Installment Loans Vs. Personal Loans: Which is the Better?

Have you maxed out your cash reserve due to the rising inflation and increasing cost of living? You’re not alone. In fact, young adults in Singapore are taking on more personal debt since the second quarter of 2020.

This is why legal lenders and financial institutions are offering more installment loans designed to help borrowers get out of sticky financial situations. Many of us are seeking personal loan options to meet our urgent needs, such as mounting unpaid bills. But are installment loans and personal loans the same?

Note that it is also common for some lenders to use the terms “personal loan” and “monthly installment loan” interchangeably. These lenders may offer the same loans that are unsecured, meaning they do not require collateral, and are repaid in fixed monthly installments over a predetermined period.

Installment Loan vs Personal Loan

Technically, the main difference between these two loans is that installment loans are typically used for larger purchases and are secured by collateral, whereas personal loans are not secured and can be used for a variety of purposes.

Features Installment Loan Personal Loan
Interest Rates May vary depending on the installment loan; typically lower than personal loans since some of them are secured. Banks 3.5% to 10.8% p.a.
Legal Lender up to 4%
Loan Amounts Different types of installment loans offer different loan amounts. Up to 6x your monthly income
Repayment Terms Longer repayment tenure; some up to 30 years. Banks 1 to 7 years
Legal Lender up to 12 months
Credit Score Requirements Most installment loans, such as home loans and car loans, require a credit history check. Banks have strict credit score requirements. 

Legal lenders do not have a minimum credit score req. They will look at the borrower’s income level and overall financial situation

Processing Time Depends on the bank or financial institution. Banks can take several weeks due to the stringent evaluation process. 

Legal lenders can approve the loan in less than 30 minutes.

Collateral Requirements Can either be a secured or unsecured loan Unsecured loan; no collateral is required

To Summarize:

Both installment loans and personal loans allow you to borrow money and repay it in equal monthly payments at a fixed interest rate.

  • Choose a personal loan if you need quick funds for your personal needs, such as for unexpected home repairs, medical bills, and debt consolidation among others.
  • Choose installment loans if you are facing a more specific financial situation. For instance, if you need financing for a new property, you can get a home loan – which is another type of installment loan.


Features of Installment Loans

Installment loans are any type of loan wherein you borrow a lump sum of money and pay what you owe in monthly installments over a set loan term. Among the advantages of installment loans is that they typically offer fixed monthly repayments, which can make budgeting manageable. Personal loans are a common type of installment loan.

Features of installment loans:

  • Fixed loan amount: The total loan amount will vary depending on several factors, such as the type of loan, your income, and your credit score.
  • Fixed interest rate: Since installment loans charge a fixed rate, your monthly repayments will stay the same throughout the loan tenure.
  • Structured repayment period: You will be given a repayment schedule with a fixed repayment amount that will last throughout the loan tenure.
  • Flexible loan terms: The loan terms will depend on the type of installment loan as well as the financial institution’s policies.

Types of Installment Loans

Installment loans come in many forms. Each of these types has different features, loan amounts, interest rates, and purposes:

  • Personal Loans
  • Home Loans
  • Auto Loans
  • Student Loans
  • Home Equity Loans


  • Fixed monthly repayments mean easy to set aside a budget
  • The large cost of expense is spread out throughout a specific period
  • When paid regularly paid on time, it helps improve your credit score
  • There is a predetermined time when the debt must be paid off.


  • You may incur early repayment fees if you decide to pay off the loan early
  • Your credit score may take a hit if payments are late or missed
  • Potential to borrow more than what you really need
  • If you default on a secured installment loan, you might end up losing a valuable asset

Features of Personal Loans

A personal loan is an unsecured loan with a fixed interest rate. It must be repaid for a year or longer at equal monthly repayments. Personal loans can be used for a wide variety of purposes, such as for home repairs, medical bills, or used as emergency cash.

Features of Personal Loans

  • Unsecured loan: It does not require any kind of collateral.
  • Fixed interest rates: Interest rates may vary depending on the bank or financial institution. Legal online lenders in Singapore may charge up to 4% per month.
  • Fixed repayment schedule: It must be repaid in a fixed amount throughout the loan tenure, typically 1 to 7 years. Legal lenders offer a loan tenure of up to 12 months.
  • Flexible loan terms: Most lenders can customize personal loans to meet your financial needs and situation.

Types of Personal Loans

  • Wedding Loans
  • Debt Consolidation Loans
  • Travel Loans
  • Foreigner Loans
  • Emergency Loans

Note: Payday loans are not a type of personal loan. A payday loan is a short-term loan wherein you borrow an amount equivalent to your monthly income or less and repay it within the next payday.


  • Fast approval process
  • Quick access to funds in case of emergencies
  • Unrestricted use of funds
  • Lower interest rates compared to a credit card or personal line of credit


  • This can lead to a debt trap if you keep borrowing more.
  • May end up borrowing more than what you need.
  • You might incur hefty fees and penalties if you fail to make repayments on time
  • Potential credit score damage in case of late or missed repayments


Whether you choose an installment loan or a personal loan, make sure that you can afford it. Defaulting on a loan will negatively affect your credit score. Plus, you’ll be incurring hefty fees, such as late fees and late interest.

Key Takeaways:

  • An installment loan is an umbrella term for a wide variety of personal and commercial loans.
  • It is any type of loan that is repaid in regularly scheduled repayments or installments.
  • Personal loans are a type of installment loan that provides borrowers with a fixed loan amount and a set tenure, typically 1 to 7 years.
  • Legal lenders in Singapore offer personal loans and other types of loans as an alternative when you need emergency cash.

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