Singaporeans are spoilt for choice as far as credit sources are concerned. There are lots of different loan types currently available in the market. And as if that is not enough you can get a loan tailor-made for your different needs. Even then, all these credit sources can be confusing for anyone and even choose one can be difficult especially when you do not know the right one to pick.

A Reminder About Credit

This article is aimed at giving you the comparisons between the different credit sources for when you need them. For further information about personal loans, you can visit moneylenders near you for you to get accurate information thus make an informed choice.

In Singapore the main credit sources are:

  • Bank Loans
  • Licensed Moneylenders
  • Pawn shops
  • Credit cards

Bank Loans

It’s a legitimate source of loans and is well regulated, as well as adheres to professional standards.

When your credit score and paperwork are in order, the approval can be done within the same. It’s convenient when you have to remit money or receive it in a different currency.

Their interest rates vary depending on how detailed the loan application is. For instance, when requesting for a car loan, your interest may be 1.8% to 2.2% each year. And when you request for the unspecified personal loan, your interest can be 5 to 8 percent.

  • Maximum Loan Amount

Small loans are usually 4x your income. Bigger loans like car loans the loan amount limit depends on the Debt Servicing Ratio (DSR).

Thus for a loan DSR of 30%, your monthly repayment on a loan cannot go above 30% of your earnings. This factor, together with your loan tenure determines the maximum loan amount you get.

  • Pros

Quick approval, well-regulated service, and you may receive customized loans at lower rates. Banks also offer bigger loans than in the market.

  • Cons

You require a regular income of around $30,000 annually to qualify for a bank loan.

Failure to pay or late payments will have the lower your credit rating. This reduces the amount you may borrow and will affect future loans from every bank.

Also, they allow debts increase interest for long periods. This will turn a large loan into lifelong repayments.

Credit Cards

These are issued by the banks and they act almost like small bank loans.

They’re handy and give rewards.

Credit cards have high interests around 24% yearly which can get even higher when you use the cash advance services.

Actually, it’s better to utilize your cards as a means of payment, and not a good credit source.

  • Maximum Loan Amount

The credit limit is generally 2-4 times your salary. Users with high credit scores and who always pay in full each month can request a higher credit limit.

  • Pros:

Approval is instant. You get rewards and shopping discounts as well, earn frequent flier miles. They are suitable for online payments.

  • Cons:

Their high interests make them a bad source of credit. In addition, the majority credit cards require you to be earning $25,000 and above each year; and even more for a foreigner. However, there are cards such as the Citi Clear Card intended for students and have a credit limit of $500 and does not require any minimum income but is a choice for the non-working young adults.

Pawn Shops

These deal with secured loans. To start with you give them something valuable, often gold or jewellery which is referred to as a pledge), and will act as collateral for your loan. The worth of your pledge is often determined by the pawn shop valuer. The determined amount is then given to you in form of a cash loan.

Every time you make repayments, the shop will renew your pledge for an additional six months all this while still holding onto your valuable. Once your loan is fully repaid, with an interest of around 1.5% each month, you will be able to get your item back. When you discontinue making repayments, your pledge is sold off.

  • Maximum Loan Amount

Depend on your pledge’s value. Shops may have their own limits, meaning they have a limited number of items they can take up at any given time.

  • Pros:

These shops are helpful for retirees and the unemployed because they don’t need a minimum income. What’s more, the worst result of any unpaid loan you losing the pledge. This isn’t as risky as failing to pay bank loans.

  • Cons:

Pawn shops only deal with smaller loans making it impossible to get a big loan from the shop. Furthermore, if you don’t have valuables to pledge, they are ineffective credit sources.

Pawn shop loans can be costly when you are slow on repayments. If you will take over a year to get back your pledge, it may well be better you simply let it go.

Licensed Moneylenders

Singapore’s licensed moneylenders are a lot more flexible compared to banks. The background checks they run are quicker, and they offer mostly smaller loans. Licensed moneylenders in Singapore are regulated in accordance with Moneylenders Act. It is easy to identify them through their license number, often displayed at their shop’s front.

  • Maximum Loan Amount:

Just like banks, the amount limit is 2-4 times your salary. However, a lot of moneylenders may loan you an amount less than that. It is advisable that you visit some to find out their highest offer.

  • Pros:

Licensed moneylenders are lenient compared to banks. You will have to produce your pay slips and CPF statements, but you may be forgiven for a not-so-good financial record.

Moneylenders have additional flexible payment plans such as bi-monthly in place of monthly, which may fit your cash flow requirements. Many are open for negotiations than banks, and especially regarding issues like late payments.

  • Cons:

Their interest rates are high, making them the last option. Also, even with the licensing, the industry is less regulated compared to banks. Therefore it’s upon you to confirm whether the lender you are dealing with is certified, to ensure you are not working with a rogue moneylender.