Personal Loans

3 Serious Consequences of Not Making Loan Repayments on Time

There are a plethora of reasons people take out personal loans. Financial emergencies such as paying for medical and hospitalization expenses could take a toll on one’s funds. Besides emergencies, big-ticket purchases are also one of the top reasons people apply for personal loans – the costs of having a wedding, going on a honeymoon can be really high. Financing a renovation, or making purchases like household appliances are also commonly seen in those looking for a personal loan.

Personal Loans: How Do They Work?

A personal loan is also known as a consumer loan, where a consumer borrows an amount of money at a typically flat annual personal loan interest rate. Consumers can borrow from banks and licensed moneylenders in Singapore. These loans usually include an annual fee and have to be repaid in monthly installments, over the course of a few months or a few years.

What Happens if You Can’t Repay Your Personal Loan?

As per its name, personal loans have to be repaid as they are borrowed and not given money. But what happens if you are suddenly hit with financial difficulties such as an emergency, and are unable to repay the personal loan you have taken out? Most lenders consider a 30 to 90 day period of non-payment as a loan default. If you default on a loan, this could lead to some serious consequences on the robustness of your financial, emotional and physical wellbeing.

Distressed man sitting on couch

Let’s delve into some of these possible ramifications now.

1. Money and Collateral Seized

A secured loan is one that is backed by collateral which borrowers must put up for the lenders. If you have taken out a secured loan, it pays to ensure that you will be able to repay the loan. Since they are backed by collateral, which could be a property or a car, secured loans are typically of lower financial risk for the lenders, which leads to them offering lower interest rates or cost of borrowing. The danger lies in the failure to repay, where lenders could seize ownership of your collateral, causing you to lose it.

If your licensed moneylender is a bank, they may also have access to your bank accounts. It is possible that money in your bank accounts could be seized from you, if the funds in your bank account could be used to repay the personal loan debts you owe the bank.

2. Legal Action Taken Against You

Non-repayment of personal loans is considered to be debt, meaning that you, as the borrower, are legally obliged to repay it.

If you are unable to repay your loan due to financial emergencies or difficulties, lenders may be open to providing other alternatives and options such as loan restructuring or even debt written off.

However, if lenders discover that you have been wilfully avoiding your loan obligations, such as having money in your bank account but not repaying your loan, legal proceedings for criminal loan default could be taken against you. Even if the debt is eventually written off due to extended periods of no contact, legal action can still be taken as a contract has been signed by both the lenders and borrowers for the personal loan.

3. Bad Credit Report

For every loan you default on, it becomes a debt and leaves a mark on your credit scores. Do credit reports exist in Singapore? Are they really used by financial institutions and employers? The answer is yes, and yes.

A credit report is a record of an individual’s credit payment history collated across different financial providers and institutions. Credit payment history refers to a list of various factors and records, including – credit account history, enquiry activity, and account delinquency data.

Account delinquency data includes records of loan defaults, which will be displayed in your credit report on the date it was uploaded to the system, and would not be taken down after periods of 12 months or 3 years, which is the case for credit card repayments and closed credit accounts respectively).

Having a bad credit score on your credit report is undoubtedly undesirable. But what could happen? Below are some of the possible unsavory circumstances you might find yourself in, with a bad credit score.

4. Disqualification for Important Loans and Financial Resources in the Future

If you have defaulted on your personal loans, it would make it harder for you to apply for credit in the future. If, in the future, there is a need for you to take on home, education or auto loans, there is a reduced possibility of a successful application because of your default. This is because most lenders would request from the credit bureau to check your credit report in order to ascertain your credit worthiness before they make a decision on whether to lend to you.

Having a bad credit score due to a presence of loan default would cause banks and future lenders to deem you uncreditworthy, depriving you of future opportunities like enrolling in university, or getting a car or a house.

5. Disadvantage During Job Seeking

Besides lenders requesting to view your credit report, future employers, especially those in the finance sector, may also request to know your credit worthiness. If you have a low credit score and a history of defaulting on loans, it is needless to say that many employers may form a bad impression on your financial management and decisions, causing you to face difficulties in seeking employment in your preferred industry and job functions in the future.

Looking for a Loan to Finance Milestones?

The dire consequences you may face if you default on a personal loan are mostly in the long-term. Comparing available loans on the market, choosing a moneylender and a personal loan that is flexible with good repayment terms is absolutely crucial. Hence, it is best not to take up any loans which we might not be able to repay, because many of these ramifications can be long running and could affect your future.

Have some financial opportunities up your alley and looking for a loan to finance it? Finding the personal loan with the best payment terms and of course, the best personal loan interest rates in the market, can be taxing. To avoid all that hassle, do check out our curated list of best personal loans from banks and licensed moneylenders in Singapore. The average personal loan interest rate in Singapore stands at a whopping 13%, while our carefully curated list has a much more affordable average of 8.75%.

1. HSBC Personal Loan

PROMO: Get up to S$100 cashback and up to 1.5% cashback on loan amount upon loan approval
Consider this if you prefer affordable personal loans or you are a foreigner seeking personal loan in Singapore
  • Eligibility
    • S$30,000 of annual income
    • Max. Loan Amount
      • 4x monthly salary for income S$30,000 to S$120,000; 8x monthly salary for income > S$120,000; S$200,000 Maximum Loan Size (2x monthly salary for foreigners)
      • Min. Loan Amount
        • S$10,000
        • Processing Fee
          • S$88, waived for online applicants
          • Approval Time
            • 1 minute approval, receive cash in one business day
            Promotion:
            • New BAU Promo: S$100 Cashback
            • Enjoy a promotional interest rate from 3.2% p.a. (EIR 6% p.a.)^

            HSBC Personal Loan has one of the best personal loan interest rates in Singapore as it is one of the market leaders in terms of Effective Interest Rate (EIR), starting from 6%. Another advantage of the HSBC Personal Loan is its loan tenure of up to 7 years, which is the longest tenure available in Singapore.

            PROMO: Get up to S$100 cashback and up to 1.5% cashback on loan amount upon loan approval
            Consider this if you prefer affordable personal loans or you are a foreigner seeking personal loan in Singapore
            • Eligibility
              • S$30,000 of annual income
              • Max. Loan Amount
                • 4x monthly salary for income S$30,000 to S$120,000; 8x monthly salary for income > S$120,000; S$200,000 Maximum Loan Size (2x monthly salary for foreigners)
                • Min. Loan Amount
                  • S$10,000
                  • Processing Fee
                    • S$88, waived for online applicants
                    • Approval Time
                      • 1 minute approval, receive cash in one business day
                      Promotion:
                      • New BAU Promo: S$100 Cashback
                      • Enjoy a promotional interest rate from 3.2% p.a. (EIR 6% p.a.)^

                      HSBC Personal Loan has one of the best personal loan interest rates in Singapore as it is one of the market leaders in terms of Effective Interest Rate (EIR), starting from 6%. Another advantage of the HSBC Personal Loan is its loan tenure of up to 7 years, which is the longest tenure available in Singapore.

                      2. Standard Chartered CashOne Personal Loan

                      Consider this if you prefer competitive interest rates for large loans
                      • Eligibility
                        • S$30,000 of annual income
                        • Max. Loan Amount
                          • 2x monthly salary for annual income below S$30,000; 4x monthly salary for annual income > S$30,000; 8x monthly income for annual income above S$120,000 (up to S$250,000)
                          • Min. Loan Amount
                            • S$1,000
                            • Processing Fee
                              • S$199 for 1st year, S$50 for subsequent years (waived for borrowers who make repayments on time)
                              • Approval Time
                                • 15 minutes
                                Promotion:

                                Standard Chartered's CashOne Personal Loan is an attractive personal loan for low-income borrowers. It offers a pretty competitive interest rate, with an EIR of 6.95% and has a low minimum loan amount of S$1,000. Promotions going alongside this personal loan are also aplenty, and it makes for a good choice when taking out smaller-sized loans.

                                Consider this if you prefer competitive interest rates for large loans
                                • Eligibility
                                  • S$30,000 of annual income
                                  • Max. Loan Amount
                                    • 2x monthly salary for annual income below S$30,000; 4x monthly salary for annual income > S$30,000; 8x monthly income for annual income above S$120,000 (up to S$250,000)
                                    • Min. Loan Amount
                                      • S$1,000
                                      • Processing Fee
                                        • S$199 for 1st year, S$50 for subsequent years (waived for borrowers who make repayments on time)
                                        • Approval Time
                                          • 15 minutes
                                          Promotion:

                                          Standard Chartered's CashOne Personal Loan is an attractive personal loan for low-income borrowers. It offers a pretty competitive interest rate, with an EIR of 6.95% and has a low minimum loan amount of S$1,000. Promotions going alongside this personal loan are also aplenty, and it makes for a good choice when taking out smaller-sized loans.

                                          3. Lendela Personal Loan

                                          Consider this if you prefer access to personal loans from money lenders
                                          • Eligibility
                                            • S$1,600 per month
                                            • Max. Loan Amount
                                              • 6x monthly salary
                                              • Min. Loan Amount
                                                • S$500
                                                • Processing Fee
                                                  • Varies
                                                  • Approval Time
                                                    • 1 day
                                                    Promotion:
                                                    • No promotions currently offered

                                                    Lendela Personal Loan is excellent for those who may have difficulties in seeking out a loan from banks, fret not, as there is also Lendela to the rescue. We reviewed Lendela and found it a useful platform for comparing the best licensed moneylenders and personal loans in Singapore. Lendela offers many benefits including flexible financing amounts, fast cash disbursement and a low minimum income requirement.

                                                    Consider this if you prefer access to personal loans from money lenders
                                                    • Eligibility
                                                      • S$1,600 per month
                                                      • Max. Loan Amount
                                                        • 6x monthly salary
                                                        • Min. Loan Amount
                                                          • S$500
                                                          • Processing Fee
                                                            • Varies
                                                            • Approval Time
                                                              • 1 day
                                                              Promotion:
                                                              • No promotions currently offered

                                                              Lendela Personal Loan is excellent for those who may have difficulties in seeking out a loan from banks, fret not, as there is also Lendela to the rescue. We reviewed Lendela and found it a useful platform for comparing the best licensed moneylenders and personal loans in Singapore. Lendela offers many benefits including flexible financing amounts, fast cash disbursement and a low minimum income requirement.

                                                              Conclusion

                                                              Making a large purchase soon? Stretch your financial opportunities to their fullest potential by taking up a personal loan now. One thing to take note though – don’t forget to repay them on time!

                                                              Fiona Ling

                                                              Fiona is a full-stack marketer working in the digital sphere for more than six years.
                                                              A self-proclaimed foodie and bargain hunter, she wants to bring the best deals and value to the community around the world. When not working on her pet projects, Fiona can be found sipping a coffee while reading a paperbacks or watching mystery thrillers on Netflix and Disney+.

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