The debt servicing ratio (DSR) is a financial metric used by lenders to assess a borrower's ability to manage debt repayments. It measures the proportion of a borrower's income that goes towards servicing current debt obligations, such as loan repayments and credit card payments.
The DSR is usually calculated by dividing the total debt obligations by the borrower's gross income. Lenders use this ratio to evaluate whether a borrower has sufficient income to cover their debt repayments comfortably. A lower DSR indicates that the borrower has more disposable income available to manage debt, while a higher DSR may suggest that the borrower is at risk of financial strain or default.
Also, on an industry level, the authorities such as MAS may set a DSR level. They are aggregated among lenders, meaning you cannot e.g. borrow 5x from 5 different lenders, resulting in a 25x DSR level when the industry level is 8x. (Please note this is just an example and varies depending on the loan type and lender type.)
Please look at the following industry DSR levels in Singapore for the one that applies to you.
For individuals :
1)Unsecured Credit Borrowing Limit (unsecured loans with banks)
2)Mortgage Servicing Ratio(MSR) and Total Debt Servicing Ratio(TDSR) (property)
3)Moneylender DSR
MLCBs(Moneylender Credit Bureau) reports are usually updated within an hour or 2, and all moneylenders will be able to see who else you borrowed from. Your DSR for one loan type or lender category is typically not used in the calculation of another, and you may be able to borrow from 2 lenders from different categories.
The specific formula and thresholds for internal DSR can vary depending on the lender's policies. Depending on the lender's risk appetite, they could also be lower than the industry DSR.
Some personal loan brokers just introduce you to the first lender they find, to have a quick sale, but you might end up going for the more expensive loan. We are here to help you Find The Loan you need, and as since you can only borrow from a limited number of lenders, we recommend you should compare and pick the right one/s for you before committing.
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For businesses: There is currently no industry-level DSR, though there may be for business property-related loans (Please refer to here for more)
Please also note that where there is no industry-level DSR, members of CBS or MLCB can update it, making it available to other respective members, who may then factor it into their internal DSR. After taking a loan, you can check your reports to see if it has been reflected. Members of CBS are mostly banks and some FIs, while MLCB is all moneylenders.
However, as CBS (Credit Bureau Singapore) records can take some time to update, banks and non-bank lenders often rely on your latest bank statements to assess your Debt Servicing Ratio (DSR). For example, if there’s a recent injection of funds, lenders may examine the sender to determine whether it’s from a loan disbursement. Also, if you were quoted a loan offer in early July, by mid-August you would have received your July bank statements. If you had previously only submitted statements from January to June and have not yet signed the loan agreement, lenders may request your July statement before proceeding.
Your DSR for one loan type or lender category is typically not used in the calculation of another, you may be able to borrow from 2 lenders from different categories or even a number of non-bank lenders.
The specific formula and thresholds for internal DSR can vary depending on the lender's policies. Depending on the lender's risk appetite, they could also be lower than the industry DSR.