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Applying For Personal Loans: Private Money Lender Or Bank?

A young woman thinking whether to apply for a personal loan from a private money lender or a bank

If you reside in Singapore and find yourself in a financial crisis, you may end up needing a personal loan from either a bank or private money lender. Even though the application process for both avenues is convenient, you need to evaluate which option is suitable for your situation.

Deciding on the most viable credit option can be difficult and confusing for some. If you make the wrong choice, it could land you in further debt in the long run.

Read on to find out how to obtain the best personal loan in Singapore, so you can make an informed decision.

Loan Amount

Banks Money lenders
Higher loan amounts Smaller loan amounts

The loan amount is the main difference between banks and private money lenders in Singapore. Banks offer higher loan amounts whereas private money lenders provide smaller loan amounts.

Therefore, it is a good option to approach a bank if you need a bigger loan, for instance, to start a new business venture. However, if you only need a small loan amount, private money lenders might be more suitable as banks typically impose a minimum amount.

Banks typically loan up to 10 times your monthly income, while private money lenders are only legally allowed to approve up to 6 times your monthly income.

Interest Rates

Banks Money lenders
3.38-6.52% interest per annum 1-4% interest per month

Banks typically charge an advertised interest rate of around 3.38%-6.52% interest per annum, while private money lenders impose 1-4% interest per month.

The reason why the interest rates are generally higher at licensed money lenders is that they take a higher risk than banks as they have less stringent requirements.


Banks Money lenders
At least 21 years old

Stable income (at least S$20,000 per annum)

Good credit score

At least 18 years old

Proof of regular income (no minimum salary)

No credit score discrimination

To get a loan from banks, you need to be 21 years old and above and have a stable income of at least S$20,000 or $30,000 per year, depending on the bank you’re borrowing from. In addition, your credit score has to be good.

On the other hand, you only need to be 18 years old to get a loan from licensed money lenders. They also do not impose a minimum salary, though your income would affect the maximum loan you’re eligible for.

Whether you work full-time, part-time, freelance, or self-employed, you can still apply as long as you have a consistent source of income. Licensed money lenders also do not practice credit score discrimination, which is a welcoming respite for those with low credit scores.

Application Process

Banks Money lenders
Up to two weeks Less than 30 minutes

As banks are more stringent, the application process can take up to two weeks. They need to review your credit score, employment history, and income. The process can be especially long if you are not an existing customer of the bank.

Licensed money lenders do not need to check your credit scores, hence their processing time can be a lot faster and simpler. As long as you meet the eligibility criteria and your documents are in order, your application can be approved within 30 minutes.

Thus, if you need an urgent cash loan, licensed money lenders might be a more suitable option.

Late Payment Penalties

Banks Money lenders
Varies Late interest: max 4% per month

Late repayment fee: max S$60 per month

Different banks have different ways to calculate late or missed payments. Some may impose a flat rate, whereas others may charge a percentage on the outstanding loan amount. Therefore, it is important to read your contract carefully. You might end up paying much more than the amount you owed just by missing a single payment.

Licensed money lenders in Singapore are only allowed a maximum late interest of 4% per month and a maximum late repayment fee of S$60 per month. In addition, if approved by the court, they can claim the legal costs associated with the recovery of the loan. These rules are mandated by the Ministry of Law.

Licensed money lenders are not allowed to harass their customers for loan repayment. They’re legally obliged to follow a strict code of ethics.

Early Termination Fees

Banks Money lenders
Applicable Not applicable

Licensed money lenders do not charge an early termination fee if you choose to pay off your loan in full before the specific time frame. On the other hand, banks charge early termination fees.

Here is a handy comparison table as a summary:

Banks Licensed Money Lenders
Loan Amount Up to ten times monthly income Up to six times monthly income
  • At least 21 years old
  • Stable income (at least S$20,000 per annum)
  • Good credit score
  • At least 18 years old
  • Has a source of regular income (no minimum salary)
  • No credit score discrimination
Application Process Up to two weeks Less than 30 minutes
Late Payment Penalties Varies
  • Late interest: max 4% per month
  • Late repayment fee: max S$60 per month
Early Termination Fees Applicable Not applicable

Should you apply for a personal loan from a private money lender or bank?

Applying for a personal loan in Singapore can be a big decision, therefore it is important to evaluate your options. Consider your needs and situation as everyone has unique circumstances. Being a responsible borrower would go a long way to keep your finances healthy.

Soon Seng Credit, one of the top licensed money lenders in Chinatown, provides personal loans with one of the most competitive rates in the market. We pride ourselves in providing excellent customer service and a fast, streamlined application process. Talk to us today to discuss your loan requirements.


About the Author
Jasbir Kaur

No fuss, No stress. You can count on me to get the facts right.

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