As a young person starting life on your own, you may encounter times when you are struggling for cash. This is especially so when you reach the life stage of marriage and have to use your savings in preparation of the ceremony or get your own house using your CPF and loans amid the rising housing prices. You may have limited financial records and low cash flow but that does not have to come in the way of your plans in life. While bank loans may be challenging for you to access, you still have many options out there for you. Here are some types of loans that you may want to consider.
A personal loan can be used to finance school fees, a car, home renovations, and even a vacation or any other personal expenses – it is versatile and flexible. It can be in the form of a secured or unsecured loan.
Here are the different types of personal loans that are popular among young adults:
Singapore has a top-tier education system. However, the cost of higher education, especially a three- or four-year university course, can be high despite government subsidies. The fees also vary depending on your course of study. Taking a study loan can help you fund your studies without additional worries.
Here are also some common myths about study loans, debunked.
Your wedding will be one of the happiest occasions in your life and is a celebration of an important step in a young person’s life. Organising a wedding in Singapore is exciting, but it can also cause a serious strain on your finances.
Budgeting early and efficiently is very important to control spending while you plan your big day. From the wedding dinner to outfits and photographers, the costs can add up to a hefty amount. To manage the numerous costs that need to be undertaken, a wedding loan can help fund your once-in-a-lifetime event with some peace of mind.
While a wedding loan can provide short-term help for cash flow, it is important that you budget your wedding efficiently and not use a wedding loan to splurge on a wedding you cannot afford. So while planning for a wedding loan, also budget and plan for its repayment. Once you’re ready to apply for a loan, think about the steps you need to take to quicken the wedding loan approval process.
Many young people often look for a side hustle, and driving a private hire vehicle is a popular way to earn extra money. Grab and Gojek are the leading ride-sharing platforms in Singapore and enable many youngsters to generate income.
If you are looking to get onto a ride-sharing platform, you may find that there are also initial costs to bear, such as acquiring the various licenses to be approved to drive. You will also need to budget for the rental costs for the vehicle itself.
To help you get started on these platforms you may find a Gojek or Grab loan to be helpful. However, study all the aspects of being a driver on the ride-sharing platform and make sure it works for you.
While there are various types of loans to consider, not everyone with debt will automatically qualify for a personal loan. To be eligible for a personal loan with either a bank or a licensed moneylender, you must meet these general criteria:
- Be a Singapore Citizen, Permanent Resident, or foreigner with a valid Employment Pass or Work Permit.
- Be at least 18 years old (for licensed moneylenders) or 21 years old (for banks).
- Be employed (either full-time, part-time, or self-employed)
- Meet the minimum income requirements (which are different for each bank and lender)
|Annual income below $20,000||Annual income above $20,000||Annual income above $120,000|
|Loan amount is capped at $3,000||Loan amount is up to
6X of income
|Loan amount is up to
10X of income
Banks will usually look at your credit report before deciding if you qualify for a personal loan. The report from the Credit Bureau of Singapore will contain a summary of all the major credit decisions you have made in the past few years. If a borrower has a low credit score, it is generally assumed that the borrower may be more likely to default on their loan repayments. For this reason, the bank might then decide not to approve the applicant’s loan.
While licensed moneylenders do not typically look at the credit score, they will need to check borrowers’ borrowing limit and borrowing history with the Moneylender’s Credit Bureau. As for the possibility of getting loans even with bad credit, you are more likely to get a loan from a moneylender as they typically pay greater attention to your current ability to repay rather than your records.
Tips to apply for your first loan
Here are three tips that you should pay attention to as a young adult assessing the various types of loans that you can apply to, be it from the bank or a moneylender.
First, it is important to check and clarify the interest rates you have to pay, loan tenure, and other loan terms with the bank or moneylender before signing the loan contract. Ensure that you read the fine print and note down any additional fees and charges involved.
If you have chosen to go with a moneylender, check that the lender is licensed and professional, per the Ministry of Law’s list of licensed lenders. It is also important to check if they have good reviews and a physical office.
If you have chosen a bank, make sure you check the bank’s effective interest rate i.e., EIR.
Ensure that you draw up a reasonable and practical budgeting plan to repay your loan in instalments, so that you do not incur late fees and charges or fall into a debt cycle. Both banks and moneylenders impose late fees if your repayment is late, which can lead to a vicious cycle of debt if you are unable to pay on time. This can affect your credit score and your borrowing history, which can have a serious impact in the future.
Last but not least, it is important to only take a loan if and when really necessary. An unexpected medical emergency might be an example of when you might have to take up a loan.
As a general rule, it is not recommended to take a loan for large expenses that you cannot afford to pay back. If you take a loan, ensure good borrowing habits and that you pay off the full amount due on time.
As a young person, you may be faced with various challenges and pressures that compel you to strain your financial resources. Be disciplined in your spending and know that there are financial tools that can help you tide over important decisions such as higher studies, marriage, etc. Always do thorough research for yourself before applying for any loan.
If you are a young adult who requires a personal loan but is unsure of how to apply, our loan professionals are here to explain all the different types of personal loans to you. Apply for your loan online with Cash Direct now.