Time has not been playing well since COVID-19!!
Everyone is facing a lot of ups and downs in the financial aspects especially. Most of the organizations are running out of money to pay their employees and cutting down the percentage of the same.
In these difficult times, loans are definitely a beneficial tool to adopt. But, here, you need to be more cautious about exploring the loan options.
Most of the time, this financial help works as a blessing, but, sometimes, it could be a bane. It is better to look after a suitable loan based on the services and goods that you are thinking of buying. Different loans have obviously multiple purposes and have multiple characteristics.
When there is a cash emergency, but you cannot ask family or friends to help, then, you can get a personal loan easily from the authorized moneylender in Singapore. Personal loans are helpful as you can use the money at your volition. Compared with banks or credit cards, these loans generally have fewer interest rates.
Why is Personal Loan required?
In Singapore, unsecured personal loans are a beneficial way to get a substantial amount of cash that you quickly require. Here, we do not advise you to have long term financing to support short-term needs. You can leverage the Personal Loan Singapore as it is the more dependable way as compared to credit card debt if the cash is needed urgently.
There are several examples where the financial emergency arrives; it could be the medical treatment where you do not have funds to pay. Or, it might be you need the down payment for the wedding. Despite what it is, if you lack a large amount of cash or money, personal loans online are an ideal way to solve the issues in less time.
Below we have a few examples where you might need to have a personal loan:
- Family Emergency
- Medical Emergency
- Honeymoon or Vacation
- Debt Consolidation
- Pay Off Credit Cards
- Education Expenses: School Books or College Tuition
Personal loan Explained
Lending banks or companies offer personal loans to those who require help with the funds to reduce investment, financing car repairs and consolidating debts, etc.
A personal loan can even be used for personal requirements, like, paying bills, buying cars, or weddings. For education or renovation purposes, these specific loan products are meant to fulfill these requirements. Because every personal loan in Singapore is not the same, hence, one should monitor what they provide and how they are differentiated from others. It could be by means of fees, terms, or interest rate, everything has to be equally considered.
How does Singapore’s personal loan work?
To have a personal loan from the Singapore bank, some requirements are there that you have to accomplish.
Are you qualified to apply for a personal bank loan?
- For those living in Singapore, taking a personal loan is not a tough thing, until you are qualified enough to have it. First and foremost, you have to be Singaporean, foreigner, or Personal Resident (PR) and must be between the age of 21 and 65.
- The next thing that the moneylender will have to look for is the annual income. Those who are PRs and Singaporeans must earn approximately $20,000 a year.
- Though, the vital thing to perceive here is that if the earning is between $20,000 and $30,000; then the interest rate would be more than those who are earning more than $30,000 a year.
- For those who are foreigners, and earning $40,000 and S$60,000 a year according to the lander. Employment Pass is also required with the validity of twelve months.
Different types of Personal Loan in Singapore
All loans in Singapore come under the term loan category as they have the appropriate period and set monthly installment payments. For those who are getting a term loan, they must return the money by the end of the loan period.
Many banks might have some term-loan program that supports small businesses with the funds they have to carry out. The smaller businesses might leverage the term loan to buy the set assets, like, equipment, etc. for its production method.
Nevertheless, few packages are labeled as revolving loans where the borrowers can leverage the credit to fix the limit whenever it is required.
As long as you draw the lines, you can only pay interest, and you can easily withdraw the credit again after paying off the amount withdrawn. The interest rate is normally higher than that of a term loan, and the type of interest rate can be fixed or variable.
You can pay only the interest as long as the line is drawn and after that, you pay off the amount drawn, the credit becomes readily available to be drawn once again. Interest rates charged are usually higher than that of a term loan and it can be variable or fixed. Below, we have mentioned the four types of personal loan in Singapore. Check them out below:
Money lender firms
Fortunately, both traditional lenders and secured online lenders can now grant personal loans. Leveraging them, you can cope with all the essential expenses, incorporating possible emergencies. Several online lenders now provide fast applications and approvals for personal loans.
In comparison to the credit cards, personal loans from the reputable money lender will not affect your credit score and are more sound and secure.
Through a customized loan package, the money lenders guarantee to satisfy all your financial needs. Also, it becomes seamless for you to repay the loan amount. Check out some of the considerations below to get the best lender in Singapore.
Request for recommendations and referrals
Know the reliable money lenders in Singapore by asking your friends and family. Also, find out how their dealings are.
Analyze the reputation of the moneylender
Read testimonials and reviews from google about the best money lenders. Do not choose the company that experienced negative reviews, poor ratings, and many complaints.
Customer service level
Find out about their customer support system before getting a personal loan in Singapore. Know if they are available 24X7 to look after the customer’s issues.
Loan products available
Inquire about the types of personal loans they are dealing with. You must know that reliable lenders providers customized loans as per the particular needs.
Personal Installment Loan
The second loan on our list is a Personal Installment Loan. Many banks have several names for it, besides, the principle is not similar. You get a particular sum, get a one-time processing payment, and repay the amount in fixed monthly sets of at least 60 months.
How it operates
The personal installment loan permits you to get a sum of cash and return them in regular monthly installments. The fees and interest are computed for the entire loan period; it is included in the total loan amount.
Its processing fee is between $0 and 3%. Not to forget, the interest rate differs from bank to bank and it initiates from 3% (Effective Interest Rate at 6.96%) and higher. The banks can most of the time, abandon the processing fees, and provide exceptional interest rates in the promotional periods.
The installment loans are dependent on an accessible credit limit in the line of credit account or personal loan account. Generally, the utmost amount is four times more than the monthly salary. This can reach up to ten times the monthly salary if the annual income is more than $120,000 or if you have a great credit history.
Generally, the repayment period ranges from 12 to 60 months.
When to use it?
Personal installment loans are easy when there is a need for more money to meet the higher expenses that will obviously take more time to pay.
Line of Credit
We have Line of Credit as the third type of personal loan on our list. It is considered as the overdraft amenity that only takes interest while withdrawing from the account.
How it operates
After the approval of the loans, the money can be taken via cheque, internet banking, ATM, or via visiting the bank physically. The interest can be charged while withdrawing the funds. And, it does not charge any interest when the funds are repaid.
Generally, the line of credit charges the fee from $60 to $120 annually. Its interest rates varied from 18% to 22% per annum and these are implied before the promotional offer itself.
Basically, the banks provide twice the monthly salary as the credit limit as this can proceed up to four to six times when the other credit facilities are included.
Line of Credit does not have any static tenures. It gives you the facility to extend it to a suitable time. The interests are required to be paid only when the loan is used; the converse is also true.
When to use it?
This personal loan is helpful as the standby cash capital for unanticipated expenses. It leverages you to withdraw the funds when there is some emergency; though it does not demand any approval. However, it is advised to withdraw the cash only when it is highly required.
Balance Transfer or Funds Transfer
The last type of loan is the Balance Transfer (BT) or Funds Transfer (FT) that considers the accessible credit on the credit card. It enables you to spend a one-time processing fee and experience 0% or very less rate for around three to twelve months.
Then after, you can either settle the interest rates within 18% to 29% or can clear the outstanding amount. This is applicable according to the credit facility of the funds being drawn from.
How it operates
The aim of the balance transfer is to allow you to send the outstanding funds from one credit card to a 0% interest account or low credit line. It offers you prompt cash when in need of an emergency. When the transfer amount gets approved, it charges an only one-time processing fee.
In case of balance transfer offers, generally, the banks impose a one-time processing fee of 1% to 5% on the sanctioned loan amount. Besides, the suitable balance transfer offers do not include this processing fee.
The ideal bank transfer loans are in the range of S$500. Nevertheless, it can be extended up to ten times more monthly salary, but, only if you hold a better credit history or are a high-income earner.
The range of the general repayment period lies in 6 to 12 months till the higher interest rates arrive.
When to use it?
The bank transfer is more helpful when you require cash on an urgent basis or have small or big term expenses on the horizon. Or, when you prefer to overlook the high-interest rates on other loan facilities. These general use cases are the consolidating repayment on the left debts on the different credit cards, medical bills, emergency car repair, business, or investment opportunities.
Additionally, do not forget to secure the most suitable balance transfer offers in the market, that can be ignored or compensate for the processing fee via cashback or incentives.
Things to know before getting a Personal loan
Keep your repayment plan intact
If you are considering that the personal loans are non-profitable then you have the wrong perception. The loans are meant to be functional and beneficial. Consider the case, when your funds get stuck in the stock, and you want to sell it at its current price. Give us the chance to reveal that you are doing nothing but, opening the gates to lose money.
Hence, get a loan, give interest, and pay when the stock price rises. You can even now secure a net profit if the profits from the stock are more than the paid interest. The actual issue with the personal loan is that many do not have an exact plan of repayment.
Usually, the plan goes into acquiring money and thinking it will get paid one way or the other. Hence, it leads to a vicious cycle. So, it is better to borrow the loan when you really have to and assure when you will finish the outstanding.
Less percentage doesn’t mean less interest
First of all, you need to know that most of the loans are front-ended. Besides, the processing of normal loans is simple. You get money and give a fixed interest on the borrowed amount. The normal loans do not charge anything when repaying. The front-end says that the interest is implied on the total loan amount and the duration of the loan is calculated. Later, the loan amount is added to the loan and that is what is called the outstanding debt.
Consequently, even if the loan amount got reduced, you are intended to pay the interest on the money which already is being paid. It gives rise to the Effective Interest Rate (EIR). Particularly, it is applied to BTs and TLs.
Repay the loan in full before the ending of promotional interest rate
Be sure to get the benefit of the different promotional offers of the bank. However, do not forget that this is a loan, and for every loan, be sure to pay in full before the end of the promotional period to avoid high interest.
Banks apply risk-based pricing to fix interest rates
Usually, the bank checks your credit profile prior to loan approval and interest rates. It is obvious that the one that requires loan urgently and also has applied for it before, holds the “risky or bad” credit profile. On the other hand, the one who does not require a loan, and even, has not asked for it as well, holds a “good” credit profile. What we meant here is that banks offer each customer a different interest rate.
Every borrowing influences Total Debt Servicing Ratio (TDSR)
Each loan or expense in the name influences the TDSR, even if it is for five or fifty months. Therefore, it is better to plan the loan correctly so that the TL or BT of the loan $6,000 doesn’t affect the $600,000 substantial car loan or home loan.
Taking personal loans is everyone’s necessity these days in Singapore. But, one needs to be careful while securing the deal. It is better to look around, research, outline your necessities, compare the interest rates with others, and then, get it.
Generally speaking, there are money lenders and banks that offer personal loans in Singapore. Here, in this article, we have mentioned the same. It is totally your choice whether you want to take assistance from the moneylender or you are ok with the banks. The choice is all yours!!
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Thanks for reading!!