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Legal Loan Limits in Singapore
Navigating financial security often requires a debt-free lifestyle, although achieving this is not an easy task. To help you understand the legal boundaries of loans, delves into the specifics of loans and their associated limits within Singapore.
There are fundamentally two types of loans: secured versus unsecured. Recognizing these distinctions is vital; while unsecured loans require no collateral from the borrower, they offer higher interest rates compared to secured loans due to the increased risk for lers. Unsecured loan options commonly include:
Credit cards
Personal loans
Education loans
Credit lines
Under Singapore's regulatory framework, the Monetary Authority of Singapore MAS has imposed an upper limit on total unsecured loans that one can borrow, capped at 12 times monthly income. This cap serves as a safeguard to prevent borrowers from overexting themselves financially. Unsecured loans must also be considered when calculating your Total Debt Servicing Ratio TDSR.
It's crucial to understand that each type of unsecured loan has its own set of limitations. For secured loans, like home and car loans in Singapore:
Home loans
Car loans
The regulations are structured differently.
Total Debt Servicing Ratio TDSR
When it comes to property purchases or refinancing through a property-related loan, the TDSR acts as a metric for lers to assess your ability to service debt. This ratio is calculated by including any loans used to purchase properties, any secured agnst properties, and any refinances of such loans.
To ensure borrowers don't overleverage when purchasing real estate, Singapore's MAS sets a maximum TDSR at 55 for property purchases granted under Option to Purchase as of December 16, 2021.
Loan-To-Value LTV Limit
The LTV ratio is the percentage of the loan amount relative to the property’s value. For HDB Concessionary Loans and bank loans:
Housing Development Board's HDB resale applications after September 30, 2022, are subject to an LTV cap at 80.
Maximum loan terms for HDB Concessionary Loans remn capped at 25 years for purchase and 30 years for refinancing.
For ECs Executive Condominium or private properties, the maximum loan term is limited to a bank-approved tenure of up to 30 years.
Vehicle Financing
When financing a vehicle, whether new or used, the maximum loan term is capped at seven years with varying LTV limits based on the car's open market value OMV:
For vehicles priced under $20,000: Maximum LTV = 70.
For vehicles with an OMV above $20,000: Maximum LTV determined by vehicle purchase price including taxes and COE.
that insurance coverage and credit cards may also play a role in your financial obligations.
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This article is reproduced from: https://apacrelocation.com/blogs/legal-loan-limits-in-singapore/
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Legal Loan Limits in Singapore Overview Unsecured Loans Cap at 12 Times Income Total Debt Servicing Ratio TDSR Calculation Property Purchase LTV Limit Explanation Vehicle Financing with Limited TermsLTVs Secured Loans: Home and Car Loans Details