Although unsecured loan in Singapore is a bit popular. But, if it is your first time taking an unsecured loan, such as a personal loan, you need to read this guide.

With this handy guide, you can understand how an unsecured loan works. Moreover, you will discover the differences between a secured and unsecured loan.

In addition, you will be familiar with several types of unsecured loans.

First, let us uncover unsecured loans in Singapore.

What Is An Unsecured Loan?

Unsecured Loans in Singapore

An unsecured loan in Singapore does not require any form of collateral. In this type of loan, the borrower does not provide assets such as a car or home during application.

Instead, they will check your credit score and annual income as part of loan requirements. The lender will issue funds based on the borrower’s creditworthiness.

The lenders in Singapore take on more of the risk than the borrower. If you fail to repay a loan, there is no collateral to recover.

However, your credit score is negatively affected. It can decrease your credit score and lead to poor credit history. Moreover, the lenders might be more reluctant when approving your loan applications.

Therefore, it is essential to be a responsible borrower when taking any unsecured loan.

Furthermore, to have a clear picture of how unsecured loan works, let us differentiate it from a secured loan.

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Advantages Of Unsecured Loan

  • You can take an unsecured loan even with no property to build up as collateral (no need for collateral).
  • The application is easier and faster than the secured loan.
  • The loan approval is much faster than the secured loan.
  • You can use the money for any purpose, in short its multi-purpose.

Disadvantages Of Unsecured Loan

  • The interest rates can be much higher than secured loan since the lender bear a higher risk.
  • It can be difficult to obtain if you have a poor credit history and a stable income.

Moreover, an unsecured loan may vary in terms of repayment periods. It can be a term loan or a revolving loan. But what is a term loan? What is a revolving loan?

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What Is A Term Loan In Singapore?

A term loan has a fixed repayment period and floating interest rates. You need to pay a specific amount over a period. The best example of this is a personal loan in Singapore.

What Is A Revolving Loan In Singapore?

A revolving loan allows you to borrow money based on the existing credit limit. Once you have repaid the amount you borrowed, you can draw down or withdraw again.

Moreover, the interest rates on a revolving loan vary. Among the examples of revolving loans are credit cards, overdrafts, or personal lines of credit.

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What Is A Secured Loan?

A secured loan is a loan that needs collateral, such as a house or a car. This is also known as a collateral loan. Examples of these loans are mortgage loans, car loans, or vehicle loans.

Backed by collateral, the lender has lessened the risk of lending money to a borrower. It also means that when the borrower fails to repay a secured loan, the lender will recover the assets.

If you do not own any property to use as collateral, a secured loan in Singapore is not a good option for you. Instead, it is ideal to have an unsecured loan such as a payday loan.

Advantages Of Secured Loan

  • You can borrow a much larger amount,
  • It can have much lower interest rates since the lender is taking less financial risk.

Disadvantages Of Secured Loan

  • The property used as collateral is at risk.
  • The money borrowed is used for a specific purpose. For instance, you can take a car loan to purchase a vehicle.

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Unsecured Vs Secured Loan: What Are The Differences?

Unsecured Loan
Secured Loan
There is no need to own any assets and pledged as collateralAssets such as your car or home to pledged as collateral
Loan quantum may depend on your annual income and credit score

Loan quantum depends on the asset value and your creditworthiness (annual income and credit history)
Obtain quick cashBorrow a larger amount and have lower interest
It is flexible to use. You can use it for almost anything, e.g. paying medical bills, weddings, vacation, monthly bills, and unexpected expensesUse for specific purpose e.g. car loan for purchasing a car

An unsecured loan does not require any form of collateral. On the other hand, a secured loan is backed by personal assets such as your car or home.

If the borrower fails to repay the loan under a secured, the lender will recover the assets. The collateral will be used as repayment in the event of a default.

The main difference between an unsecured loan and a secured loan is the presence and absence of collateral.

Moreover, the amount you take varies which each type of loan. The funds you can get from a secured loan will depend on the value of the collateral and your annual income. The lender will evaluate your creditworthiness to make sure you can repay on time. Overall, a secured loan provides a higher loan quantum with lower interest rates since the lender carries lesser risk.

On the other hand, the amount you can borrow from an unsecured loan depends on your annual income and credit history. In addition, applying for an unsecured loan is quick and easy. For instance, an unsecured personal loan application can be approved in minutes.


With unsecured loan, if you have a low credit score, you can borrow a much lower amount with a higher interest. However, if you have a good credit score, the licensed moneylender can offer a higher loan quantum with lower interest rates.

Need to take a personal loan without income proof in Singapore? Find out how here.

Moreover, find out the things that you need to consider when applying for a personal loan.

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What Are The Types Of Unsecured Loans In Singapore?

Personal Loan

personal loan is an unsecured loan in Singapore that you can borrow from licensed moneylenders or banks. You can use the cash from a personal loan for anything – a flexible kind of loan.

For instance, you can use a Singapore unsecured personal loan to pay your medical bills, wedding, vacation, monthly bills, or other sudden expenses.

Moreover, applying for a loan is fast and easy. Thus, this is also known as fast cash loan.

Find out the top reasons why you need to get a personal loan in Singapore.

Line of Credit

A line of credit (LOC) allows you to borrow money when you need it – up to 4 times your monthly income. This is also known as a credit line.

Moreover, this is a type of revolving loan where the interest charges accumulate daily. There is also no fixed repayment term with the line of credit.

You can withdraw an amount based on your credit limit. Credit limit also refers to the maximum amount that you can withdraw.

Credit Card Instalment Plan

Credit Card in Singapore - Unsecured Loan

Another unsecured loan is a credit card instalment plan. With a credit card instalment, you can pay your purchases in equal amounts monthly.

This implies that instead of making a one-time payment with your credit card, you can pay your purchases monthly in equal amounts. You can choose to pay an equal amount for three. Six, twelve, or twenty-four months.

Using a credit card instalment plan is ideal when making big purchases.

Balance Transfer

In a balance transfer, you are allowed to transfer the outstanding balance from your credit card to another one.

Moreover, you can transfer the percentage from the credit limit to your bank account. In addition, you can enjoy a 0% loan interest for a period of three to twelve months.

Debt Consolidation Plan

Debt Consolidation Plan (DCP) in Singapore allows you to consolidate all your unsecured loans from various financial institutions.

With DCP, it can make your debts more manageable. It will combine all your existing debts into one loan. Therefore, you can repay your debt in just a single monthly repayment.

Find out more on how you can consoldiate your debts here.

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What You Need To Know About Rules On Unsecured Debts In Singapore?

The government has provided rules to financial institutions to protect you from accumulating too many unsecured debts or over-borrowing. They have added measures to unsecured debts since these loans often have much higher interest rates.

Here are the measures that you need to know.

If the total unsecured loan exceeds the borrowing limit for three (3) consecutive months, you will have limitations.

  • You can’t apply for a new credit card, borrow from unsecured facilities, or increase your credit limit.
  • You can’t use your existing credit card or borrow money from unsecured facilities.

As of 1 June 2019, the borrowing limit is set to 12 times your monthly income.

This move helps to reduce the reliance of borrowers on getting unsecured debts.

If you are 60 days (about 2 months) past due on any credit card or unsecured debts, you will have some limitations.

  • You are unable to apply for a new credit card, borrow from unsecured facilities, or increase your credit limit.
  • You cannot use your existing credit card or borrow money from unsecured facilities.

If you cannot repay your credit card bill and revolving unsecured credit facilities in full, the bank notifies you and make you understand what will happen if your debt is left unpaid.

  • You will receive a statement from bank or credit facilities containing the total amount and the time needed to fully pay off your unsecured debts if you plan to pay off the minimum amount each month.
  • Moreover, the statement will contain the total amount that will accumulate if you cannot pay within six (6) months.

In addition to these measures, you will notice that the lenders conduct a credit bureau check before granting you a credit card or any unsecured credit facility.

Moreover, financial institutions do a credit bureau check before granting a credit limit increase and checking your creditworthiness.

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In Summary

Applying for Unsecured Personal Loan in Singapore

An unsecured loan can be an ideal option if you need to borrow money even without owning assets. Moreover, you can quickly and easily borrow cash when you need it the most.

For instance, you can get approval for your loan application within minutes. There is no need to wait for days or months.

In addition, you can get quick cash within the day of your application. However, it is essential to remember that you need to repay your loan in time.

Are you searching for the best personal loan offer in Singapore?

Published On: September 25th, 2023

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