Can you get loans without a bank account?

Need a loan but not sure if it’s possible without a bank account? You’re not alone. Find out more about the documents required, how loans are disbursed and whether or not you have options despite the lack of a bank account.

In today’s day and age where ‘Smart Nation’ is one of the lingos constantly going round in conversations, you might be surprised to learn that some of the people in our community do not have internet banking or even a bank account for that matter. 

There are so many different reasons why some people choose not to have a bank account  — lack of trust in banks, worries about minimum balance requirements, a less-than-glorious history of bounced checks and unpaid overdraft fees, or even the thought of being too old to need one.

The thought of getting loans without a bank account seems far-fetched but you might be surprised to learn that it is actually possible if you spread your net further out.

Below, we share more about the things you ought to know about loans and the types of loans that you could consider going for even if you don’t have a bank account.

What documents do you need in order to get a loan?

While you may not necessarily need a bank account in order to apply for a personal loan, it is a fact that most loans are disbursed to the borrower’s bank account once everything has been finalised and the paperwork has been signed. 

When it comes to loan applications, these are the main documents you need to produce: 

• Proof of identity (NRIC/ Passport/ Employment Pass)
• Proof of residence (e.g. Latest local utility bills, phone bills, letters addressed to you, bank or credit card statements, tenancy agreements) 
• Proof of income (e.g. Payslips or CPF contribution from the last 3-6 months, tax returns from the last two years) 

Your proof of income is essential as it gives lenders a sense of your ability to repay the loan, the amount of money they feel comfortably lending you, the interest rate to be charged. 

If you are looking to borrow a bigger sum of money, consider furnishing your lender with your payslips for sure since there is a cap on how much of your salary actually goes into your CPF account every month. This tip comes in handy if you earn quite a handsome amount of money every month.

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How are loans disbursed?

Most loans are disbursed into bank accounts, which you can then withdraw when you need to get the cash. While the most common, that’s not the only way loans can be disbursed. 

There are times that lenders may opt to pay your creditors directly to make sure you do not misuse the loan. There are also loans that are paid directly to your credit card or credit line account(s) as well as loans that are extended to you straight up in the form of cash or cheque. 

Here’s a quick rundown on how loans are usually disbursed: 

• Bank accounts
• Credit card/ credit line account(s)
• Directly to creditors
• Cash, cheque

Loans that do not require a bank account

Almost all personal loans offered by banks and financial institutions in Singapore disburse funds into the borrower’s bank account. If you happen to not have a bank account but need to get a loan, the following options could come in handy. 

1. OCBC balance transfer

This facility is available to existing OCBC Credit Card or OCBC EasiCredit account holders.

OCBC Balance Transfer lets you convert up to 90 per cent of the available limit on your credit line or credit card into interest-free cash, with a one-time processing fee as low as 1.80 per cent (EIR 7.22 per cent p.a.). The repayment periods range from 3 to 12 months. 

You can apply to transfer the funds to any credit card/credit line account(s) held with any other bank or financial institution in Singapore; and/or any bank account held with OCBC or any other bank or financial institution in Singapore.

2. HSBC Personal Line of Credit

With HSBC’s Personal Line of Credit account, you will receive a free-of-charge cheque book along with a debit card so you can gain easy access to the account anytime, anywhere. This revolving credit facility gives you flexible access to extra cash that you may need during emergencies. 

Depending on your customer status with HSBC, you can get an interest rate as low as 12 per cent or 16.5 per cent (Premier and Revolution/Advance members respectively) – the market average stands at about 19.8 per cent. All other customers are tagged to an interest rate of 18.5 per cent. 

Keep in mind the interest is charged on the amount utilised — you only get charged interest when you withdraw from the account.

Also, bear in mind your aggregate credit limit with HSBC for all unsecured facilities is capped at four times your monthly income if you earn between $30,000 and $120,000 per year.

3. Pawn shop loan

I’m sure you have seen major pawn shops like Maxi Cash, Money Max, Value Max and Cash Mart nestled in shopping malls in the suburbs. 

If you need cash urgently, don’t want to deal with documentation, and recognise that the ultimate worst that could happen if you don’t redeem your pledged item back within a certain time period is that you’ll never get your valuable item back, consider turning to pawn shops. 

When you take your valuable item (like gold jewellery, designer bags or branded watches) to the pawn shop, you’ll typically get 60 per cent to 80 per cent of its market value in cash pretty much instantly. 

Bear in mind there is no free lunch in the world: (i) you will not be able to redeem your pledged item at the same price you got for it; (ii) prepare to pay more interest the longer you take to repay your loan. The interest rate usually starts from 1 per cent for the first month, 1.5 per cent for the second month, so and and so forth. 

Most pawn shops hold your pledged item for about half a year, or longer if you make payment for the interest incurred.

4. Cash advance

A cash advance is a facility bundled with your credit card that allows you to withdraw part of your card’s credit limit in cash from ATMs both locally and overseas. You will need a PIN in order to execute a cash advance transaction. How much you can get depends on your available credit limit. 

While quick and convenient, there are things you ought to know about cash advances: 

• The upfront cash advance fee that applies each time you get cash from the ATM 
• Higher interest rates than the base interest rates that come with credit cards 
• Interest is accrued daily from the day you get cash
• No rewards or cashback will be earned for cash advance transactions 
• If you use your credit card to get cash out at an overseas ATM, you could also be charged for currency conversion, adding to the overall cost of the cash advance
• Overall, cash advances are expensive
• Some credit cards do not come with the cash advance facility

5. Payday loan

A payday loan is an extremely high-cost, short-term loan that lets you get quick cash should you ever find yourself in that unfortunate situation with different emergencies to pay for all at once. 

While lenders are more than happy to have you as their customer, take note that your payday loan has to be a smaller amount than your paycheck. Payday loans are available from Cash Mart, Value Max and licensed moneylenders in Singapore. 

As its name suggests, you have until your next paycheck to pay up what you’ve borrowed. However, the interest rates for payday loans are incredibly high — up to 24 per cent for just two weeks! That’s way more costlier than carrying the debt on your credit card for a month. 

If possible, avoid payday loans. The interest rates are sky high and it’s easy for people to wind up in massive debts with life-ruining potential.

ALSO READ: Best personal loans for foreigners in Singapore

Cheaper loan options often disburse funds into bank account

Even though nobody would want to be in a position where they have to deal with money woes, it remains a fact that personal loans are often cheaper than alternatives like cash advances and payday loans. 

Learn more about how low-interest personal loans could help you save money on interest charges and the overall cost of your debt.

That being said, the funds from personal loans are usually disbursed into bank accounts. If you don’t already have one, definitely consider opening one with your preferred bank of choice.

This article was first published in SingSaver.com.sg. All content is displayed for general information purposes only and does not constitute professional financial advice.