Personal Loans VS Balance Transfers In Singapore

What is a balance transfer? A balance transfer is a short-term cash facility that has 0% interest. It's useful for flexible repayments over a short period of time. The catch is that you need to pay a one-time processing fee and make sure that you clear what you owe within 3 to 18 months. Explore the benefits of balance transfers versus personal loans and find out how taking on either affects your credit card score!

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Making Sense of Balance Transfers in Singapore

How does a balance transfer work? Is it better than a personal loan or a debt consolidation plan?

Balance Transfer Singapore: How Does It Work?

A balance transfer works by transferring your outstanding credit card balances to a 0% interest account. Essentially, you borrow from the available credit limit of your existing credit line or credit card account.

The repayment period is usually much shorter than a personal loan, from 3 months to 18 months. You can choose to pay a minimum sum of 1% to 3% of the outstanding amount per month, but at the end of the repayment period, you must pay the remaining of what you owe.

For example, you owe $5,000 and put it on a 6-month balance transfer. Your minimum payment is 1%, which is $50. For 5 months, you pay $50. This means that on the 6th month, you must repay the remaining $4,750, or the 0% interest rate will revert to the original rate, which can be as high as 30% p.a.

It’s a good solution if your cash flow is tight but you know for sure that you will receive a large amount of cash (perhaps your bonus or a maturing endowment plan) that you can use to repay in the following months.

Things to Note Before Applying for Balance Transfer

If you are looking for a way out for your credit card debt or an emergency expense, a balance transfer might be the perfect solution if you use it responsibly! Here's a list of things to note before applying for a balance transfer.

Credit Limit

Your credit limit is determined by your minimum annual income. The limit of your balance transfer is tied to your credit card or credit line account, with the maximum amount dependent on your salary.

Minimum Repayment Sum per Month

Unlike a personal loan, you can choose how much you want to pay each month - as long as you meet the minimum repayment sum each month.

Late Payment Fees

Anyone who uses credit cards will be aware of penalties for late payment. Balance transfers are no different. Late payment fees can go as high as $60 to $125 depending on the bank. Be sure to meet the minimum repayment sum to avoid these high fees!

Interest-Free Periods & Processing Fees

Depending on the bank you're looking at, there are interest-free periods of 3, 6, 9 or 12 months. However, instead of paying for interest you'd be paying for processing fees ranging between 1 to 5%.

Interest Rates after Interest-Free Periods

If you still have remaining balance by the time your interest-free period is up, the interest rates can go as high to 19% to 26% p.a. Be sure to pay off the remaining balance before the end of the interest-free period!

Credit Card Interest Rate

If you are conscientious about the monthly payment of your credit card bills, you won’t need to worry about credit card interest rates. However, mistakes can happen, potentially leading to snowballing credit card debt. As credit card interest rates are charged daily and are also applied on top of new purchases which are accrued using the same credit card, your outstanding balance can grow very quickly. Having any outstanding credit card bills is, therefore, a very bad idea.

Bank Consolidation Loans

Some people utilise bank consolidation loans to refinance their debt. This loan is equivalent to the amount owed on existing debts. Once the approved loan amount is in your hands, you’ll be able to clear your debts and then pay off your new loan over time. Some creditors offer flexible payment terms, which makes it more convenient for debtors to manage.

Best Balance Transfer Rates in Singapore (2022)

Consolidate credit card balances into one account so you can make flexible repayments at low interest rates. Note that EIR stands for Effective Interest Rate, which is also sometimes referred to as Effective Annual Interest Rate.

DBS Balance Transfer

Pay as little as $50 or 2.5% of the statement balance, whichever is higher.

6-month DBS Balance Transfer: 0% p.a. + 2.5% fee (online exclusive). 5.27% EIR for Cashline and 5.34% EIR for credit card.

12-month DBS Balance Transfer: 0% + 4.5% fee (online exclusive). 5.06% EIR for Cashline and 5.2% EIR for credit card.

OCBC Balance Transfer

The minimum monthly repayment is $150.

3-month OCBC Balance Transfer: 0% p.a. + 1.8% p.a. processing fee. EIR 7.38% p.a.

6-month OCBC Balance Transfer: 0% p.a. + 2.5% p.a. processing fee. EIR 5.34% p.a.

9-month OCBC Balance Transfer: 0% p.a. + 3.5% p.a. processing fee. EIR 5.18% p.a.

12-month OCBC Balance Transfer: 4.5% p.a. + 0% p.a. processing fee. EIR 5.2% p.a.

Citibank Balance Transfer

If you take up a balance transfer on Ready Credit, the minimum payment is 3% of the transfer amount or $45, whichever is higher throughout the loan tenure.

For credit cards, the minimum payment is 1% of the transfer amount or $50, whichever is higher throughout the loan tenure.

Citibank 6-month balance transfer (existing): 0% + 2.5% processing fee. EIR 5.81% for credit card, EIR 5.72% p.a. for Ready Credit.

Citibank 12-month balance transfer (existing): 0% + 5.5% processing fee. EIR 7.87% for credit card, EIR 7.58% p.a. for Ready Credit.

UOB Balance Transfer

Pay from as little as S$30 or 2.5% of the statement balance (whichever is higher) for CashPlus.

For Credit Cards Balance Transfer, pay from as little as 3% of outstanding statement balance of S$50, whichever is higher.

6-month UOB Balance Transfer: 0% + 2.0% processing fee (EIR 4.27% with UOB credit cards and 4.17% with UOB CashPlus)

12-month UOB Balance Transfer: 0% + 4.28% processing fee (EIR 4.95% with UOB credit cards and 4.69% with UOB Cash Plus).

Standard Chartered Balance Transfer

Pay as little as $50 or 1% of the statement balance, whichever is higher.

3-month StanChart Balance Transfer: 0% p.a. + 0.7% fee. EIR 2.83% p.a.

6-month StanChart Balance Transfer: 0% p.a. + 1.5% fee. EIR 3.10% p.a.

9-month StanChart Balance Transfer: 0% p.a. + 2.5% fee. EIR 3.51% p.a.

12-month StanChart Balance Transfer: 0% p.a. + 4.5% fee. EIR 4.86% p.a.

HSBC Balance Transfer

Pay as little as 3% monthly minimum payment.

6-month HSBC Balance Transfer (Under $10,000): 0% p.a. + fee 2.5%. EIR 5.47% p.a.

12-month HSBC Balance Transfer (Above $10,000): 4.88% p.a. with no processing fee (EIR 4.88% p.a.)

6-month HSBC Balance Transfer (Under $10,000): 0% p.a. with 1.5% fee (EIR 3.26% p.a.)

12-month HSBC Balance Transfer (Above $10,000): 4.88% p.a. with no fee (EIR 4.88% p.a.)

Best Balance Transfer Deals in Singapore (2022)

Best ForBankBenefits
6 Months Balance TransferStandard Chartered Funds Transfer 0% interest + 1.5% processing fee
12 Months Balance TransferUOB CashPlus Funds Transfer0% interest + 4.69% processing fee
Flexible RepaymentsDBS Balance TransferMinimum repayment of 2.5% of balance or $50, whichever is higher
Standard Chartered Funds Transfer Minimum repayment of 1% of balance or $50, whichever is higher
UOB CashPlus Funds TransferMinimum repayment of 2.5% of balance, or whichever is higher

Should You Get a Balance Transfer or a Personal Loan?

If you still cannot decide between a balance transfer or a personal loan, consider the below factors:

Loan amount: If you are borrowing a large loan amount, it is safer to take out a personal loan. You can repay in fixed amounts over a longer time frame of between one and five years. If the amount is small, you can do a balance transfer to enjoy 0% interest rates. If you choose a balance transfer, you must make sure that you will have the cash to repay within the loan tenure of 3 to 12 months.

Your cash flow in the near future: Balance transfers usually have a tenure of 3 months, 6 months or 12 months. While you are allowed to pay a small minimum sum monthly during this repayment period, you must clear your debt within the end of it. This means that you need to be sure that you will have the money to repay within 3 to 12 months. Otherwise, the interest rate jumps back up to 25% to 30%.

If you are considering a personal loan for steady repayment of debt, here are some recommendations.

Key Differences Between Balance Transfer and Personal Loan

Balance TransferPersonal Loan
Interest rate 0% p.a. 3.5% to 10.8% p.a.
Processing fee 1.5% to 5.5% 1% to 2%
Repayment period 3 months to 18 months 1 to 5 years
Repayment amount Varies, but minimum 1% to 3% of outstanding amount per monthFixed amount per month throughout the term
Early repayment penalty NoYes

Top 3 Personal Loans in Singapore (2022)

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Total Amount Payable
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Processing Fee
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Interest Rate*
3.4%
Total Amount Payable
S$11,020
Processing Fee
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Per Month
S$306
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Interest Rate*
3.45%
Total Amount Payable
S$11,035
Processing Fee
S$0
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S$307

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Remember to Pay Full Amount During the Interest-Free Periods

Your balance transfer credit card or credit line account will allow you to borrow more, but remember to use it with caution. You might end up paying a lot more once your grace period ends and the high interest rates kicks in. Take full advantage of the balance transfer by making sure that you have the ability to pay off the full amount within the interest-free period. In addition, be sure that you can pay the minimum repayment sum each month, else you will incur expensive late payment fees. This will render your interest-free period useless! So, if you find the interest rates on your credit lines to be suffocating, or you need a interest-free loan for an emergency use, a balance transfer is exactly what you need.

Frequently Asked Questions

How do I do a balance transfer?

If you have decided that a balance transfer is the best option for you, you simply need to apply through the bank's website. Sometimes banks run online exclusive promotions so do check before you apply. Generally, a balance transfer is done on an existing credit card account or credit line, so you would have to apply for an account if you don't already have one.

Will a balance transfer affect my credit score?

If you’re worried about your credit score and are thinking of holding off on your balance transfer request, we have some good news for you.

If you have taken out a balance transfer and abided by the terms and conditions, a balance transfer could even improve your credit score. This means that you paid the necessary minimum sum monthly on time and the full amount at the end of the repayment term, which signals to the banks and financial institutions that you are reliable and do not have a risk of defaulting.

However, if you have applied for multiple balance transfers and are in the midst of repaying them, there is a possibility that the credit bureau will note that your debt amounts are not paid in full. This may have a negative impact on your credit score.

Keep in mind that your credit score is also affected by your credit card utilisation ratio. If it is high, it may signal to creditors and banks that you are relying heavily on credit to manage your finances. Paying down debt, clearing it before any interest kicks in and not cancelling unused credit cards can help to lower your credit card utilisation ratio.

Is it smart to pay off one credit card with another?

Yes, if you use a balance transfer credit card which has 0% for a short period of time and you are confident of repaying on time, it could be smarter to consolidate credit card debts into one account. It isn't smart to pay off one credit card with another without first comparing interest rates.

We hope our guide was useful in helping you to understand the differences between balance transfers and personal loans. New to the world of personal finance and considering applying for a credit card? Or perhaps you’re wondering if a personal loan is right for you? Check out our overview of credit cards in Singapore, as well as our consolidated list of personal loans available now.