A personal loan is not something you should take out on a whim just because your bank account balance is getting low at the end of the month but you want to go shopping.
But if you’re already in debt, consolidating it with a personal loan that charges lower interest rates than your existing lenders can be a smart move.
Let’s check out the UOB personal loan to see whether it’s worth your time.
UOB personal loan interest rate
The most important factor for most of us when choosing a personal loan is interest rate. After all, if you’re consolidating your loans, the whole idea is to get an interest rate that is lower than what you’re currently paying.
UOB is currently offering a 4.25% per annum interest rate on their personal loans when you sign up online. In addition, you will be charged a 1.5% fee. The minimum amount you can borrow is $1,000, and the maximum will depend on your monthly income.
The Effective Interest Rate (EIR) of the UOB personal loan is estimated at 8.86% p.a., but in reality it will range from 8.38% for a 5-year loan to 10.45% for a 1-year loan.
For a loan of $10,000 taken over a period of 3 years, this is how much interest you would be paying:
|UOB Personal Loan||For a loan of $10,000|
|Interest rate||4.25% p.a.|
|Effective interest rate||8.86% p.a.|
|Monthly instalments (over 36 months)||$313|
|Total interest payable||$1,425|
|Processing fee (1.5%)||$150|
What’s the difference between the regular interest rate and the effective interest rate? Well, when you take out a personal loan, in addition to the quoted interest rate, you’ll also be paying other fees, such as the 1.5% fee UOB charges.
The EIR, or the actual interest rate you end up paying as a percentage of your loan, will thus be higher than the interest rate being quoted to you.
So, how do these interest rates measure up compared to the personal loans offered by other banks in Singapore? Well, to put it bluntly, this is a pretty expensive personal loan. So, if you’re looking for a bargain, look elsewhere: The Best Personal Loans in Singapore with Lowest Interest Rates (2019)
UOB personal loan promotions
The current interest rate of 4.25% is a promotional rate and is valid until 30 Sep 2019. No news yet about what the revised interest rate will be like or whether the promotion will be extended.
UOB Cash Plus vs UOB Personal Loan
When you’re short of cash and need it fast, UOB offers two main solutions: the UOB Personal Loan and UOB Cash Plus. But what’s the difference?
UOB Cash Plus is a line of credit. How it works is that you apply for the line of credit ahead of time, and once approved you have it on standby to use whenever you want. You withdraw the money, generally at an ATM machine, when you wish to use it. You will then be charged interest on the sums you have withdrawn.
With the UOB Personal Loan, you need to make up your mind how much money you need ahead of time and how much time you need in order to repay it. Once the money has been disbursed, you’re locked into repaying a fixed sum every month.
Repaying money you’ve withdrawn through UOB Cash Plus, however, is a lot like repaying credit card debt. You only have to pay the minimum sum on your bill every month in order to get the debt collectors off your back. That means you can potentially roll a significant sum over to the next month.
You should definitely not do so, however, as credit lines like UOB Cash Plus typically charge much higher interest rates than personal loans. Right now, UOB Cash Plus is offering a promotional 3 months at 0% interest and no processing fees.
But once that time is up, you’ll be charged interest rates that are comparable to credit cards’. Proceed with care!
How long does approval take for UOB personal loans?
UOB offers instant approval for both new and existing UOB customers, provided you apply during their operating hours from 7am to 8pm. The cash will be deposited into a savings account of your choice.
A word of warning about personal loans
Compared to credit card debt or UOB Cash Plus’s line of credit, the interest rate charged by the UOB personal loan doesn’t sound that high.
But it’s still high! When you factor in the EIR, you’re still losing a lot of money in order to borrow that cash. So you should not be relying on personal loans on a regular basis. Rather, think of them as a last resort, only to be used in an emergency.
Ideally, you want to get your finances to the point where you’ll never have to take out personal loans in the first place. That could mean spending less or earning more per month, as well as accumulating an emergency fund that will give you a cash buffer for unexpected expenses.
Do you have any experience with the UOB Personal Loan? Share your reviews in the comments!