Continue your simulation with the OCBC personal loan calculator and learn to turn a flat applied rate into the EIR you really pay.
Personal loans in Singapore are usually advertised with a flat applied rate, which looks low because interest is charged on the original amount for the whole tenure. In this guide you will learn how OCBC instalments are calculated, how to convert a flat rate into an effective interest rate, how processing fees change the result and how to compare banks.
Direct answer: add the flat interest for the full tenure to the loan amount and divide by the number of months to get the instalment. For S$20,000 at a 5.5% flat rate over three years, interest is S$3,300 and the instalment is approximately S$647. The equivalent EIR is close to 10.7%, or about 11.5% with a 1% processing fee.
The EIR is higher than the applied rate because you repay part of the principal every month, yet the flat rate keeps charging interest on the original amount. In practice, you pay interest on money you have already returned. That is why the Monetary Authority of Singapore requires banks to show the EIR alongside the advertised rate.
A frequent mistake is to compare a bank quoting a flat rate with another quoting an EIR. The numbers are not comparable, and the flat rate will always look cheaper. Convert every offer to EIR, include the processing fee and compare the total amount repayable for the same loan amount and tenure before choosing a particular bank.
Next, you will see the flat-rate instalment method, a table converting applied rates into EIR for different tenures, the effect of a processing fee, a check using the amortisation formula, how early settlement works and a checklist for comparing offers. Keep the advertised rate, fee and tenure of each offer you are considering at hand.
How a flat-rate instalment is calculated
- Multiply the loan amount by the flat annual rate.
- Multiply the result by the tenure in years to get total interest.
- Add the total interest to the loan amount.
- Divide the total by the number of months to get the instalment.
For S$20,000 at 5.5% over three years, the annual interest is S$1,100 and the total is S$3,300. The amount repayable is S$23,300, and dividing by 36 gives about S$647.22 per month. The arithmetic is simple, which is one reason banks like to advertise flat rates, but it hides the true annual cost.
Converting the applied rate into EIR
The EIR is the rate that makes the present value of all instalments equal to the amount you actually receive. It is found by solving the amortisation equation instead of reading a fixed table. The figures below were calculated for a S$20,000 loan and show how the EIR changes with tenure.
| Applied flat rate | Tenure | Monthly instalment | EIR without fee | EIR with 1% fee |
|---|---|---|---|---|
| 3.5% | 1 year | about S$1,725 | about 6.6% | about 8.6% |
| 3.5% | 3 years | about S$614 | about 6.8% | about 7.5% |
| 5.5% | 1 year | about S$1,758 | about 10.5% | about 12.6% |
| 5.5% | 3 years | about S$647 | about 10.7% | about 11.5% |
| 5.5% | 5 years | about S$425 | about 10.5% | about 11.0% |
Two lessons stand out. First, the EIR is roughly double the flat rate. Second, a processing fee has the strongest effect on short tenures, because the fee is spread over fewer months. On a one-year loan, a 1% fee adds about two percentage points to the EIR.
Processing fees and promotions
Banks sometimes waive the processing fee during promotions, or deduct it from the amount you receive. If S$20,000 is approved with a 1% fee deducted, you receive S$19,800 but repay instalments based on S$20,000. Always check whether the fee is deducted, added or waived, because each option changes the effective cost of the same loan.
Checking with the amortisation formula
The standard formula P·r/(1−(1+r)^−n) links the instalment to the monthly EIR. Using r equal to about 0.85% per month for 36 months on S$20,000, the instalment comes out close to S$647, which matches the flat-rate calculation. Spreadsheet functions such as RATE can solve the equation for you.
How early settlement works
If you repay early, many banks calculate the interest saved using a method that favours the lender in the first months, and they may add an early settlement fee. As a result, early repayment of a flat-rate loan often saves less than you might expect. Ask for an indicative settlement figure before assuming you will gain much by repaying.
Comparing tenures for the same amount
| Tenure | Instalment at 5.5% flat | Total interest |
|---|---|---|
| 1 year | about S$1,758 | S$1,100 |
| 3 years | about S$647 | S$3,300 |
| 5 years | about S$425 | S$5,500 |
With flat rates, total interest grows in direct proportion to the tenure. A five-year loan costs five times the interest of a one-year loan for the same amount. Choose the shortest tenure your budget can handle, keeping in mind that your existing commitments also affect what the bank approves.
Worked comparison of two offers
Suppose one bank offers S$20,000 at a 3.8% flat rate over three years with a 1% fee deducted, while another offers 4.2% flat with no fee. The first instalment is lower, but once the fee is deducted, the effective rates move much closer. Only a full EIR calculation shows which offer is really cheaper for you.
To run the comparison, calculate each instalment, subtract any fee from the amount received and solve for the monthly rate with a spreadsheet RATE function. Multiply the monthly rate by twelve and compound it to obtain the annual EIR. The offer with the lower EIR and the lower total repayable is generally the better choice.
What the bank’s calculator does not show
- Late payment charges and the interest on overdue instalments.
- Early settlement fees and the method used to rebate interest.
- Whether the promotion rate depends on specific conditions.
- How the new loan affects your total unsecured credit limit.
Checklist for comparing offers
- Convert every offer to EIR, including fees.
- Use the same amount and tenure for all comparisons.
- Check whether the processing fee is deducted, added or waived.
- Ask for the total amount repayable in writing.
- Read the early settlement and late payment charges.
Summary: think in EIR
Flat rates make loans look cheaper than they are. Converting to EIR and including fees lets you compare OCBC with other banks on equal terms.
- Flat interest is charged on the original amount for the whole tenure.
- The EIR is usually around double the flat rate.
- Fees raise the EIR most on short tenures.
- Total interest grows with tenure on flat-rate loans.
- Early settlement may save less than expected.
Frequently asked questions
Why do banks show both rates?
Singapore rules require the EIR to be disclosed so borrowers can see the true annual cost.
Can I negotiate the processing fee?
It is sometimes waived during promotions, so compare current offers before applying.
Is the EIR the same for every borrower?
No, the approved rate depends on your profile, so your EIR may differ from the advertised one.
Does a longer tenure lower the EIR?
Only slightly, because the fee is spread over more months, but the total interest paid still rises sharply with a flat rate.
Where can I see the exact EIR?
The bank must show it on the product page and in the loan offer, so check both before you accept.
Conclusion
Using an OCBC personal loan calculator correctly means converting the applied rate into EIR, including the processing fee and comparing the total amount repayable. Test several tenures, confirm current rates and fees on the official OCBC website and compare at least two banks before accepting an offer.