Personal Finance

HDB Loan Vs Bank Loan – Which Is Better For You?

February 28, 2023

In finance, it’s essential to make informed decisions about borrowing money. If you’re considering purchasing a home in Singapore, you’re likely to face a choice between two common loan options: HDB loan or bank loan. 

Both options have pros and cons; the right choice will depend on your circumstances. 

This article will compare HDB loan vs bank loan to help you understand the differences between the two and ultimately determine which one is better for you.

What Is A HDB Loan?

A HDB loan is a special loan provided by the Singapore Housing and Development Board (HDB). This loan is designed to help Singaporeans finance their flat purchase.

 It is available to both Singapore citizens and permanent residents and is granted on the basis of certain eligibility criteria.

With a HDB loan, your property will be used as collateral for the loan. This means that you are responsible for repaying the loan principal plus the interest rate for HDB loan, usually fixed at 2.6%. Failure to do so may result in the HDB taking possession of your property.


  • Paying off your HDB loan early incurs no penalty, allowing you to reduce the total interest payable over time.
  • 20% of the sale price is the new minimum down payment requirement, which can be paid with cash, CPF OA funds, or a combination of the two.
  • You can obtain a loan for up to 80% of the purchase price of a new property. This means that you can take out a loan for a greater portion of the property’s value, reducing the amount of money you need to come up with upfront. 
  • HDB loan interest rates are more stable than bank loan interest rates because they are tied to the CPF OA interest.


  • The total amount owed will increase with a higher interest rate and loan-to-value (LTV) ratio, reducing overall savings.
  • The interest rate for HDB loans is currently set at 2.6% per annum, which is 0.1% higher than the Central Provident Fund Ordinary Account interest rate.

What Is A Bank Loan?

A bank loan is a loan provided by a financial institution, usually a bank, to an individual or business. This loan is typically used for various purposes, such as purchasing a home, car, or other large purchases or to fund a major project.

Like the HDB loan, the bank loan is secured against a property or assets. This can be a home, car, or other collateral. 

The loan amount and repayment terms are typically based on the borrower’s credit score and other factors such as their income. The repayment period can range from a few months to several years, depending on the type of loan and the amount borrowed.

The Singapore Interbank Offered Rate (SIBOR) and Singapore Dollar Swap Offer Rate (SOR) fluctuate, thus making the interest rates of bank loans vary as well.

A bank loan might be more or less advantageous than the 2.6% offered by a HDB loan according to the current SIBOR/SOR rates.


  • The eligibility criteria have been made more accessible with relaxed restrictions, such as the removal of the income ceiling.
  • Bank loans typically have lower interest rates than 2.6% p.a. for HDB loans.This makes them an attractive option for those looking to finance their housing needs. 


  • An early repayment fee may apply if you attempt to pay off your bank loan before the end of the lock-in period. This fee typically amounts to 1.5% of the loan amount.
  • The interest rate on your loan may vary depending on market conditions and can be subject to change.
  • In order to secure a loan, a substantial downpayment of 25% is required, with at least 5% of this amount needing to be paid in cash.

Eligibility Criteria For A HDB Loan And Bank Loan

It is essential to understand the eligibility criteria for both HDB loans and bank loans before applying for either.

Eligibility Criteria For A HDB Loan

To be eligible for an HDB loan, you must meet the following criteria: 

  1. The applicant must have yet to take two or more housing loans from HDB previously.
  2. Disposal of any private residential property: The applicant must not own or have disposed of any private residential property in the past 30 months prior to the date of application for an HDB Loan Eligibility letter.
  3. At least one buyer must be a Singapore Citizen
  4. Average gross monthly household income must be:
  5. At most, $14,000 for the respective household.
  6. A maximum of $7,000 for singles buying a resale flat with less than five rooms, a new two-room flat in a non-mature estate, or a five-room resale flat.

Eligibility Criteria For A Bank Loan

Unlike HDB loans, the eligibility criteria for a bank loan are more flexible. Generally, to qualify for a bank loan, you need to meet the following criteria: 

  • Have a good credit score
  • Be able to demonstrate financial stability and reliable income

Bank Loan vs HDB Loan

Key Considerations For A Bank Loan vs HDB Loan

Bank LoanHDB Loan
Rate Of Interest1.2% to 2.2%, but expected to rise within the next about two years2.6%
Amount To Be RepaidVaries since fixed interest rates are valid for at most three yearsConsistent as interest rates are stable
Loan To Value Limit(LTV)75%80%
20%-Cash or CPF
20%-can be paid using CPF
Early RepaymentPenalty of 1.5%No penalty
Late RepaymentIf you are late with your payment, an additional fee of $50 will be applied to each of your repaymentIf you are late in making your payment, you will be charged a fee of 7.5% per year

Differences Between HDB Loans And Bank Loans

Rate Of Interest

The HDB Loan interest rate is fixed at 2.6% which is not subject to any changes. On the other hand, Bank loan interest rates are variable and may fluctuate depending on the current SORA rates, which are subject to market fluctuations but cheaper than a HDB Loan.

Bank interest rates range from 1% to 2.05%. However, the downside of bank rates is that they are only fixed for about 2-3 years, beyond which the rate may change under SIBOR or SOR.

Level Of Compassion

HDB loans have a much softer approach as compared to bank loans. In the case of HDB Loan, you are given more time to pay off their loan, and they also have more leniency when it comes to late payment fees or penalties.

On the other hand, Bank Loan has a stricter approach, and you have to pay a hefty amount of late payment fees or penalties if the loan is not repaid on time. 

Early Repayment Penalties

HDB loans have no early repayment penalties. You can pay off your loan anytime without any extra charges. Bank loans, on the other hand, have a hefty early repayment penalty ranging from 1.4% to 1.5%.


Regarding consistency in repayment, HDB loan is much more reliable than bank loan. HDB loan offers a fixed repayment schedule for the entire loan term, usually 30 years.

Bank loan, on the other hand, has a variable repayment schedule. In the first 2-3 years, the loan amount will be fixed, but after that, the repayment amount may vary depending on the prevailing market interest rates. 

Downpayment With CPF

HDB loan has a minimum downpayment of 20%, which you can pay fully using your CPF savings, given that your ordinary account has enough balance. This does not apply to a bank loan.

For a bank loan, the initial down payment is usually 25%, whereby you have to pay 5% of it in cash and the remaining 20% from your CPF savings.


Whether you opt for a HDB or bank loan, you must comply with the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) framework. The government designs these frameworks to restrict borrowers from borrowing beyond their means.

The TDSR framework limits the amount of money you can borrow to an amount that is not more than 55% of your gross monthly income. The MSR framework, meanwhile, caps the amount of money you can pay monthly for your mortgage at 30% of your gross monthly income.

Get The Best Personal Loan 

The decision between HDB loan vs bank loan should come from personal preference and financial situation. 

Both loans have advantages and disadvantages, and you should choose based on what works best for you. Consider each loan’s interest rates, repayment terms, and other features before deciding what works best for you. 

Take control of your finances today with GS Credit. As a licensed money lender, we are committed to providing you with the best personal loan options tailored to meet your unique financial needs. 

Don’t let unexpected expenses or financial emergencies leave you feeling stressed and overwhelmed. Apply for a personal loan with us today and take the first step towards financial stability.

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