Ever since Singapore did away with the VTLs and opened the travel floodgates, Singaporeans have been flocking overseas after two holiday-free years.

And by a strange coincidence, there’s also been an uptick in searches for personal loans, although we really hope people aren’t taking out loans to go on holiday.

If you yourself have been searching for a personal loan, this article will guide you through the factors you need to consider such as interest rates and repayments.

Warning: Not to be your mum, but please remember that you should not “anyhow” take out personal loans for non-essential spending like going on holiday or buying new shoes.

Personal loan interest rates are quite high and can spiral out of control of you don’t repay them on time. And high interest debt is what makes many people go bankrupt. Personal loans should thus only be used for valid reasons like medical emergencies or consolidating credit card.

HSBC’s personal loan is one of the most widely searched-for personal loans after those from local banks such as the DBS and POSB personal loan, OCBC personal loan, and UOB personal loan. Let’s look at how the HSBC personal loan compares to the three local banks’.

HSBC personal loan application criteria

HSBC’s personal loan plan is called the “HSBC Personal Line of Credit (PLOC) Installment Plan.

The minimum loan amount is $1,000, and you can choose from a loan tenor of one to seven years.

For those earning under $119,999 per year, you could potentially borrow up to 4x your monthly salary, although you should of course avoid borrowing more than you need.

The HSBC PLOC personal loan application criteria are as follows:

• Between 21 and 65 years of age
• Singapore Citizens and PRs: Annual income of 30,000 SGD for salaried or 40,000 SGD for self-employed or commission-based
• Foreigners: Annual income of 40,000 SGD and employment pass with validity of at least 6 months

HSBC personal loan application & approval time

You can apply online on HSBC’s website with the following supporting documents:

• Completed and signed Letter of Instruction
• NRIC or Passport
• Notice of Assessment and CPF Statement (via Myinfo, Singpass login required)
• Last three months’ computerised pay slips (for salaried employees with monthly income of over $6,000)
• Employment Pass (foreigners only)

If you’re an existing HSBC customer, you don’t have to go through the above procedure. You can just apply through your online banking account.

You can expect to receive HSBC’s approval letter within five working days of your application.

ALSO READ: Best personal loans in Singapore with the lowest interest rates (2021)

HSBC personal loan interest rate (2022)

HSBC is currently offering promotional interest rates of 3.2 per cent to 8.2 per cent per annum, which works out to an Effective Interest Rate (EIR) of 6per cent to 14per cent, when all fees and charges are taken into account. The promotion ended on May 4, 2022.

You also have to pay an annual fee of $60 (waived for Premier customers).

These interest rates are very competitive compared to what POSB/DBS, UOB and OCBC are charging right now, but be aware that what you actually end up paying varies depending on your loan amount and loan tenure.

The easy solution is to use MoneySmart’s personal loan comparison tool to compare loan interest rates charged by the different banks for your desired loan amount and loan tenure.

HSBC personal loan vs DBS, POSB, OCBC, UOB personal loan interest rates

Let’s say you want to borrow $10,000 and repay it back over a period of three years.

Here’s how the HSBC loan would measure up to the three local banks’.

As you can see, for this particular loan, HSBC is actually charging significantly less than any of the three local banks.

Using MoneySmart’s personal loan comparison tool, you can work out your interest rate as well as the amount you would have to pay each month for your own situation.

HSBC personal loan promotions

HSBC is offering the following personal loan promotions:

• Waiver of the 1 per cent processing fee for applications received (ended May 4, 2022) and approved by May 31, 2022. You can get up to $88 of your processing fee waived.
• $100 cashback when you apply for a first HSBC PLOC (ended May 4, 2022)
• Cashback of 0.5 per cent of loan amount (capped at $1,000) for online applications (ended 4 May 2022) with minimum loan amount of $10,000 and loan tenor of at least two years.

To qualify for the above promotions, you need to consent to receive marketing materials from HSBC.

HSBC personal loan calculator

To work out how much you’ll be paying in interest and monthly installments, you can use HSBC’s personal loan calculator.

Here are the amounts to pay attention to:

• Monthly repayments – These are the monthly installments you must pay every month.
• Total amount repayable – Subtract the amount you’re borrowing from this figure and you’ll get the total cost of the interest payments you’ll be making over the tenure of the loan.
• Applied / Effective interest rate – This is the “real” per annum interest rate you’ll be paying when all fees and charges are taken into account.

How to pay HSBC Personal Loan monthly online

You can repay your loan by transferring money to your PLOC account via internet banking.

Simply log into your internet banking account (it doesn’t have to be an HSBC account) and transfer money to HSBC using the reference details in your monthly statement.

Make sure you pay installments on time, otherwise you’ll get slapped with a late charge of $75.

How to close HSBC personal loan

If you strike Toto or manage to save up enough money, you can repay your loan early, but you will have to pay an early repayment fee (typically 2.5 per cent of the redemption amount, but you should check your approval letter to be sure). You must also pay an administrative charge of $40 if you close your account within the first 6 months of account opening.

To repay your loan early, you must give the bank 30 days’ notice. They will then send you a Repayment Letter indicating the full amount you must pay and the deadline.

When you have fully paid off your loan, your account will be closed automatically.

ALSO READ: Can I take a personal loan? 7 most common questions answered

HSCB personal loan vs HSBC personal line of credit balance transfer

A personal loan is not to be confused with a credit balance transfer.

Credit balance transfers are meant for people who already have existing personal loans or credit card debt. They let you transfer your existing debt to one HSBC account, which makes sense if HSBC is offering a more attractive interest rate than your other creditors.

A personal loan like HSBC PLOC, on the other hand, is a fresh loan, which means the bank will be lending you a fresh disbursement of money to be added to anything else you might already owe other creditors.

Be cautious with personal loans

I’ve said it once and I’ll say it again: You should only take out personal loans for the unavoidable, like emergencies and necessities to keep you alive. The purpose of the personal loan is to stop you from having to resort to credit card debt, which is even higher interest, when you really have no other options.

For everything else, it’s just not worth it, man. If you feel like you really need to go on holiday now that borders have opened but you don’t have the cash, eat instant noodles for a few months or take on a side gig until you’ve saved up enough, rather than get into debt.

This article was first published in MoneySmart.