**Loan Application**

**Apply for a Loan**

When it comes to loan applications, borrowers need to consider three important things: how much they can borrow, the interest rates, and other fees lenders can charge.

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**Loan Caps**

Singapore’s Ministry of Law recently established new rules on loan applications, which took effect on November 30, 2018. The new rules set certain caps on the total amount that a borrower can take out as a loan. These loan caps are based on the borrower’s annual income and whether he or she is a citizen, a permanent resident, or a foreigner residing in Singapore.

Singapore citizens and permanent residents

- Less than S$20,000 annual income: S$3,000
- At least S$20,000 annual income: six times the monthly income

Foreign residents

- Less than S$10,000 annual income: S$1,500
- At least S$10,000 and less than S$20,000 annual income: S$3,000
- At least S$20,000 annual income: six times the monthly income

It is important to note that the above figures are the total maximum amounts each borrower can get at any instance from all moneylenders combined.

For example, if a citizen or a permanent resident of Singapore who earns less than S$20,000 a year decides to take out a loan, either from one moneylender or from various lending companies, he or she is only allowed to borrow a total of S$3,000. The loan cap is higher for those who earn at least S$20,000 yearly. In this case, citizens or permanent residents can borrow six times their average monthly income. So, if one’s annual earning is S$60,000, then his or her average monthly earning is S$5,000, which means that he or she can borrow a maximum of S$30,000 (S$5,000 x 6 = S$30,000).

The same applies to foreign residents whose yearly earnings are at least S$10,000 or at least S$20,000. The only difference is for foreign residents who earn less than S$10,000; these borrowers have a lower loan cap of S$1,500 in total. (See the summary above.)

**Interest Rates and Late Interest Rates**

For their protection, borrowers should remember that licensed moneylenders can only charge the following interest rates regardless of the borrower’s income level and the type of loan they applied for:

- Maximum interest rate: 4% per month (computed based on the outstanding balance or the remaining principal)
- Maximum late interest rate: 4% per month (applies only on the months when repayment is late)

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**Other Fees **

Besides the interest and late interest rates, there are other fees that borrowers may need to pay. Fortunately, there are also certain caps on how much lenders can charge for these fees.

- Maximum late payment fee: S$60 monthly (applies on each month when repayment is late)
- Maximum administrative fee: 10% of the principal of the loan (once the loan application is granted)
- Legal fees: any costs per the order of a court for a lender’s successful claim in recovering a loan

Of these charges, the interest, late interest, late payment fee, and administrative fee—in total—should not be higher than the principal of the loan. To illustrate, if a borrower is granted a loan of S$3,000, the combined amounts of all these fees should not exceed S$3,000.