Personal Loan for Business
What is a Personal Loan?
A personal loan is a loan to an individual that is repaid over a period of time with interest. A typical unsecured personal loan in Singapore does not require for the borrower to put up any asset as collateral. This essentially means that credit assessments for personal loans are based on TWO key factors:
- Your credit rating – which is found in your credit bureau report.
- Your monthly income
From financing a vehicle purchase, to debt financing, to debt consolidation for the purpose of improving credit ratings, everyone chooses personal loans. Mostly because personal loan interest rates are significantly lower than credit card interest rates, which could potentially save you a lot of money.
Do You Need A Personal Loan?
We all know that there are those times in life where you could just do with some extra money. Maybe you had to pay for a hefty hospital bill, or needed to make a substantial deposit for the purchase of your car, or some other crazy unexpected payment that you have to make.
This would be one of those times that a personal loan could be really useful. You could use the personal loan to pay off other more expensive debts , make up for previous missed payments, start up a business, or even invest the money.
No matter what your commitments or reasons are, if you need more immediate cash right now Capable Loans is here to help guide you to the best deals in Singapore.
How Your Personal Loan Affects Your Credit Bureau Report
If you have never had credit card or have never taken a personal loan before, chances are that your credit rating will be a GX in your credit bureau report. The GX rating simply implies that you do not have a credit history on record.
While it may seem like a good thing, the problem is that without a credit history, the banks would not have any historical credit performance to base their credit assessments on. Essentially, they would not be able to tell if you are a good or bad paymaster.
If you are a business owner, it is imperative to know that having a credit history can be very important for the purpose of getting a business loan in Singapore.
For all SME loans in Singapore, there is a requirement for the Director(s) of the company to provide personal guarantee. And in order to qualify as a guarantor to your business loan, you must have a credit rating of at least CC to AA.
Therefore, if you have not built up a healthy credit history yet, a personal loan can go a long way in helping to build a proper track record.
Here is how to build your credit rating:
When a personal loan is obtained, the bank or financial institution will report your monthly repayments to the national credit bureau in Singapore. So to ensure that you build a healthy credit history, it is essential that you make all repayments on time.
Try to avoid late or missed payments. It takes only ONE late payment to affect your credit rating, but a few months of timely repayments to get your credit rating back up.
Having a consistent track record of prompt repayments will definitely go a long way in improving or creating a good credit score.
What is an Unsecured Loan?
An unsecured loan is a loan that does not involve any collateral.
You do not need to own any valuable assets in order to qualify for a personal loan. In most cases, money is only lent out to applicants who have a solid credit history.
Unsecured personal loans, or personal credit lines, involve borrowing from the banks without having to put any collateral up. Simply because there are no assets for the banks to place leverage on, these loans are deemed to be riskier than others.
More risk always means more charge, with higher interest rates and requirements for better credit scores.
Personal loans usually have a faster processing time than SME loans, involve less paperwork and is less of a hassle to obtain. Repayment periods can go up to 5 years and interest rates are generally lower than that of a small business loan.
The best part about the unsecured personal loans is that you can do anything you want with the funds. You could pay for a car, pay for your school fees, bring your partner out for a romantic treat, or even use the funds for your business operations.
Note that business owners with a poor credit rating will always face difficulty when getting SME financing. Even if a business loan application is approved, interest rates will likely to be higher for them. There is also a high chance that the lending institution will request for an additional guarantor to secure the corporate bank loan.
Who Should Consider a Personal Loan in Singapore?
If you are a business owner and have failed to obtain an SME loan, but you happen to need working capital urgently for business operations, you should consider taking up a personal loan for business.
Personal loan interest rates in Singapore are often similar, if not lower, than a working capital loan.
If you do not yet own a property or some kind of valuable asset, unsecured personal loans are often the only option that you might have. The good news is that these loans can be used for any purpose that you choose.
How To Apply For A Personal Loan in Singapore?
Since the personal loan for business does not require collateral and is only based on a promise by the borrower to pay, it is safe to assume that credit history will play a significant role in credit assessments.
After applying for a personal loan, applicants are then instructed to submit personal documents – usually monthly payslips, income tax assessment reports, or CPF statements, to prove that that they are earning enough on a monthly basis to repay the loan instalments.
Under-writings are usually done by an automated scoring system and further assessed by the credit department of the lending institution, where the applicant will be notified after about a week as to whether the application was successful or rejected. These days, no one actually needs to walk into a bank branch to get a personal loan. You can simply go online an apply within a span of 30 min.
Which Bank is Best for Personal Loan?
There are regulations that govern personal borrowing in Singapore. As a rule of thumbs, here are two general rules to follow:
- if your personal income in below S$120,000 per year, you may borrow up to 4 times of your monthly income.
- If your personal income is S$120,000 and above, you may borrow up to 12 times of your monthly income.
Below is a list of banks in Singapore that offer the best personal loans:
3.99% (EIR 7.50% p.a.)
3.88% (EIR 7.9% p.a.)
Standard Chartered Bank
3.88% (EIR 7.97% p.a.)
3.88% (EIR 7.9% p.a.)
4% (EIR 7.5% p.a.)
5.8% (EIR 12.12% p.a.)
FAQ on Personal Loans
Before you take up a personal loan, it is imperative that you know all the details of the loan.
Most importantly, you MUST know how much your monthly installments will be.
(Here is a link to a personal loan calculator)
You need to ensure that you will have enough cash flow to sustain the monthly installment amounts, so that you can make timely repayments comfortably.
Therefore, a personal loan can be a very good idea and a very useful tool if planned and utilized properly.
However, if taken without proper planning, it can turn out to be a disaster to your personal credit rating.
There are many factors that must be taken into consideration when choosing which personal loan to take up and with which bank.
As a rule of thumbs, the first thing that you should look at is the EIR, or effective interest rate. While it is compulsory for banks in Singapore to advertise the EIR of a loan product, more emphasis is usually placed on the simple interest rate to make it seem more attractive.
However, it is important to bear in mind that the true cost of a loan is reflected in the EIR.
Next, you should compare the various personal loan offers to see if any of the banks are running a promotion. Attractive promotions are often offered along with personal loan products.
Finally, you should consider the processing speed of the bank. Some banks tend to process loan applications faster than others.
Generally, for as long as your personal credit ratings are acceptable, it will be easy to get a personal loan from any of the banks.
Having said that, if we had to make a choice, it would be the personal loan with Standard Chartered Bank.
About Capable Loans
Capable Loans (by Capable Group) is a Corporate Financing Consultancy with a specialized expertise in the syndication and structuring of debt financing and SME Business Loans in Singapore.
Our team of professionals boasts a wealth of experience in the finance industry. With a 98% approval rate, we have helped many companies to secure the financing they need to grow their business.