Unsecured loans (e.g. business loans, renovation loans, medical loans, education loans) that were previously exempted from unsecured credit rules will be subject to all the rules, except:
(a) the minimum income eligibility criteria;
(b) the regulatory credit limits applicable for each FI;
(c) the borrowing limit; and
(d) the 60 days past due rule
Why has MAS extended the unsecured credit rules to unsecured loans that were previously exempted?
The unsecured credit rules provide important safeguards for borrowers. Therefore, they should cover all unsecured loans. For instance, by requiring FIs to disclose the relevant finance and late payment charges for unsecured loans that were previously exempted, borrowers will be able to make more informed decisions in relation to such loans.
However, MAS will continue to exempt education, business, medical and renovation loans from the minimum income eligibility criteria⁸ , per-FI regulatory credit limits,⁹ the industry-wide borrowing limit,¹⁰ and the 60 days past due rule.¹¹
⁸ Borrowers are generally required to have an annual income of at least S$20,000 to qualify for an unsecured credit facility from an FI. This rule will not apply to education, business, medical and renovation loans.
⁹ The maximum credit limit that an FI can grant to a borrower is generally 4 months’ income for borrowers with annual incomes of at least S$30,000 but less than S$120,000, and 2 months’ income for borrowers with annual incomes of less than S$30,000. This will not apply to education, business, medical and renovation loans.
¹⁰ With effect from 1 June 2015, FIs will not be allowed to grant further unsecured credit to borrowers whose aggregate unsecured debt across all FIs exceeds 24 times their monthly incomes for 3 months or more. This will not apply to education, business, medical, and renovation loans. The industry-wide borrowing limit will be lowered to 18 times monthly income with effect from 1 June 2017 and 12 times monthly income with effect from 1 June 2019. Please see here for more information on the industry-wide borrowing limit.
¹¹ With effect from 1 June 2015, FIs will not be allowed to grant further unsecured credit to borrowers who are 60 days past due on any credit card or unsecured credit facility extended by the FI. Other FIs will also not be allowed to grant credit limit increases, or issue new credit cards or unsecured credit facilities to such borrowers. Please see here for more information on the 60 days past due rule.