By The Ledger desk · Last verified 7 October 2026
Most bank personal instalment loans in Singapore are advertised at a flat interest rate, where interest is charged on the original loan amount for the whole term even as you pay it down. The effective interest rate (EIR) shows the true yearly cost, and for a flat-rate loan it is much higher than the advertised rate, often close to double. On top of interest, check the processing fee (a one-time charge some banks deduct when the loan is approved) and the early repayment charge: as of October 2026, CIMB charges 3% of the outstanding principal or S$250, whichever is higher, for example. MAS also caps how much unsecured credit most people can hold across all banks at 12 times monthly income.
A personal loan can be a tidy, fixed-term way to pay for something important, and it is usually far cheaper than rolling a credit card balance. Compare loans on EIR and total cost, and you will choose well.
Quick facts
- Flat rate: interest is worked out on the original amount and stays the same every month.
- EIR: the yearly cost that reflects you repaying the loan in instalments; compare loans on this figure.
- Processing fees, where charged, raise the real cost; ask whether the quoted EIR includes them.
- Paying off early can cost a fixed fee or a percentage of the outstanding principal, and may need advance notice.
- Late instalments attract a late fee and higher interest charges.
- Most borrowers cannot hold more than 12 times their monthly income in unsecured credit across all banks.
Flat rate, monthly rest and EIR
| Term | How interest is worked out | What it means for you |
|---|---|---|
| Flat rate | On the original loan amount for the full term | Looks low; the real cost is higher because you pay interest on money you have already repaid. |
| Monthly rest | On the outstanding balance each month | Interest falls as you repay; the advertised rate equals the EIR. |
| Effective interest rate (EIR) | The true annual cost of the loan | The figure to compare between lenders. |
MoneySense shows how much repayment frequency matters: S$200 of interest on a S$1,000 loan for one year is an EIR of 20% if repaid in one lump at the end, but 41.3% if repaid in twelve monthly instalments.
A worked example: S$10,000 over three years at 5% flat
- Interest: S$10,000 × 5% × 3 years = S$1,500.
- Total repaid: S$11,500, or about S$319.44 a month for 36 months.
- EIR: about 9.3% a year (about 9.7% if compounded monthly), nearly double the 5% headline.
- Add a 1% processing fee taken from the loan, so you receive S$9,900 but repay the same S$11,500: the EIR rises to about 10% to 10.5%.
These are our own calculations to show the arithmetic, not any bank’s offer. Banks advertise promotional rates; DBS, for example, showed a personal loan rate from 1.48% a year with an EIR of 3.22% in October 2026, which illustrates the same gap between flat rate and EIR.
What does early repayment cost?
Clearing a loan early saves future interest, but banks charge for it. Two published examples show how different the charges can be:
| Lender (published terms) | Early repayment charge | Other conditions |
|---|---|---|
| CIMB Personal Loan | 3% of outstanding principal or S$250, whichever is higher | One month’s advance notice; you pay the balance shown on the early redemption statement by the due date. |
| DBS/POSB personal loan (under Cashline terms) | S$150 per loan if fully repaid before the end of its tenure | Interest is on a flat-rate basis, fixed for the whole loan. |
Before you repay early, ask the bank for a written redemption statement. It shows the exact amount needed to close the loan, including any interest still due, so you can compare it with simply carrying on.
How much can you borrow?
Under MAS rules, unsecured borrowing across all financial institutions is capped at 12 times your monthly income (since 1 June 2019). If your total unsecured debt stays above that for three consecutive months, you cannot draw more or open new unsecured credit anywhere until it comes down. Loans for business, medical or education needs are exempt, as are people earning S$120,000 or more a year or with net personal assets above S$2 million. Separately, if any unsecured balance is more than 60 days past due, you are blocked from new unsecured credit at all institutions.
Before you sign: a five-point check
- Compare EIRs, not flat rates.
- Ask whether the EIR includes the processing fee, and how the fee is collected.
- Write down the total amount you will repay over the full term.
- Read the early repayment, late payment and cancellation charges.
- Pick the shortest term whose monthly instalment you can pay comfortably.
The WahLiao Verdict
Borrow only for something that matters, and compare every offer on EIR and total repayable, never on the flat rate in the advert. A shorter term costs less interest overall, as long as the instalment is comfortable. If you might repay early, favour the loan with the gentler redemption charge. And if you are borrowing to pay off other debts, step back and read up on debt consolidation and free credit counselling first.
Questions people ask
Why is the EIR so much higher than the advertised rate?
Because a flat rate charges interest on the full original amount even after you have repaid much of it. The EIR reflects what you really pay on the money you still owe.
Is a bank loan cheaper than a licensed moneylender?
Usually, for people who qualify. Licensed moneylenders operate under separate legal caps on interest and fees, which are typically well above bank personal loan rates.
Does a personal loan affect my credit score?
Your loan and repayment record are reported to the credit bureau. Paying on time helps your record; missed payments harm it.
Can I cancel after approval?
Often yes, but some banks charge a cancellation fee, and the processing fee may not be refunded. MoneySense lists cancellation fees among the costs to check.
Sources: MoneySense, flat rate, monthly rest and EIR; Association of Banks in Singapore, MAS rules on unsecured credit; CIMB Singapore, early repayment of personal loans; DBS, personal loan terms and personal loan rates. The Ledger explains; it does not advise.
Read next: Borrowing From a Licensed Moneylender: The Legal Caps on Interest and Fees · Your Credit Score in Singapore: How the CBS Grades Work and How to Check Yours · Back to The Ledger
For what’s worth it this week, with the bill shown, read The WahLiao Week.
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