Resorting to personal loans can be a wise financial move if you’re already in debt, have no way to repay all of it right now and wish to consolidate your debt in order to lower your interest payments.
With a tagline like “neighbours first, bankers second”, it’s no surprise that many loyal Singaporeans turn to our friendly childhood bank POSB/DBS for financial help. Both banks market their own personal loans on their websites, but the POSB Personal Loan and DBS Personal Loan are actually identical. So we’ll talk about both here.
Here’s how the POSB/DBS Personal Loan measures up compared to other loans available in Singapore.
POSB/DBS personal loan eligibility
In order to take up a POSB/DBS personal loan, you have to be a Singaporean or a PR, between 21 and 65 years old, and have an annual income of at least $20,000.
When applying for a personal loan, you will need to have a POSB/DBS deposit account. We trust this is not an issue for most Singaporeans… But just in case you don’t have one, you can apply for it at the same time.
It’s not compulsory to have have a POSB/DBS credit card. But having one will be a real plus, since you can get your loan approved immediately.
How to apply for DBS personal loans
You can apply for a POSB/DBS personal loan through the DBS Digibank portal (either on browser or mobile application). You can also do so via our MoneySmart portal. Here is a step-by-step guide:
- Visit the MoneySmart DBS personal loan page
- Log into DBS iBanking there
- Specify your loan amount and preferred tenure
- Receive the funds in your deposit account within 1 minute
POSB/DBS personal loan interest rate (2020)
When you apply for the DBS Personal Loan online, you get to enjoy an interest rate advertised as “from 3.88% p.a.” That’s super low!
In reality, however, the quoted interest rate does not reflect the true cost of taking out the loan.
That’s because when you add up all the other costs, such as the processing fee, administrative fees and so on, you actually end up paying a higher sum to take out the loan than the 3.88% interest rate you’re being quoted. For example, there is also a one-time 1% processing fee that’s charged on the amount you’re borrowing.
The true cost of taking out a loan is measured by Effective Interest Rate (EIR). The lowest possible EIR you can get when taking out a DBS personal loan is 7.56%.
BUT! Even if you’re okay with an EIR of 7.56%, there is no guarantee that you’ll get it. POSB/DBS will quote you a personalised interest rate and processing fee “based on your personal credit and income profile. It may differ from the published rate and the rate offered to other borrowers.”
The highest possible EIR that POSB/DBS can charge is 20.01% p.a., which… Isn’t exactly reassuring. So proceed with caution!
Is the current POSB/DBS personal loan interest rate any good?
If you do manage to secure the advertised interest rate, here’s what a loan of $10,000 taken over a period of 3 years looks like with a DBS Personal Loan:
For POSB Personal Loan, it’s exactly the same:
Compared to other personal loans on the market, the interest rates offered by DBS are not the absolute cheapest, but still considered below average and quite competitive. But again, that’s only in the best case scenario (where you secure the lowest possible rate).
Before you commit, do compare personal loans in Singapore on MoneySmart.sg to make sure you’re not missing out on a better rate.
POSB/DBS personal loan promotions
Depending on the loan amount you intend to take out, you may be eligible for the following POSB/DBS personal loan promotions.
If you borrow at least $10,000, new-to-POSB/DBS customers receive $200 cashback.
If you borrow at least $30,000, existing POSB/DBS customers get $688 cashback while new customers get $888.
If you borrow at least $50,000, existing POSB/DBS customers get $888 cashback while new customers get $1,088.
But please don’t take a personal loan just because of a cashback promotion, no matter how attractive. In most cases, the total interest payable will far exceed whatever cash back you can get.
Only take a loan out if you actually need it.
How to use DBS personal loan calculator
DBS has a personal loan calculator that lets you calculate your monthly loan repayments based on how much you wish to borrow and for how long.
It’s super easy to use. Just enter the loan amount and whether you wish to repay your DBS personal loan over 1, 2, 3, 4 or 5 years.
The calculator will then show your monthly repayment amount, the effective interest rate as well as the total amount you’ll have to repay, including interest and other fees.
DBS Cashline vs DBS Personal Loan
DBS Cashline sounds suspiciously similar to the DBS personal loan, but there are some major differences.
Cashline is a line of credit that’s meant to be kept on standby in case you need it. What’s a line of credit? It’s an amount of money that the bank could potentially lend to you if you need it. When you need the money, you withdraw it, usually through an ATM machine, and you get charged interest on the sums you’ve withdrawn.
A credit line like DBS Cashline is a lot more flexible than a personal loan in terms of repaying interest. With a personal loan, you need to apply for a fixed loan amount and then repay a fixed amount every month.
With Cashline, on the other hand, you can withdraw money whenever you need it. So long as you repay the minimum sum every month, you can take as long as you like to pay it back. Well, you can, but you mustn’t. Taking your own sweet time to repay your Cashline bills means you’ll end up paying a lot more in interest.
Lines of credit like DBS Cashline charge much higher interest rates than personal loans, the current EIR being 20.5% (!!!) for people with a minimum gross annual income of at least $30,000. Proceed with caution.
How long does approval take for DBS personal loans?
Assuming you already have an existing POSB or DBS account, you can get your cash from a DBS personal loan application very quickly.
For applications that meet all the bank’s requirements, you can get approved almost instantly (except from 11:45pm to 8am) and have the money immediately transferred to your savings account.
Be cautious with personal loans
While personal loans aren’t as exorbitant in terms of interest as credit card debt, they’re still high-interest unsecured loans, so it’s a good idea to use them only as a last resort or as a band-aid solution to unexpected problems.
In the long term, instead of relying on personal loans, look to more sustainable solutions such as adjusting your expenditure and increasing your income. Also look to beefing up contingency plans for emergencies, such as by building up a decent emergency fund, so you can avoid getting into debt altogether should unexpected expenses crop up.
Do you have any experience with the DBS Personal Loans? Share your reviews in the comments!