More Access To Bank Loans

Thursday, 26 February, 2009

HUNDREDS of thousands of lower income earners in Singapore are to be given greater access to relatively small unsecured loans from banks. From March 1, those earning $20,000 to $30,000 a year will - for the first time - be able to seek unsecured bank loans, that is, loans not requiring collateral.

Until now, they have been able to seek these loans only from non-bank lenders such as GE Money and SingPost or other licensed moneylenders, who sometimes charge prohibitive interest rates. They will be able to borrow up to double their monthly income, but only if they have a good credit history. These loans might be for anything from paying grocery bills to funding a holiday.

In a joint release yesterday, the Monetary Authority of Singapore (MAS) and Ministry of Law announced that from March 1, the minimum annual income requirement for unsecured credit facilities will be $20,000, down from $30,000. In 2007, an estimated 450,000 people here fell into that income bracket.

The minimum annual income requirement for credit cards remains unchanged at $30,000 for individuals aged 55 or younger and $15,000 for those over 55. 'The revised rules will allow access to unsecured credit to more individuals who may have occasional genuine borrowing needs,' MAS said yesterday.

The central bank said another reason for the changes was to ensure 'a more consistent regime'. Broadly, the move will bring bank loans in line with rules governing moneylenders. Licensed moneylenders can impose a maximum interest rate of 18 per cent for unsecured loans.

Source: http://www.straitstimes.com/