Last Updated on 2025-09-10 , 2:15 pm
If you’re thinking of taking a personal loan, good: at least you’re doing your homework before clicking on any “Apply” you see online.
In Singapore, loans are pretty easy to get if your credit is decent, and that’s exactly why people sometimes jump in too fast and pay more than they need to.
Now, let’s walk through five super common mistakes Singaporeans make, plus how to avoid them.
Mistake 1: Only looking at one or two options (or just your usual bank)
We all have a “default” bank. Maybe your salary goes there, or you like their app.
But personal loans aren’t kopi; prices differ a lot. Banks advertise one rate, but the true cost shows up only after you factor in processing fees, tenure, and how interest is calculated. The key number you need is the Effective Interest Rate (EIR), which reflects the real, all-in cost per year. Later, we’ll talk more about it.
Also, don’t forget there are licensed moneylenders regulated by the Ministry of Law.
They’re not loan sharks, and some borrowers use them when banks say no or when they need funds very quickly. I’m not saying “go straight to a moneylender”, but they’re a legal part of the landscape, and comparing across banks and licensed lenders gives you a fuller picture.
If you do consider a moneylender, always verify they’re on MinLaw’s official list!
Now, here’s a shortcut if you hate spreadsheets: Personal Loan Finder is a Singapore site that lets you compare bank personal loans and get free quotes from a network of fully legal lenders, all in one place. Nice if you want a broader view without cold-calling 10 different places! You can click here for more information.
Mistake 2: Focusing on the “headline” interest rate, not the EIR and fees
“1.88% p.a.” looks shiok.
But as mentioned earlier, that number is often the applied/advertised rate and doesn’t include processing fees or the way interest is computed. The EIR does.
Two loans can have similar advertised rates but very different EIRs because of fees and tenure. Again, remember: EIR is what shows your true cost, and that stretching your tenure to make monthly payments smaller usually means paying more overall.
So, don’t just sort by the “from x% p.a.” line, open the fine print and look at EIR, fees, and your total repayment figure.
Mistake 3: Ignoring your borrowing limits and risking a suspension
Singapore has rules to prevent people from over-borrowing on unsecured credit (that includes credit cards and many personal loans).
If, across all financial institutions, your outstanding interest-bearing unsecured debt exceeds specific limits relative to your income for a sustained period, you may be blocked from getting more unsecured credit until you bring the balances down.
MAS phased this in and the current cap, often explained by banks, 12 times your monthly income for the industry-wide borrowing limit. If you cross it for the required period, new unsecured credit facilities can be suspended. Don’t test the limit; it’s not a target.
If your balances have already snowballed, look into formal help like Debt Consolidation Plans (DCPs) through participating banks, or the Debt Management Programme via Credit Counselling Singapore (CCS). DCPs roll multiple unsecured debts into one with a structured plan; CCS can negotiate with banks for affordable instalments.
Mistake 4: Not checking if the lender is actually licensed (or falling for “too good to be true” offers)
Now, this is important.
If you’re dealing with licensed moneylenders, there are strict rules: maximum interest of 4% per month, late interest capped at 4% per month, late fee up to $60 per month, and an administrative fee up to 10% of the principal when the loan is granted.
Anything way outside these bounds is a bright red flag. Verify the lender on MinLaw’s official list before you hand over your IC or payslips.
To double-check a name, use the Registry of Moneylenders’ public list. If it’s not there, walk away. If someone WhatsApps you out of the blue to “approve” a loan, also walk away. IMMEDIATELY. Licensed moneylenders cannot do that. Those are likely loan sharks.
Also, real licensed lenders do not harass you or ask you to pay “advance fees” just to release a loan.
Mistake 5: Skipping the fine print on penalties, and taking a tenure that looks comfy but costs more
Even for bank loans, fees can sneak up on you: processing fees, late charges, and sometimes early repayment or cancellation fees if you decide to clear your debt ahead of schedule. That’s why comparing based on EIR and total cost is key.
Choose a tenure that you can handle monthly, but avoid dragging it out “just because the instalment looks small”: you will pay a lot in the future.
The key thing to learn from this point is to read every single fine print.
Also, here’s practical tip: set up GIRO or calendar reminders so you never miss a due date. And if you think you may prepay early, pick a lender with lower early-repayment costs.
Bonus mistake: Not checking your credit report first
Your credit report affects whether you get approved and at what rate. In Singapore, you can buy your report from Credit Bureau Singapore (CBS) online.
It currently costs about S$8 before GST, and you might get a free copy within 30 days if you’ve just applied for a new credit facility. Knowing your standing helps you set expectations and prevents painful surprises.
How Personal Loan Finder helps you avoid all these
If you want to explore both banks and fully legal alternative lenders without spending your whole weekend comparing, try Personal Loan Finder. Here’s how it helps:
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One place to compare bank personal loans, then request free, no-obligation quotes from a network of vetted, fully legal lenders. Saves the headache of submitting forms all over the place.
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Transparent info to help you watch the EIR, fees, and tenure, so you don’t get tripped up by the common mistakes above.
The Bottom Line
A personal loan can be a helpful tool when used responsibly. The biggest trap is rushing in, thinking the lowest advertised rate must be the cheapest. Take 10 minutes to compare properly, check that any non-bank option is genuinely licensed, and make sure your tenure and fees don’t quietly inflate your cost.
If you want an easy way to avoid Mistake #1: not exploring all your options, head to Personal Loan Finder to compare bank loans and request free quotes from fully legal lenders in one shot. It’s fast, it’s local, and it helps you see the full picture before you commit.
This article is written in collaboration with Personal Loan Finder.
