Signboard outside office building reads ‘POST COVID RECOVERY’

Post-pandemic recovery: Is this the time to apply for loan?

4 min

It has been a long time coming and we have had reversals along the way but it seems that the world is finally entering the ‘post-pandemic’ stage. Singapore has already relaxed social rules significantly for the vaccinated. Does that mean that the financial side of things is normal, too?

In this post, we take a look at what has changed, what remains the same, and what could change in the near future. It is essential reading for anyone who wants to apply for loan in Singapore.

The current situation

With two vaccines already rolled out across Singapore and a high community vaccination rate, social distancing is gradually going to be phased out. That indicates a return to normalcy for retail businesses.

This is critical because it means that more people can patronise each of those establishments every minute that they are open. It also promotes spending by a population eager to return to their pre-pandemic habits.

Another factor is that many people have been able to save money they would have spent on transport, socialising, eating out, and impulse window shopping purchases. These individual elements are building up an avalanche of spending to come soon.

Why apply for a loan now?

For anyone who wants to apply for loan and open a business, there is no time like the present.

Firstly, banks and legal moneylenders in Singapore have eased their loan repayment terms and sometimes also their eligibility requirements. This means that borrowers have access to larger loans, lower interest rates, and easier conditions if they apply now.

These institutions will likely revert to their original terms and clauses when the post-pandemic recovery is complete.

If you set up a business with a loan today and the situation returns to normal, these conditions will remain the same. However, your income from the increased post-recovery business will rise. It’s an exciting prospect for budding entrepreneurs.

Another thing to note is that while the Singapore government has always been extremely business-friendly, it is currently even more so. There are a variety of active government schemes aimed at boosting self-reliance, including employee wage subsidies and low-interest loans.

Before you apply for a loan in Singapore

A loan is a responsibility that should not be taken lightly. The consequences of mismanaging your finances with borrowed money can affect your credit score for over a decade. It affects your ability to apply for future loans, the interest rate you are charged, and the terms you get.

Before you apply for loan, ask yourself these questions and answer them honestly:

How much do I need?

It may be tempting to get an especially large loan if the rates are attractive but don’t go overboard. Additional debt is meaningless if you are only going to stash the money away in an account. Create a detailed business plan and estimate the amount you need accurately.

How long will I have to pay it back?

This is one of the first questions that you should ask because the lender will ask you the same thing. Your business plan should take into account the rate at which you expect to make a profit. This will help you obtain a lower rate because you will be able to pay the loan off faster.

How much will I pay in interest?

Most licensed money lenders like Cash Direct will give you fixed-rate loans. This means that you will pay a fixed minimum amount every month above the loan principal. A low rate of interest spread over a very long term is often more expensive than a high rate short-term loan.

Can I afford the monthly payment?

The entrepreneurial spirit is a good thing but don’t let it overshadow reason. You will spend the initial part of your setup simply playing catchup as you establish your name. In this period, there may be very little income or even none at all. Factor that into your plan.

Does the personal loan have fees?

Loans come with interest but also with fees. There are admin fees for processing the loan as well as penalties for late or missed payments. The cumulative fees can add up to a significant total.

Do I have a good enough credit score?

Your credit score determines whether you get a loan at all. Once you do, it affects the maximum that you can borrow as well as the interest rate. If your credit score is low now, you may have to wait for it to improve so you can get better loan terms. The alternative is to get a co-signer.


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