UOB Personal Loan Review: Interest Rates, Approval Times and Loan Amounts, Money News
A personal loan is not something you should take out on a whim just because your bank account balance is low at the end of the month, but you want to go shopping.
But if you’re already in debt, it might be a good idea to consolidate it with a personal loan that charges lower interest rates than your existing lenders.
Let’s take a look at the UOB personal loan to see if it’s worth it.
UOB personal loan interest rate
The most important factor for most of us when choosing a personal loan is the interest rate. After all, if you’re consolidating your loans, the idea is to get a lower interest rate than what you’re currently paying.
UOB currently offers an interest rate of 3.4% per annum on its personal loans when you register online. The effective interest rate (EIR) of the UOB personal loan is estimated at 6.42% per annum for a three-year loan
What is the difference between the regular interest rate and the EIR (effective interest rate)?
Well, when you take out a personal loan, hidden fees and charges can pile up. In the case of UOB, the processing fee of 0% or 1% (for one-year loans) are also factors to consider.
We won’t go into details here, but if you’re curious, here’s how banks calculate the effective interest rate.
Either way, the EIR is the actual interest rate you end up paying as a percentage of your loan. So, when comparing personal loans, always compare the TIE rather than the advertised rate.
The minimum amount you can borrow is $1,000 and the maximum will depend on your monthly income.
Is the current UOB personal loan interest rate good?
Let’s see. For a loan of $10,000 taken out over a three-year period, here is the total amount you would pay:
$11,020 – $10,000 = $1,020 interest
So how do these interest rates compare to personal loans offered by other banks in Singapore?
Honestly, it’s a pretty decent personal loan right now. So if you’re looking for a better deal, look elsewhere.
READ ALSO: Why you should never take out a personal loan for home renovations
UOB Personal Loan Promotions
From now until April 30, 2022, UOB is offering up to $600 cash back when you apply for a UOB personal loan of $30,000 with a loan term of three years, four years or five years.
…But would we recommend borrowing MORE money just to reach the next level of cashback? Absolutely not!
Because this cashback is going to be eaten up by the amount of interest you pay to UOB when repaying the loan.
UOB Cash Plus vs UOB Personal Loan
When you’re short on cash and need it fast, UOB offers two main solutions: UOB Personal Loan and UOB Cash Plus. But what is the difference?
UOB Cash Plus is a line of credit. How it works is that you apply for the line of credit in advance, and once approved, you have it waiting to be used whenever you want.
You withdraw the money, usually at an ATM, when you want to use it. You will then be charged interest on the sums you have withdrawn.
With the UOB personal loan, you need to determine in advance how much money you need and how long you need to pay it back.
Once the money is paid, you are obligated to repay a fixed amount each month.
Paying back the money you withdrew via UOB Cash Plus, however, is much like paying off credit card debt. You only have to pay the minimum amount on your bill each month in order to get the debt collectors off your back. This means you can potentially carry a large amount over to the next month.
However, you definitely shouldn’t, as lines of credit like UOB Cash Plus typically charge much higher interest rates at 20.9% than personal loans.
From now until June 30, 2022, UOB Cash Plus is offering three-, six-, or 12-month promotional loans at zero percent interest and low processing fees. Effective interest rates (EIR) range from 1.11% to 1.22%.
But once that time has elapsed, you’ll have to pay credit card-like interest rates. Proceed with caution!
How long does UOB Personal Loans Approval take?
UOB offers instant approval for new and existing UOB clients, as long as you apply during their business hours of 8am to 9pm.
The money 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 line of credit, the interest rate charged by UOB personal loan does not seem so high.
But it’s still high! When you factor in the EIR, you still lose a lot of money to borrow that money.
You should therefore not regularly rely on personal loans. Instead, think of them as a last resort, to be used only in an emergency.
Ideally, you want to get your finances to the point where you never have to take out personal loans in the first place.
This could mean spending less or earning more per month, as well as building up an emergency fund that will give you a cash reserve for unexpected expenses.
READ ALSO: Advantages and disadvantages of personal loans, and 5 things you should never use them for
This article was first published in MoneySmart.