Finding how to get quick cash might be one of the most stressful parts when you’re in a difficult spot financially. In Singapore, personal loans are a common way to acquire fast cash, however, there are a variety of other options now on the market, such as CPF personal loan.
This kind of loan can provide you with quick and easy access to financial funding, whether it is for medical bills, house repairs, or any other form of emergency.
Continue reading to learn more about what a CPF personal loan is, whether or not you are eligible for it, what the requirements are to apply, and how they compare to personal loans.
What is a CPF Personal Loan?
A CPF personal loan is a form of loan that can be obtained against the savings that you have in your Central Provident Fund (CPF) account in Singapore. CPF personal loans provide you with rapid access to these funds, making them suitable for unforeseen expenditures.
Furthermore, CPF personal loans enable you to borrow up to six times your monthly income at relatively low interest rates ranging from one percent to four percent each month. In addition, the repayment period for these loans is normally between 6 and 12 months after the loan has been approved, or up until your 55th birthday.
You can learn more about the age eligibility requirements and other prerequisites in the sections that follow.
What are the Requirements to be Eligible for this?
To get this loan, you must meet strict qualifying requirements, which are as follows:
- Age requirements start at least 54 years old or must be within one year of turning 55 years old.
- There is a minimum wage of S$2,000 for Singapore citizens and permanent residents.
- A minimum withdrawal of S$5,000 is permitted from either a Special or Ordinary Account Savings.
What are the Prerequisites and Requirements?
To begin, a person must be a citizen or permanent resident of Singapore in order to be eligible to submit an application for a CPF personal loan. In addition to that, you are expected to be able to supply the following documents:
- Cards of identification/NRIC
- Documentation demonstrating that you live at the address given (such as letters sent to you, utility bills, or rental agreements) is required.
- Documentation of employment, such as recent pay stubs, a certificate of employment, a letter or contract outlining job terms, etc.
- SingPass is required in order to log into the CPF, HDB, and IRAS websites.
Which is Better: a Loan taken out against your CPF or a Personal loan?
As a Singaporean, you may find yourself in a situation where you need extra money such as when you don’t have emergency funds anymore. Two options you might think about are taking a loan from your CPF or getting a personal loan from a bank. But which one is better for you?
Let’s start with a loan against your CPF. The good thing is that the interest rate is usually lower because you’re borrowing your own money. You might also have more time to pay it back. But remember, when you take money from your CPF, you’ll have less saved up for when you retire.
For personal loans, the interest rate is usually higher than a CPF loan because the bank is taking a bigger risk. But the good news is that you can get the money faster, and your CPF savings won’t be touched. Just keep in mind that you’ll need a good credit score to get a good deal on a personal loan.
Which one should you choose? It really depends on your own situation. If you want to keep your CPF savings for retirement and can handle higher interest rates, a personal loan might be better. But if you’re okay with using some of your CPF money and want a lower interest rate, then a loan against your CPF could work for you.
Read Also: What Do You Need to Apply for a Personal Loan in Singapore
Risks and Considerations of CPF Personal Loans
One big thing to remember is that when you borrow money from your CPF, you’re actually taking money away from your retirement savings so you’ll have less money saved up for when you’re older and ready to stop working. The money you take out won’t be earning the good interest rates that your CPF savings usually get.
Before you apply for the loan, make sure you can afford to pay it back based on the payment plan. Remember that that there are limits to how much you can borrow with a CPF loan, depending on how much money you have in your account and how much you earn each month.
Alternatives to CPF Personal Loans
While CPF personal loans and regular personal loans are popular options for Singaporeans in need of quick cash, there are other alternatives worth considering, depending on your specific financial situation and needs.
Debt Consolidation Plans
A debt consolidation plan (DCP) could help you manage your repayments more effectively. This combines your debts into a single loan with a lower interest rate and a more manageable repayment schedule, making it easier for you to pay off your debts over time.
Borrowing from Family or Friends
If you have a trusted family member or friend who is willing to lend you money, this could be a more affordable and flexible option compared to taking out a formal loan. However, it’s essential to establish clear repayment terms and maintain open communication to avoid straining your relationship.
Financial Counseling and Budgeting
It may be helpful to seek financial counseling and learn how to create and stick to a budget to avoid falling into a debt trap.
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