EIR is the number to compare. Not the advertised rate.
When a bank promotes a personal loan at 3% per annum, that figure is the advertised or nominal rate. It is calculated on the original loan amount for the full tenure, which makes it look lower than what you actually pay.
EIR, or Effective Interest Rate, is the truer figure. It accounts for how interest compounds as you repay monthly, and includes fees that the headline rate leaves out. It is always higher than the advertised rate.
For most bank personal loans in Singapore, the EIR is roughly 2 to 3 times the advertised rate.
MAS requires all banks and licensed lenders in Singapore to publish the EIR alongside the advertised rate. If you are comparing two offers, EIR is where to start.
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Shorts · Lendela
Check before you consolidate
Shorts · LendelaLower EIR does not always mean you pay less.
Here is where most people get caught. A longer loan tenure produces a lower EIR, because the same interest cost is spread across more monthly payments. But the total amount you pay back over the full tenure is higher.
Key insight
The EIR goes down. The total cost goes up. Both things can be true at the same time.
The two offers below use the same loan amount and the same advertised rate. The only difference is tenure.
| What you are comparing | Option A | Option B |
|---|---|---|
| Loan amount | $10,000 | $10,000 |
| Advertised rate | 5% p.a. | 5% p.a. |
| Tenure | 12 months | 24 months |
| EIR | 5.2% | 4.7% lower |
| Monthly repayment | ~$875 | ~$458 lower |
| Total you pay back | $10,520 | ~$11,000 higher |
A note on choosing
There is no single best option. The lowest total payable is the logical choice on paper. But the right offer is the one you can commit to every month without stretching your existing finances. A slightly higher total cost on a shorter, more manageable repayment schedule is often the smarter real-world decision.
One cost that quietly changes what you actually receive.
Beyond the rate, watch for the processing fee. This is a one-time charge applied when your loan is approved and disbursed. It can be a fixed dollar amount or a percentage of the loan amount.
Watch for this
Processing fees are sometimes deducted upfront from your disbursement. You receive less cash than you borrowed on paper. If you need $10,000 in hand, factor this into your actual loan amount.
This is one of the main reasons EIR is higher than the advertised rate. If an offer has a processing fee, it should already be reflected in the EIR figure. If it is not, ask.
The comparison checklist
How to compare any two loan offers.
Match the tenure first
EIR comparisons only work like-for-like on the same repayment period. A 12-month and a 36-month offer are not comparable on EIR alone.
Use EIR as your first filter
EIR accounts for compounding and fees. It is always higher than the advertised rate. For most bank personal loans in Singapore, roughly 2 to 3 times higher.
Check total payable, not just monthly
A lower monthly repayment stretched over a longer tenure can cost you more in total. Compare principal plus interest plus all fees.
Look for processing fees in the fine print
Processing fees are sometimes deducted upfront. You receive less than you borrow on paper. Factor this into your actual cash need.
Check early repayment terms
If there is any chance you will clear the loan early, check whether a penalty applies and how it is calculated before you sign.
The right offer is the one you can commit to every month without stretching your finances.
lendela labIs your EIR in a normal range?
A useful sanity check before you commit. The average personal loan EIR in Singapore typically sits between 9% and 14% per annum. Advertised rates generally run from around 3% to 6% per annum.
Typical advertised rate
3% – 6%
per annum (what banks promote)
Typical EIR (true cost)
9% – 14%
per annum (what you actually pay)
If an offer is significantly below this range, check whether all fees have been included in the EIR calculation. If it is significantly above it, it may be worth asking Lendela to surface whether other offers are available for your profile.
