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What You Need To Know About Applying For A Loan in Singapore

Singapore law has set new thresholds when it comes to loan applications. The Ministry of Law has set caps for different kinds of borrowers and these new regulations apply for both Singaporeans and permanent residents.


How much can people borrow now?

Singapore citizens may borrow as much as S$3,000 if they earn below S$20,000 per year, regardless of where they apply for a loan.

For those who are permanent residents of Singapore, they can also borrow as much as S$3,000 if they earn below S$20,000 per year.

The individuals who have an income of as much as above S$20,000 per year are qualified to borrow as much as six times their average monthly earnings.

Let us do the math:

If you are a Singapore citizen or a permanent resident and you have a yearly income of S$48,000, this means that you have around S$4,000 a month. You can borrow up to S$24,000 because that is six times your monthly income.


How about foreigners?

Foreigners were given a different cap, such as:

  • Those who are classified as resident foreigners, they are mainly individuals who have kept their foreign citizenship but works and lives in Singapore for most times of the year, can borrow up to $1,500. This cap is for those earning below $10,000 per year.
  • The foreigners who are earning more than $10,000 but does not earn more than $20,000 annually may borrow as much as $3,000.
  • On the other hand, those foreigners who are earning at least $20,000 may borrow at least six times of their monthly income.

The same math logic applies:

If you are a foreigner and you have a yearly income of S$24,000, this means that you have around S$2,000 a month. You can borrow up to S$12,000 because that is six times your monthly income.


Are interest rates on loans the same?

When it comes to interest rates, they are set at a higher cap:

  • The cap for borrowers is at 4% per month, regardless of the kind of loan that the borrower has been approved for.
  • When the borrower fails to pay at any given point, the late payment interest rate is also at a cap of  4%.

The good thing about the new regulations is that the interest rate charged is based on the total amount of the outstanding principal balance and not the original balance.


Are there limitations set against money lenders?

Yes, moneylenders are limited to the following:

  • A cap of $60 for each month of late payment;
  • A fee of not more than 10% of the loan principal when the loan is arranged; and
  • Legal costs in case a problem arises.

With the new standards, a borrower in Singapore should be easier for all kinds of individuals.