It’s normal to be confused by personal loans. Just what are they? If so, when should you take them? What is the procedure for obtaining a private loan in Singapore? A personal loan is a loan taken out with a financial institution, such a bank, in exchange for a lump sum of money that must be repaid in equal amounts over a certain period of time.
Most of us will need a loan of our own money at some time. It’s okay to ask for financial assistance once in a while if you’re struggling. If you are wondering is personal loan in Singapore easy to get and not sure how to get started? Want to know the best way to go about getting a personal loan in Singapore? Everything you need to know about getting a personal loan in Singapore is right here.
Invest wisely and get a return
A personal loan may be used for anything, but you shouldn’t abuse the privilege. How, therefore, should one put a personal loan’s proceeds to use?
The greatest option is to eliminate expensive debt. Think about having an outstanding credit card amount and paying interest at a rate of 25% per year or more. Consolidating and paying off your high-interest obligations with the aid of an 8% p.a. personal loan makes financial sense.
Unexpected medical costs, financial crises, and major home improvements are some of the other common reasons people take out personal loans.
Please look at the rate of interest
You may often hear the words Applied Rate (AR) and Effective Interest Rate (EIR).
The loan’s principle is assumed to stay unchanged during the life of the loan by AR, which ignores the reality that principal is reduced with each payment.
If payments are made on schedule, EIR accurately represents the cost of borrowing. As the loan’s principle is paid down during the loan’s term, this figure is derived. Always be sure you’re comparing EIRs using the same loan amount and time period.
Learn more about the prices and costs in advance
When looking into a personal loan, interest rates aren’t the only factor to consider. There are additional fees, some of which are detailed below.
Costs charged each year: In addition to the interest you’re expected to pay, some banks also tack on an annual fee. A loan with a term of five years might result in five sets of yearly fees.
Fees for payments received beyond the due date: A late payment charge would be assessed if any installment was missed or if the borrower paid less than the agreed upon payback amount before the due date. Lenders may be quite stringent about late payments, so this is something that needs careful attention.
Amount Due for Tenure Modification: While not all financial institutions have this option, consider the following situation to see its significance: You’ve been approved for a two-year personal loan, but now that the money is due every month, you will realise that it’s too much. If there’s a way to make the payback duration longer in exchange for more money, that’d be great.
Can you tell me how much money I can borrow?
When determining a borrowing limit, banks take into account a number of criteria, including the quality of your connection with the bank, your credit history, and, most crucially, your monthly income.
The procedure is as follows. With a qualifying salary, a borrower may be eligible for a loan of up to four times their monthly take-home pay. However, a person whose annual income is less than $30,000 may be restricted to no more than two and a half times their monthly income. The total amount is often limited as well.
Suppose you need a larger loan. A bank could be willing to lend you eight or ten times your monthly salary, but they typically only do so to those in the upper income band.
What is the lender’s track record of dependability?
While this may not seem important to some, it is essential to work with reputable, long-standing lenders that are willing to be completely open with you.
Now imagine you borrow money from a moneylender who is unorganised and keeps bad records. This might lead to a disagreement if they lose track of your payments. A collection agency may even bother you if you have a debt, even if you are completely innocent of the situation.
How therefore should one go about choosing a private money lender Singapore? Stay well away from any businesses that guarantee you a personal loan without looking at your credit report. One of the larger banks with a well-known name would be your best chance.
Possible consequences for your credit card limit
Do you intend to apply for a personal loan with the same financial institution that supplied your credit card? If you take out a personal loan, the amount for which you may use your credit card is likely to decrease.
To be clear, this is not always a terrible thing. It will aid you in maintaining a manageable overall loan amount. As you make regular loan payments, this restriction will be lifted.
Getting the best personal loans for debt consolidation is a great option for doing so. A personal loan may be the best option if you need money quickly for unexpected medical bills or any other kind of crisis.
Before agreeing to a personal loan, regardless of your motivations, you should read the tiny print and make sure you completely grasp the repayment specifics depending on your loan amount and term.