Often, when applying for a loan in Singapore, you will have to choose between a secured loan in Singapore or an unsecured loan. A secured loan should be favored if you are planning for a large purchase including a house or a car or you need urgent cash to pay a lump sum amount.

Depending on your circumstances, the bank might give you options. Hence, it is important to have an understanding of the types of loans that banks offer in Singapore to pick the right one for you.

In this article, we will take you through your options of secured loans in Singapore.
What is a Secured Loan?

A secured loan in Singapore can be called a type of credit that borrowers apply for in cases when banks or lenders require them to put up assets including a car or property as collateral to guarantee the payment of the loan.

Usually, the borrowers can apply for up to S$200,000 with terms up to seven years. If in case, the borrower is unable to pay back the money, the lender can acquire the collateral. Here, the collateral can be anything from a valuable asset that may or may not be of the borrower’s possession.

How Secured Loans are Different from Unsecured Loans?

The secured loan in Singapore differs from unsecured loans in many aspects.
● Interest Rates
Unlike unsecured loans, secured loans can be availed with lower interest rates. If you wish to save some bucks by paying less interest, go for the secured loan.
● Loan Amount
The reason why lesser interest rates are applied for secured loans in Singapore is that these are subjected to lower risks as opposed to unsecured loans. As we mentioned above, the attachment of collateral to the loan ensures that the lender is safe at all times. Hence, they lend higher amounts of money to the borrower.
● Risks
As you will be asked to put up a valuable asset as security for the loan, secured loans become a little riskier for the borrower. There are high chances of you losing the valuable asset. If you are unable to pay your obligation, the bank can, by all means, seize your asset.
What are the Types of Secured Loans?
● Vehicle Loans
It’s quite common for people to apply for a car loan when purchasing a new vehicle. Usually, the amount paid by the bank to borrowers is used for the purchase of a brand-new car as well as used as security. So, if you don’t pay the loan in the stipulated time, the bank can take away the car.
● Mortgage Loans
As purchasing a home requires even upfront money, people usually take up mortgage loans for banks to fund it. Similar to vehicle loans, the lenders can seize the property you bought if you couldn’t pay it on time.
● Secured Credit Cards
These are the types of loans that most people are not aware of. The secured credit cards offer credit when needed. That being said, instead of taking out a one-time loan, you can apply for a credit card and use a cash deposit to secure it.
So, if the cardholder can’t make payments, the card issuers already have the deposit as collateral to compensate.
● Share Secured or Savings Secured Loans
In case, if you don’t have a valuable asset for collateral, you can go for share secured loans. In this, you can use your savings as collateral and apply for a secured loan from a lender.
This way, you will not be losing your savings but only use them as collateral. It will benefit you by giving you an income from interests as well as serve as security for the loan.
● Secured Lines of Credit
Similar to a secured credit card, secured lines of credit allow you to borrow money as and when needed from the approval of the lender. However, you will have to promise an asset as collateral every time you apply for the money. The asset can be anything from the property or a savings account that the lender can seize if you are unable to pay.
● Car Title Loans
In this short-term loan, the borrower is required to pledge the title to the car they possess as collateral to get a loan. The lender, after appropriating the vehicle (if the borrower fails to pay), takes ownership of the car, sells it, and compensates with the amount the borrower failed to pay.
● Pawn Shop Loans
A pawn shop loan is the easiest way to borrow and pay money upfront. It neither requires extensive documentation nor the credits are checked. All you are required to do is bring a valuable asset as collateral based on which your loan amount is determined.
● Life Insurance Loans
Another way to borrow money is through your life insurance policy (if you have one already). However, borrowing money through a life insurance policy requires the policy to be either a permanent or a whole life insurance policy.
● Bad Credit Loan
This is similar to the secured credit card; you can borrow the money as and when needed. However, in this, you will have to promise an asset as collateral every time you apply for the money. The asset can be anything from property to a saving account that the lender can appropriate if you are unable to pay on time.
Pros and Cons of Secured Loans

1. Compared to unsecured loans, secured loans offer lower interest rates.
2. As secured loans are less riskier for lenders due to collateral security, these are easier to get for borrowers.
3. Tax deductions are also available to borrowers for interest payments on secured loans.

1. There is always a risk of losing your valuable asset as collateral if you default on the loan.
2. The borrowers are bound by the collateral security and hence have less flexibility.

Secured loan Singapore is one of the easiest ways to apply for a loan if you are planning to buy a house or a car or wish to make an upfront payment. However, make sure that you follow the loan obligations and pay the amount in the stipulated time frame to avoid losing your valuable asset.

Should you wish to have a secured loan or get in touch with an expert, consult our team at Online Credit as we will be happy to assist you. Know more about us here.