If you are a young adult, there are times when you might struggle with cash flow problems. This is especially so if you are starting to make payments for big ticket items such as a new home or a wedding.
However, if you have limited financial records, especially if you have just started working not long ago, it might be difficult for you to get a bank loan.
What are your options then? Here are some types of loans that young adults qualify for.
Popular personal loans younger adults qualify for
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 may be secured or unsecured.
Here are the different types of personal loans that are popular among young adults:
1. Study loan
Singapore has a top-tier education system, but even with government subsidies, the cost of higher education is still high, especially if it is a three or four-year university course you’re applying to. 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.
2. Wedding loan
Getting married and holding a wedding in Singapore might be a happy occasion, but it can also cause a serious dent in your wallet if budgeting is not done properly.
From the wedding dinner to outfits and photographers, the costs will add up to be hefty. With a wedding loan, you can fund your once-in-a-lifetime event with peace of mind.
However, while a wedding loan is a short-term solution that can help a couple with their cash flow, it is important to note that couples also have to be able to do their budgeting well, and should not rely on a wedding loan to splurge on a wedding they cannot afford.
3. Grab/Gojek loan
Many young people are often looking for a side-hustle, and driving a private hire vehicle is a popular one. Grab and Gojek are the leading ride-sharing platforms in Singapore, and enable many to generate income.
However, there are also many costs to bear, such as rental costs for the vehicle, and acquiring the various licenses to be approved to drive, so taking a Grab/Gojek loan would be helpful.
4. Payday loan
Perhaps you might have run into a small financial emergency, but it’s the start of the month and you find yourself unable to make it to the next payday. This is where a payday loan might be helpful for you.
A payday loan is capped at your monthly salary, and has to be repaid in a lump sum (together with interest), either exactly a month after receiving the loan, or on an upcoming payday. Interest rates are usually higher due to the short repayment period.
Before you apply, it is important to understand more about how payday loans work and their benefits.
What are the criteria to qualify for a personal loan?
Not everyone with debt will automatically qualify for a personal loan. To be eligible for a personal loan with either a bank or licensed money lender, 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 21 years old
- Be employed (either full time, part time or self-employed)
- Have met the minimum income requirements (which are different for each bank and lender)
However, for unsecured loans with money lenders, your loan amount is capped at $3,000 for Singaporeans and Permanent Residents with an annual income below $20,000. If your annual income is above $20,000, you can take up a loan up to six times your income.
For unsecured loans from the bank, you can borrow up to 10 times your monthly income if your annual income is above $120,000.
Banks will usually look at your credit score before deciding if you qualify for a personal loan. They will generally request for a Credit Bureau Report from the Credit Bureau Singapore, and the report 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 seen to mean that this borrower is more likely to default on their loan repayments, and the bank might then decide not to approve of this applicant’s loan.
While moneylenders do not typically look at credit score, they will need to check borrowers’ borrowing limit and borrowing history with the Moneylender’s Credit Bureau.
Tips when taking your first loan
Here are some tips that young adults should pay attention to when taking various types of loans, be it from the bank or money lender.
1. Take note of all the terms and conditions of your loan
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 money lender before signing the loan contract. Regardless of whether you are dealing with a bank or money lender, ensure that you read the fine print and note down any additional fees and charges involved.
If you have chosen to go with a money lender, check that the lender is licensed and professional, and should be in the Ministry of Law’s list of licensed lenders. It is also important to check if they have good reviews and have a physical office.
2. Ensure proper budgeting
Ensure that you do up a reasonable budgeting plan to repay your loan in installments, so that you do not incur late fees and charges. Both banks and money lenders 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.
3. Only take a loan when necessary
Last but not least, it is important to only take a loan when really necessary. For example, an unexpected medical emergency might be an example of when you might have to take up a loan.
It is not recommended to take a loan for large expenses that you cannot afford. If you take a loan, ensure good borrowing habits and that you pay off the full amount due on time.
Looking for a personal loan?
Are you a young adult who requires a personal loan but unsure of how to apply? Our loan professionals are here to explain all the different types of personal loans to you.
Cash Direct offers a selection of affordable loans. Apply for your loan online with us now.
