EIR vs. flat rate in Singapore: how to compare the true cost

What is EIR (plain English)?

EIR is the “true cost per year” of a loan, expressed as a percentage. It better reflects how interest is paid down over time and can incorporate fee effects, so it’s more comparable than a headline rate.

Why EIR is usually higher than flat/advertised rates

A flat rate is often calculated on the original principal, even though your outstanding balance reduces each month. EIR reflects the effective cost when repayments reduce the balance over time.

The comparison checklist

When comparing 2 offers, keep the loan amount and repayment period the same, then check:

1) EIR (or APR, if provided)

2) Processing/admin fees

3) Total payable amount (principal + interest + fees)

4) Early repayment/redemption charges (if you might clear early)

5) Late fees and any contract variation fees (tenure/date change)

Worked example (illustration only)

Assume a $20,000 loan, 24 months.

- Offer A: lower headline rate, higher fees

- Offer B: higher headline rate, lower fees

The “winner” is not the prettiest headline – it’s the lower total payable amount at the same repayment period.

How to do a “clean compare” in 3 steps

1) Decide your maximum monthly repayment

2) Shortlist offers based on EIR + fees (not headline)

3) Compare total payable amount over the same tenure

Next step

• Want personalised offers you can compare side-by-side? Go here: https://sg.lendela.com/compare-personal-loans

• Want the basics on eligibility, documents and repayments? Go here: https://sg.lendela.com/personal-loan

Sources

MoneySense (EIR vs flat rate)