Explainers
Overview
Financial institutions (FIs) must ensure that individuals meet the minimum criteria before granting non-card unsecured credit facilities to them.
Regulatory credit limits are in place to ensure that individuals do not borrow beyond their means.
Note: A borrower's credit limit with an FI can exceed the regulatory limit if they are refinancing an existing debt owed to another FI.
Minimum Income Requirement
FIs can grant non-card unsecured credit facilities only to individuals with annual income of at least $20,000.
Note: Income can include non-employment income such as rental income.
Regulatory Credit Limit
The regulatory limit on unsecured credit (across both unsecured credit cards and non-card credit facilities) varies based on the borrower's annual income. The regulatory credit limit is:
| Annual income | Regulatory credit limit |
|---|---|
|
< S$30,000 |
Up to 2 months’ income |
|
≥ S$30,000 to < S$120,000 |
Up to 4 months’ income |
|
≥ S$120,000 |
No regulatory limit |
Excluded Credit Facilities
Loans granted for certain purposes are not affected by the minimum income requirement on non-card unsecured credit facilities, including:
- Education
- Business
- Renovation
- Medical
Refer to paragraph 7 of Notice 635 for full details.
Borrower's Consent for Setting Credit Limit
When setting the credit limit on a new credit card or unsecured credit facility, FIs must either:
- Ask the borrower what their preferred credit limit is.
- Get the borrower’s consent for the credit limit amount.
This ensures borrowers are granted credit limits that they are comfortable with, for security reasons and protection against overspending.