.6 percent, this one is the perfect home loan to make sure that one will survive the rising prices.
  • Second, one may also try the Commercial & Industrial Property Loan which is for properties in the commerce or industry category. The interest rate is higher at 2 to 3.5 percent.
  • There are also Personal Car Loans that come in with an interest rate of 4.5 to 6.5 and may last up to 7 years.
  • Fourth, there are Company Car Loans with an interest of 5.5 to 9 percent.
  • The SME Micro Loan is also available at a rate of 6 to 8.75 percent and with a term of 1 to 3 years
  • There is the SME Loan which may be Secured with Property but the interest rate is still at a high 6 to 12 percent.
  • The SME Working Capital Loan is also available at up to $300,000 with an interest rate of 6.5 to 8.5 and a term that lasts between 1 to 5 years
  • The other types of loans include:
    • Unsecured Business Term Loan;
    • Pawn shop;
    • Personal Loan in Banks;
    • Peer-to-peer corporate lending;
    • Factoring and Invoice Discounting;
    • Credit Cards;
    • Licensed Money Lender; and
    • Business Bridging Loan.

Now that you know the kinds of loans, what are these loans all about and how do you use them?

First kind of loan is the Residential Home Loan. The rules in Singapore regarding a residential home loan is simple, whenever an individual has a home which is valued at $1 million, he may obtain a loan of only $750,000. The good thing about it is that if the borrower would have no means to pay the debt as they fall due, the lender is practically assured of their capital that they would lend since the capital is returned securely.There are also loans that come in the form of Commercial and Industrial Property Loans or CIP Loans. These are the kinds of loan that is available for Retail, Offices and Industrial properties. Just like the residential home loan, the loans are backed up by the properties as assets.
Third, there are also car loans that are also secured loans. Vehicles are used as collateral so the loans are always approved and the interest rates are low.

There are also loans for commercial vehicles where credit companies play an important role in car loan processing.Another kind of loan is the SME Micro Loan that allows individuals to loan up to S$100,000. To qualify for an SME Micro Loan, the following are the requirements:

  • The company must be registered and operating in Singapore for at least 2 years.
  • The individual must have at least 30% local shareholding.
  • The annual sales of the loan is up to S$1 million. The loan gives up to 10 employees.

Unfortunately, even if the loan looks good, most SMEs do not get approved for it. Another kind of loan is a loan from a licensed money lender in Singapore.

When all else fails and you still need a loan, a licensed moneylender in Singapore could help you out. This option applies to those who fail the credit assessment or who do not meet other income eligibility criteria.

The word of caution that a borrower needs to know about this is that since the risk that the licensed money lender is high, the interest rate is higher to compensate for that.

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