A Few Smart Ways to Borrow in Singapore While Keeping Liabilities to the Minimum

It’s easy to put more focus on your portfolio and asset while forgetting the liability side of your balance sheet. But at the end of the day, your personal net worth has two sides; asset on one side and liability on the other. Therefore, if you normally shun the liability side of things, think again.

How to manage your debts wisely

Start by figuring out what the overall debt level is appropriate for your needs. Usually, this can be done by using the 28/36 industry rule.

The first part means no more than 28% of pre-tax household income should be allocated to servicing home debts. This should include all home-related loans, their interests, principal payments, taxes, and insurance.

The second part means that you should not dedicate more than 36% of your pre-tax income to payment of all debts. This includes unsecured personal loans in Singapore, credit card debts, auto loans, and so on. Let’s break it down further using the guideline below:

  • Anything below 30% is great
  • 30-36% is fine
  • 40% is considered borderline
  • If it’s above 40%, you’re walking in dangerous grounds especially if the debts have varying interest rates

How to determine whether or not a personal loan or business loan is appropriate for you

You should be concerned with how much you’re going to pay to take a specific loan like a business loan or a regular personal loan. Secondly, you should be aware of how you’re going to spend it. Thirdly, you need to determine if the repayments are manageable.

Once you’ve assumed an overall level of debt that you think is appropriate for you (based on your income and needs), start thinking of ways to minimize your debt payments. Unsecured installment loans and credit cards are the most expensive of loans. These loans typically have double-digit interest rates and are generally not tax-deductible. Foreigners might also find it hard to qualify for foreigner loans.

Mortgage or home equity loans

Mortgage loans are one of the most attractive loans in the Singapore market. A lot of Singaporeans use this to buy their first or subsequent properties. Given that a property is generally an appreciating asset, and that your loan is secured by such an asset, the interest rates are generally more favourable.


Whether you want a personal loan or a business loan, the liability side of your balance sheet will affect your financial goals. A business entity can decide to manage its liability to add shareholder’s value. The same way, you can manage your liabilities to achieve your overall financial goals.

Please note

Borrowing money can make or break you if you don’t seek sound advice. You should never borrow recklessly even under the context of the guidelines highlighted above. Educate yourself first before taking any form of a loan.