7 Ways To Use a Personal Loan To Improve Your Cashflow – Things To Consider

Whether it’s for emergency medical expenses, for more cash liquidity for your business or other reasons, getting a personal loan in Singapore is one way to cope with unexpected situations that require more money in a short time.

Ever since the COVID-19 pandemic outbreak which has shakened our economies and financial stability, many of us have turned to personal loans as one of the immediate or a long-term solutions to ease our cash flow. However, we should always bear in mind certain commitments and factors when you’re tied down to monthly repayments for personal loans.

To avoid any financial missteps, let’s take a look at some of the considerations on when to take, and when not to take a personal loan.

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Can I use a personal loan for anything?

There are definitely risks involved when you’re taking on any additional debt and that includes personal loans of any type.

So if you’re thinking of using a personal loan for almost anything that you want to pay for, it’s better to think twice before recklessly taking out a loan that could lead to huge debts which you cannot afford to pay off in time.

However, there are also benefits to getting personal loans which you can pay back comfortably and for reasonable expenses like a wedding, a new home, renovations, etc.

1. Debt Consolidation or repayment

Using a personal loan to help you pay off credit card bills is a way to streamline your various credit card payments so that you’ll make one monthly payment at a lower interest rate. By doing this, you can do without the hassle of keeping track of all due dates and amounts of your bills every month.

2. Improving credit score

Did you know that your credit score may improve when you consistently pay your bills on time while taking the personal loan? This is because it increases your credit mix and decreases your credit utilisation rate.

3. Home Improvement or Renovation

Home improvements or renovations usually involve personal loans which are longer term, due to the major amount of money needed. However, before you get tempted by advertisements by banks about their personal loans as a way to finance renovation work with “low interest rates and monthly payments”, you need to differentiate between the two, compare interest rates, and think about how much of it you can afford to pay off considering the loan tenures and your monthly income.

Personal loans and renovation loans seem quite similar as they both offer loan tenures that range from 12 to 60 months, with maximum loan amounts of up to 6X your monthly income. The key differences are that personal loans often have high processing fees and higher interest rates (subject to fluctuations depending on economic conditions).

At the moment, the personal loans interest rates offered by banks seem to be slightly more favourable than renovations loans as they are mostly lower than 4% while renovation loans’ interest rates then to be 4% or higher.

4. Medical emergencies

If you or your family member is not covered by health insurance or that the medical or health insurance provided has inadequate coverage for whatever costly critical health condition, a personal loan or debt settlement can really help you out.

Moreover, some medical or health insurance policies work on a reimbursement basis, so you’ll have to fork out the money first to pay the hefty medical bills before the insurance companies reimburse the amount to you. In such situations when you do not have enough savings or cash at hand to foot the bills, a personal loan or debt settlement can come in handy.

5. Lifestyle choices and milestone events

Be it a wedding or an overseas vacation, personal loans are often a go-to option to fund such events as it is quick and usually easy to qualify for. However, these are events which can do without personal loans as long as there is careful planning done on your finances. Taking a personal loan for things like that may not be worth it, as it may lead to bad financial habits, and it makes more economical sense to save for such expenses rather than to borrow.

6. Education

Instead of taking a personal loan for your local or overseas education, you can consider education loans instead, as some like the DBS Study Loan offer an interest-free benefit during your period of study. It can give you more savings than a personal loan in the long run and there are flexible repayment options available for certain education loan packages as well. To find out more, you may visit our platform to find the best education loan.

7. Micro business/small business/side hustles

For small business or SME (small-to-medium enterprise) owners looking for loans to boost cash flow, personal loans may not be the best option as SME business loans which are backed by the government tend to offer more benefits.

Certain small businesses like home-based enterprises selling home bakes or handmade products may find it a little challenging to qualify for SME business loans, but it is still worth a try applying for them. Unless you really do not qualify for any of the SME business loans by all the banks in Singapore due to certain reasons such as lack of a solid business plan or having insufficient track record (new businesses may not have enough time to build a good credit history), turning to personal loans may be a viable choice.

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Tips For Picking A Personal Loan

Decide between a term or revolving personal loan

There are two categories of personal loans which you can consider. As the name suggests, a term personal loan has a fixed period of time that usually caters to long-term needs. If you’re among those who need a year or more to completely repay your loan, this loan type is for you as the interest rate is lower.

On the other hand, if you’re capable of repaying your personal loan as soon as possible, a short term solution like a revolving personal loan would be apt although the interest rates are much higher. The upside is that there usually isn’t any penalty for early full repayment unlike a term personal loan. You can read more about the pros and cons of these two types of personal loans in our blog article here.

Try debt consolidation plans

Also known as “DCP loan”, a debt consolidation plan is simply a repayment scheme that helps combine all the outstanding unsecured debt (including those from different banks) into one single loan with one bank. So, your DCP loan will usually be calculated by the DCP issuing bank which is a sum of the total outstanding debts, plus outstanding interest, plus 5% on top of the total.

However, this plan is only meant for credit card bills, personal loans, and personal line of credit, meaning a DCP excludes any secured loans like home loans, car loans, education loans, renovation or business loans. Moreover, you need to be a Singapore citizen or PR to qualify for this type of loan.

Consider more specific alternatives

Since your secured loans cannot be included in a DCP, you may wish to find other alternatives at more competitive interest rates for the various types of expenses you have, such as a car loan for your new car, a renovation loan for your home’s renovations, an education loan for your studies, and vice versa. There are even grants by the government for housing and small businesses to help elevate your debt, so you don’t have to resort to taking a personal loan for these expenses.

Where To Get A Personal Loan In Singapore

As you start hunting for a suitable loan package, it helps to know the amount that you can afford to pay off in monthly instalments and be aware of other costs involved such as processing fees, annual fees, etc. 


If you prefer to go to your preferred bank directly to get your personal loan, remember to do some research on personal loans by other banks so that you will not end up repaying more than what you should. Otherwise, you can always tap on the convenience of the Personal Loans comparison platforms such as the one by MoneySmart to get an overview of the rates by most banks in Singapore.


Depending on how long your loan tenure is, your monthly income and required loan amount, the interest rates will vary from person to person. To make things easier to understand, let’s use an example to illustrate. 


For example, you’re a Singapore citizen or PR drawing a monthly income of $2,500 and you’re thinking of taking a $10,000 loan with a tenure of 3 years with one of the banks in Singapore. The rates are as follows, with different EIR, and excluding other administrative costs.

Compare Personal Loan Rates In Singapore

Best Personal Loans in Singapore

MoneySmart Exclusive
Receive cash in 15 mins!
MoneySmart Exclusive
Receive cash in 15 mins!

Standard Chartered CashOne

Interest Rate*
3.48%
Total Amount Payable
S$11,044
Processing Fee
S$0
Per Month
S$307

Get up to S$4,915.80 worth of free gifts [up to an Apple iPhone 14 Pro Max (worth S$1,815.80) AND up to S$3,100 Cashback from Standard Chartered] when your loan is approved this February! T&Cs apply.

Valid until 07 Feb 2023
Standard Chartered's CashOne is known for its "cash in 15 minutes" and letting you borrow up to 4X your monthly income, which means you will enjoy instant approval, and all it takes is just 15 minutes for your funds to be credited into your preferred bank account. It offers an interest rate of 3.48% with an EIR of 7.99%. Another good thing about Standard Chartered is that it disburses the funds to any existing bank account in Singapore, so there's no need to create a new Standard Chartered account just for this personal loan.
MoneySmart Exclusive
MoneySmart Exclusive

UOB Personal Loan

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

Get up to S$3695 worth of free gifts [up to an Apple AirPods Pro 2nd Gen + Apple AirTag bundle AND up to S$3,288 Cashback from UOB] when your loan is approved this February! T&Cs apply.

Valid until 28 Feb 2023
Although UOB offers a lower interest rate and lower EIR of 6.42% than Standard Chartered bank, there are a few more requirements for this loan by UOB as compared to the Standard Chartered one. You’ll need to be an existing UOB credit card or UOB CashPlus account holder to qualify for it. If you’re not, you can still apply for this UOB loan, as long as you get a UOB credit card or CashPlus along with it.
Interest Rate*
4%
Total Amount Payable
S$11,200
Processing Fee
S$0
Per Month
S$311
HSBC’s latest promotional interest rates start from 3.2% with an EIR of 6%, and you won’t have to worry about paying any processing fees. With some of the most competitive interest rates for personal loans at the moment, HSBC’s personal loan tenures range from 1 to 7 years.
Interest Rate*
3.88%
Total Amount Payable
S$11,164
Processing Fee
S$100
Per Month
S$310
If you already have a DBS Cashline or credit card, you can consider this as this DBS personal loan is solely for existing customers. This loan offers interest rates as low as 2.88%, depending on your loan amount, and a processing fee of 1% (with an EIR at about 7.90%).

How To Apply For A Personal Loan

Step 1

Visit MoneySmart’s Personal Loans page

Simply click on “Apply Now” on your preferred personal loan, or you can choose to apply via your preferred bank’s mobile app or their website with your SingPass MyInfo (if you’re a Singapore citizen or PR). If you’re using SingPass MyInfo, it will then retrieve your identity and income data from SingPass. Thereafter, the approval-in-principle page will pop up briefly after you confirm/submit your MyInfo details.

Step 2

Get the required documentation ready

There is usually some necessary documentation needed in order for the bank to approve your personal loan application. This list of documents include (but is not limited to):

  • NRIC or other identification details
  • Latest computerised payslip
  • Latest 12 months’ CPF Contribution
  • Latest Income Tax Notice of Assessment (NOA) if you wish to be considered for a higher loan amount

Step 3

Pick your monthly repayment plan

Decide on your required amount before picking the suitable plan and also pick your preferred bank account to receive your funds, or provide the details of your other bank accounts.

Step 4

Review and confirm details

Depending on which bank and type of personal loan you’ve applied for, some banks may allow you to confirm your requested funds via the bank’s mobile app after reviewing your details.

Step 5

Receive your loan disbursement

The loan disbursement will be completed upon approval of your personal loan online application. Some banks have instant disbursement while others may take about 3-5 working days.

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Frequently Asked Questions

What is the difference between a term personal and a revolving personal loan?

A term personal loan involves a fixed period of time (longer loan tenure) that usually caters to long-term needs and the interest rate is lower. On the other hand, a revolving personal loan is meant for those who are capable of repaying their personal loans as soon as possible, although the interest rates are much higher. The upside is that there usually isn’t any penalty for early full repayment unlike a term personal loan.

How do I get the best personal loans by banks in Singapore?

There is really no “best personal loan” as it depends on what suits your needs the most. Currently, Standard Chartered, UOB, Citibank, DBS and HSBC are offering the best interest rates and personal loan promotions in Singapore. To make a better decision, you can compare them based on loan repayment tenures, effective interest rates (EIR) and minimum annual income requirement with MoneySmart's comparison tool.

Can I use a debt consolidation plan for my home loan and car loan?

A debt consolidation plan (DCP) is a repayment scheme that helps combine all the outstanding unsecured debt (including those from different banks) into one single loan with one bank. However, this plan is only meant for credit card bills, personal loans, and personal line of credit, meaning that any secured loans like home loans, car loans, education loans, renovation or business loans cannot be included in a DCP.

Do I have to pay an EIR for my personal loan?

Yes, most personal loans offered by banks in Singapore do include an EIR. An EIR, or effective interest rate, is meant to reflect the true cost of taking a loan in Singapore. When you take a personal loan from a bank, there are often other costs in addition to the base interest rate, such as the administration fee that a bank may charge. EIR (effective interest rate) is much more complicated as it also takes into account any processing fees plus your repayment schedule.

Are EIRs always higher than the advertised interest rates?

Yes, most of the time it is. EIR is determined by many other factors besides the interest you are charged, which include number of instalments, frequency of instalments, whether the instalment amounts are equal or not, administrative fee or processing fees.