Is it a good idea to take out a wedding loan?

How wedding loans work

Credit: marctran/123rf

1/13

What sets wedding loans apart is that they unlock a ready line of credit without the need for collateral backing. To successfully apply for such a loan, banks and financial institutions require candidates to be employed, be of a certain age and earn a minimum income. Typically these are short term loans, and you would pay them back in instalments over the set time period.

Documents required for application usually include a copy of your NRIC, your IRAS Notice of Assessment, CPF statement, your last few months’ pay slips, and documents reflecting your billing address.

Applications can be done online for most banks; some also allow you to apply through their mobile apps. For financial institutions, you can apply online or visit one of their outlets.

Wedding costs that loans can cover

Credit: twinsterphoto/123rf

2/13

Wedding loans can range from small amounts to up to 10 times your monthly salary, so they should be more than sufficient to cover your wedding costs. These are some of the estimated expenses you could tap on a loan to cover:

Wedding banquet (15 tables of 10): $5,800–$47,300
Wedding photography: $2,000–$4,000
Wedding videography: $2,000–$4,000
 Pre-wedding photoshoot: $350–$800
Wedding hair and make-up: $250–$1,000
Wedding car rental: $300–$900
Wedding gown and suit: $500–$5,000
Wedding rings: $500–$2,000

The loan could hence help to cover an amount between $10,000 to $70,000, depending on what you want to include for your wedding. Some of these expenses could possibly be offset by the red packets you’d receive at your wedding. However as this amount is not guaranteed, you’d still want to ensure enough cashflow to cover all your bills.

If you have an annual income of $30,000 as a Singapore Citizen or Permanent Resident (PR), or $40,000 as a foreigner residing in Singapore or self-employed Singaporean, and are aged 21 and above, the HSBC Personal Loan can provide you with one of the lowest annual interest rates (3.2%) on the market. It grants a credit limit of up to $200,000, where you’ll only need to pay interest on what you eventually spend.

The loan also offers one of the longer tenures of up to seven years, so you’ll be able to spread out your repayments over a lengthier period of time.

DBS Cashline gets you a quick cash infusion of up to 10 times your monthly salary, if you have an annual income of $120,000 and above. This line of credit is for Singapore Citizens and PRs, and requires a minimum annual income of $20,000.

Easy access to your loan is one of the main draws of this option. You can apply for Cashline through DBS’ digibank app, and use it for online transactions, when needing to withdraw cash, and to pay bills. Repayment can be done flexibly, in days, weeks or months. Its interest rate can range between 20.5% to 29.8% per annum.

If a lower annual interest rate is what you prioritise however, DBS’ Personal Loan offers fixed annual rates from 2.88%, with a 1% processing fee. Its loan tenures range from one to five years. You can get cash of up to four times your monthly salary, or 10 times of your annual income is $120,000 and above.

Similar to DBS’ Cashline, UOB’s CashPlus can provide you with convenient access to borrowed cash. It also comes with a CashPlus Visa card that you can use to make payment online, in shops and to withdraw cash. The minimum annual income requirement is $30,000. For Singapore Citizens and PRs, it grants up to four times your monthly salary, or six times your monthly salary (capped at $120,000) if your annual income is $120,000 and above. Its annual interest rate is 20.9%.

In terms of personal loans, UOB has an annual interest rate of 3.4%, and is currently offering up to S$600 cash rebate if you apply for a loan amount of at least $30,000 (up till 28 February 2022). You’ll need to be a Singapore Citizen or PR with a minimum annual income of $30,000, and its loan tenures also one to five years.

Already have a Citibank credit card? Through Citi Quick Cash, you can convert your credit card’s credit limit into cash which is payable in monthly instalments. Repayment plans range from one to five years, and the minimum income requirement is $30,000 for Singapore Citizens and PRs, and $42,000 for foreigners. Existing Citibank customers can apply conveniently for Citi Quick Cash through its mobile app or website.

Standard Chartered CashOne Personal Loan has one of the lower minimum annual income requirements, at $20,000 for Singapore Citizens and PRs (but $60,000 for foreigners living in Singapore). Its loan tenure is also up to five years, and it has an annual interest rate of 3.48%. You’ll be able to borrow up to four times your monthly salary, capped at $250,000.

Holders of CIMB’s Platinum Mastercard, Visa Signature, World Mastercard and Visa Infinite can convert their credit cards’ credit limits to an instalment loan with a one- to five-year tenure. With CIMB Cashlite, there is an interest rate of 3.5% per annum for new customers, and 4.5% for existing customers. This offer is for Singapore Citizens and PRs, with a minimum income of $30,000.

OCBC also offers an option to turn your credit card’s credit limit into a loan, which can be repaid over one to five years. The interest rate is 3.5% per annum, and Singapore Citizens and PRs with an annual income of at least $20,000, or foreigners with an annual income of at least $45,000, can apply.

The same criteria also applies for OCBC’s EasiCredit loan, which is OCBC’s option for accessing your credit conveniently via mobile and internet banking, through cash withdrawals at the ATM, or cheques. Loan amounts start from two times your monthly income, and go up to six times your monthly income, depending on your income range, and the annual interest rate varies from 20.9% to 29.8% depending on the amount borrowed.

Maybank is currently waiving its 1% processing fee for online applications for its Term Loan. All existing or new holders of a Maybank CreditAble account – Maybank’s personal line of credit programme – will be able to apply for a loan, so long as they are Singapore Citizens or PRs with an annual income of $30,000. You’ll be able to borrow up to twice your monthly salary, or the credit limit on your CreditAble account and repay your loan over a one to five-year period at a per annum interest rate of 3.88%.

Besides HSBC, Bank of China is another lender that offers a loan tenure of up to seven years if you’re looking to repay your loan over a longer period of time. Although it has one of the higher annual interest rates, starting at 6.62%, the Bank of China SmartLoan also has a reducing balance repayment system. This means that you’ll be able to save on interest because it’s calculated based on the outstanding loan.

Licensed moneylenders

Credit: eric1513/123rf

12/13

Apart from the bank credit and loan offerings mentioned above, some may prefer to go to licensed moneylenders if they don’t meet the banks’ criteria. While this may be a viable option, you should do so with caution. Check the Ministry of Law’s list of licensed moneylenders to confirm that the lender is aboveboard. They would also tend to grant smaller loans at higher interest rates than banks, so be sure that you can afford the repayments before agreeing to take out a loan with them.

Conclusion

Credit: photoartem/123rf

13/13

Getting everything perfect for your wedding doesn’t have to be a financial headache if you take out a wedding loan. These wedding loans can give you a much-needed financial boost, and allow you breathing room in clearing your payments.

This article was first published in SingSaver. SingSaver is a personal finance comparison platform that allows users to easily compare credit cards, personal loans, and insurance for free while helping empower people to lead healthier financial lives through increased financial literacy.