Best Personal Loans For Low-Income Earners In Singapore

Personal loans are a convenient and flexible tool for meeting financial needs. They can be used for urgent or unanticipated events, to pay for furthering your skills and education, or to pay for home appliances or personal devices to improve your quality of life.

However, personal loans come with strict eligibility criteria. Most notably, they require an applicant to have a certain level of annual income. This threshold is even higher if you’re a foreigner. 

As a result, those of us who do not have a high enough income can find it difficult to find the personal loan we need or want.

Well, that’s because personal loans are unsecured. In other words, you do not pledge an asset as collateral on your loan.

Without a collateral, the lender has no recourse (other than bringing a lawsuit against you) should you choose not to repay your loan. 

Hence, to protect themselves from this situation, banks or financial institutions offering unsecured loans have to screen applicants to gauge their ability to repay their debt.

One of the ways they do this is by requiring that loan applicants earn an annual income that is high enough to accommodate the debt repayment.

In Singapore, this annual income requirement is typically pegged at S$30,000 for citizens. If you’re a foreigner, you’ll be subject to higher income requirements — sometimes as high as S$60,000 per annum.

See also: Your Go-to Personal Loans Guide in Singapore

Of course, not everyone has an income that fulfils these thresholds. But even with a low salary, it doesn’t mean that you won’t be able to get a personal loan in Singapore.  

You simply have to look for a personal loan that has a lower annual income requirement, and there are quite a few of such options available.

The POSB Personal Loan has one of the friendliest eligibility requirements around.

Aside from the easy application process, it is also open to anyone earning at least S$20,000 per annum, and Singaporeans, PRs and foreigners are welcome to apply — although the latter would need to have a Cashline and/or Credit Card account with the bank.

The eligible age for applicants also spans a wide range, from 21 up to 75 years old.

This loan offers low interest rates starting from 2.88% per annum (EIR 5.79% per annum), and can be repaid over as long as 5 years. 

You may borrow up to 4X your monthly salary or income.

Standard Chartered is another good option for personal loans for low-income earners; the minimum annual income required is pegged at S$20,000.

However, only Singaporeans and PRs qualify for this threshold, foreigners will need to be earning S$60,000 or more per year in order to apply.

For those who qualify, this loan offers affordable interest rates starting at 2.88% per annum (EIR 5.43% per annum).

There is a fixed one-time processing fee of S$199 in the first year, but this can be partially or fully offset with the current cashback promotion.

Borrow at least S$10,000 with a loan tenure of 3, 4, or 5 years, and you will receive S$200 cashback if you’re a new client, and S$100 if you are an existing customer.

A third option for those with annual incomes below the S$30,000 threshold is OCBC’s ExtraCash Loan.

This loan requires a minimum of S$20,000 in annual income if you’re a Singaporean or PR. Foreigners, too, may find this loan easier to qualify for, as the income threshold here is S$45,000 for expats.

One drawback, though, is the high interest rates charged on this personal loan — from 10.08% per annum (EIR 13.92% per annum). So, if possible, it might be best to wait for a promotion where you can get low rates.

Other things to note here is the bank requires a one-time processing fee of S$100, as well as a loan tenure of 1 to 5 years.

The CIMB Personal Loan offers an interest rate starting from as low as 2.80% p.a. (EIR from 5.28% p.a.), which makes it one of the lowest rates in Singapore. It also offers loan tenures ranging from 1 to 5 years.

You can borrow up to 2X your monthly income if your annual income is between S$20,000 to S$29,999.

Those with an annual income of S$30,000 to S$119,000 can borrow up to 4X of their monthly income, while you can borrow up to 8X of your monthly income if your annual income exceeds S$120,000. 

The minimum annual requirement for Singaporeans and Singapore Permanent Residents aged from 21 to 70 years old is S$20,000. The CIMB Personal Loan is now also available for Malaysians with a minimum income of S$30,000.

As for processing fees, it will depend on the low income earner’s personal credit score and salary profile.

There's also an early repayment fee of 3% of the outstanding principal amount of the approved cash loan or S$250, whichever is higher. 

Citi’s Quick Cash Personal Loan has a slightly higher minimum annual income requirement for Singaporeans and PRs — you’ll need to earn at least S$30,000 to apply.

However, for foreigners, the income threshold is a moderate S$42,000, which puts this loan within easier reach for working expats here seeking a loan.

Another advantage of this loan is its low interest rates, which start from 3.45% p.a.(EIR 6.5% p.a.). You may borrow up to 4X your monthly salary, subject to a minimum loan amount of S$1,000. Moreover, there's no processing fees and administrative fees.

Available tenures for this cash loan for low-income earners range from one to five years.

If you plan to take out a housing loan somewhere down the line, be sure to watch your Total Debt Servicing Ratio (TDSR). Also, note that this still applies whether you’re a high or low-income earner.

This is a measurement of your total debt payments each month — including personal loans and mortgages — which is capped at 55%.

Now, TDSR kicks in when you’re applying for a mortgage. Hence, if your personal loan repayments take up most or all of the 55% limit, you may have to make do with a smaller-than-expected property loan, or wait till you pay off your personal loan to get your mortgage.

When looking for a personal loan, be aware that you may not be granted the advertised interest rate. This could be due to many reasons, such as credit rating, outstanding debt, income profile and so on. 

This means you may be charged a higher-than-expected interest on your loan, which will result in heavier instalment payments each month. Consequently, it may be challenging for you to pay off your personal early.

You will be informed of the interest rate offered to you, as well as the monthly amount you’ll need to repay during the application process. So, before you proceed with bank loans for low-income earners, be sure to check thoroughly that these are acceptable.

You will notice that there are two sets of rates displayed — the Advertised or Flat Interest Rate, and the Effective Interest Rate (EIR) — when reviewing personal loans. 

How EIR is calculated can vary from bank to bank, but it essentially takes into account the effect of fees and other charges associated with your personal loan.

Take a look at the following example.

As you can see, the interest rate in the middle column (Interest rate, flat rate equivalent) seems to say that a 12-month loan is the cheapest (i.e., has the lowest borrowing cost).

However, when you take a look at the next column, Effective Interest Rate, you see that it is actually the 60-month loan tenure that is the cheapest instead.

Hence, be sure to check the EIR as well, so as to bring your borrowing cost as low as possible. One good question to ask during the application process is, “Which tenure will give me the cheapest loan on a low income?”

Even if you're a low-income earner, taking a personal loan can offer several advantages:

Personal loans for low-income earners can provide a lifeline when you encounter expenses or when you need to cover urgent financial needs. 

Whether it's a medical emergency, car repair, or essential home appliance replacement, a personal loan can offer quick access to funds, helping you manage these situations without undue stress.

Many lenders offer flexible personal loan tenures even for low-income earners, allowing you to choose a repayment period that meets your financial capabilities. 

Because of this flexibility, you can manage your monthly repayments comfortably and avoid straining your budget. 

Plus, you can select a shorter tenure for lower overall interest costs or a longer tenure for smaller monthly instalments.

Despite having a low income, you can still find personal loans online with a reasonable interest rate. 

Also, many banks and financial institutions offer competitive rates, especially for individuals with good credit scores. 

By comparing interest rates from various providers, you can secure a loan that minimises your borrowing costs and makes repayments manageable.

Securing a personal loan without income proof can be challenging, as lenders typically require this document for verification. However, it's still possible when you can explore these avenues:

If you're currently unemployed or have a low income, consider exploring ways to increase your earnings. This could involve taking on a part-time job, freelancing, or starting a small business. 

Demonstrating a steady income stream, even if it's not from traditional employment, can improve your chances of getting approved for a personal loan.

If you have a family member or close friend with a steady source of income and good credit history, they might be willing to co-sign your personal loan application. 

A co-signer agrees to assume the responsibility for the loan repayment if you default, which can provide the lender with added assurance and increase your chances of approval even with low or zero income.

If you own a home, you might be able to leverage its equity to secure a home equity loan.

Consequently, it will be easier for you to qualify for a personal loan, even with a low income or limited income proof, as the lender has the security of your property.

Some online lenders and financial institutions may have more flexible requirements for verification, providing opportunities for approval for low-income earners. 

Also, they might consider alternative forms of income proof or focus on other factors, such as your credit history or assets, when assessing your personal loan application.

While personal loans can be helpful for low-income earners facing financial challenges, it's essential to approach borrowing with caution and careful consideration.

So, make sure you know how personal loans work before making a decision and remember to follow these tips:

Avoid the temptation to borrow more than you absolutely need, especially since larger loans come with higher interest costs and monthly repayments that can affect your budget and increase the risk of default.

Banks and financial institutions often offer promotions and discounts on personal loans, such as low interest rates, processing fee waivers, or cashback offers.

While considering various personal loans, take the time to compare these promotions. Then, choose a loan that maximises your savings and minimises your borrowing costs as a low-income earner.

Whether you’re a high or low-income earner, your credit score plays a role in your loan application. After all, lenders use your credit score to determine your creditworthiness and decide on your eligibility for a personal loan.

Also, note that a higher credit score generally secures favourable loan terms and interest rates. Before applying, check your credit report and improve your score if needed.

Each lender has its own set of eligibility criteria for personal loans, and these typically include factors such as minimum income, age, and employment status. 

Before submitting your application, carefully review the lender's requirements to ensure you meet their criteria as a low-income earner.

Before applying for a personal loan for low-income earners, thoroughly evaluate your financial situation and determine if the purpose of the loan is truly necessary. 

While at it, consider alternative solutions, such as budgeting, saving, or seeking assistance from family or friends, if possible.

Choose a reputable lender for personal loans with a track record of responsible lending practices. 

You can do this by researching the lender's background, reading customer reviews, and ensuring they are licensed and regulated by the relevant authorities. 

By taking this approach, you can avoid predatory lenders who prey on low-income earners. Plus, you can ensure you're dealing with a trustworthy financial institution.

Interest rates impact the overall cost of your personal loan and your monthly repayment amounts, so take the time to understand how different interest rates affect your obligations. 

Also, consider factors such as the loan amount, tenure, and interest rate to determine an affordable monthly repayment that aligns with your budget as a low-income earner.

While having a low income might present some challenges in securing a personal loan, here are steps you can take to increase your chances of approval:

Lenders assess your debt-to-income ratio (DTI) when evaluating your personal loan application. A lower DTI, for instance, indicates that you have more disposable income to manage loan repayments. 

Before applying for a personal loan for low-income earners, focus on reducing your existing debt, such as outstanding loans or credit card balances. This way, you can demonstrate responsible financial management.

Even with a low income, demonstrating a stable and regular income stream can strengthen your loan application. Remember, lenders want assurance that you have the means to make consistent personal loan repayments. 

So, provide documentation, such as payslips or bank statements, that clearly shows a steady income flow over a reasonable period.

A higher credit score reflects responsible credit management and increases your chances of getting approved for a personal loan with favourable terms, even with a low income. 

As such, monitor your credit report regularly, pay bills on time, and avoid excessive credit applications to maintain a healthy credit score.

For a smooth application process, prepare all the necessary documents, including your identification documents, proof of income, and other supporting documents the creditor may require.

If you're a low-income earner and find it challenging to qualify for a personal loan, there are alternative options you can explore:

• Peer-to-peer (P2P) lending: P2P lending platforms connect borrowers directly with individual investors, often with more flexible eligibility criteria than banks. While interest rates may vary, these loans can be a great option for those with lower incomes or less-than-perfect credit scores.

• Government assistance programmes: The Singapore government offers various financial assistance schemes for low-income individuals and families. Additionally, these programmes can provide grants, subsidies, or loans to help with essential needs such as housing, healthcare, and education. 

• Credit cards: When used responsibly, credit cards can offer a revolving line of credit for short-term needs or emergencies. Besides, some credit cards have lower income requirements or offer secured card options, making them more accessible to low-income earners.

• Secured loans: Secured loans need a collateral, such as a car or property, which can reduce the risk for lenders. However, keep in mind that defaulting on a secured loan could put your collateral at risk.

• Licensed money lenders: Licensed money lenders operate under stricter regulations than in the past and can be a legal and regulated option for those who can’t access conventional bank loans. However, it's crucial to compare interest rates and terms carefully, as money lender loans can have higher interest rates than bank loans.

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