(Newswire.net — January 8, 2019) — Taking out a loan can be confusing. This is especially so in a country like Singapore that has more than 160 licensed moneylenders, in addition to traditional lending institutions such as banks. It is difficult to find the right licensed money lender in Singapore. Although most people have an idea of what they should be looking for in a loan, few take the time to properly shop for loans and carry out comparisons in order to get the very best deal available. If you are a first-time borrower, then you may need a short basic guide on personal loans:
Personal Loan Basic Guide
Prior to carrying out a personal loan comparison Singapore, you need to first understand personal loans. In Singapore, most licensed moneylenders offer unsecured loans, which simply means that they do not have collateral backing them up. As such, failure to repay does not result in asset seizure. Secured loans, on the other hand, are backed up by collateral that can be repossessed to cover the remainder of the loan should the borrower default.
Since an unsecured personal loan tends to be a higher risk for the lender, the interest rate is higher than that charged on secured loans such as a car loan or a mortgage. Some people think that defaulting on an unsecured loan does nothing to them since there is no asset attached to the loan. However, your credit rating is affected negatively, which can make it difficult for you to secure any kind of financing in the future. This means that you should repay any personal loans taken to ensure that your credit score remains good.
Pros and Cons of Personal Loans
Like any other loan out there, personal loans have pros and cons that you should familiarize yourself with prior to signing up for any loan. They are as follows:
Pros
- Readily available: With personal loans, the money is made available to you quickly. Many lenders are able to give you the money on the same day you apply, provided you have provided them with all the supporting documents. Others can avail the money within the same week. This is a key factor for those who are looking for emergency funds.
- Unsecured: The fact that one does not need any collateral to secure the needed funds is also a plus. This means that they don’t have to part with an asset should they fail to pay off the loan for one reason or another.
- Fixed Interest. This is a key factor when carrying out a personal loan comparison Singapore. Fixed interest rates make the repayment amount the same throughout the duration of the loan. This means that it is easier to plan and pay off the loan, and one does not get fluctuating rates.
Cons
-
High interest rates: Compared to secured loans, personal loans have a higher interest rate.
Carrying Out a Personal Loan Comparison Singapore
In order to review the loans available, you must first ask yourself several questions as follows:
- What will the money be used for? The idea is to get the best loan for your need. If you are looking to purchase a car, then the best loan for that purpose may be a car loan. A personal loan is ideal for emergency situations, to help you out with cash flow, to pay for personal needs like a wedding, a much needed vacation and the like. It is important to use the money for its original purpose. It is unfortunate that some people take out a loan for a particular purpose and then divert some of it to other things, thus falling short of meeting the original need.
- The repayment schedule. This is something that must be considered very seriously because you want a loan that you will pay back comfortably. If the loan calls for bi-monthly payments and you can only pay once a month, you need to speak up and have them amend that if possible. You must be comfortable with all the terms of the loan if it is to be a right fit for you.
- Penalties. You must consider all the penalties pertaining to the loan. Most lenders not only charge a penalty for late payments, but also for paying off the loan early.
- Fees. The total cost of a loan includes the interest paid and the fees that go with it. Make sure you understand what the fees are and when they are to be paid. Some fees will be paid upon disbursement of the loan, while others will be calculated into the monthly payment. Find out what they are and how they affect the cost of your loan.
- Interest rates. Compare the interest rates offered, but always view this in light of other penalties, fees, and terms of the loan. The interest rate may look good upfront, but when you add in other costs, you could end up paying more. Additionally, the interest rate may be good, but other loan terms may not work well for you. Look for an all-round good deal.
- Eligibility. When carrying out a personal loan comparison Singapore it is important to consider eligibility requirements. Some of the factors include monthly income, credit history requirements, employment, and minimum age. Looking at this first will help you eliminate those lenders whose eligibility requirements you do not meet. Should you have any questions in this regard, you should contact the lender directly prior to putting in an application.
- Are my needs met by the loan? Remember that you and the lender should both be satisfied with the loan. Ensure that the loan can give you the amount of money that you need. Some loans have a maximum limit, which may be less than what you need. If you have another source of funding with which you can top up, there is no problem. However, if you don’t, it may be better to find a lender that can provide all the money you need. How long does the application process take and will you be able to get your money in time to meet the need? If you are looking for emergency funds, then same day loans will do well. If you can wait longer, then look for a lender that can meet your requirements as well. Be sure to also find out how they will be getting the monthly payments. Will it be by bank debit or a check? Work with what you prefer.
- Now that you know how to carry out a personal loan comparison Singapore, here are some tips on how to manage the loan.
Managing a Personal Loan
Most people are happy to take a loan only to find that managing it is a bit difficult. These tips will help you:
- Have a budget that factors in your loan repayments. One of the best things about having a fixed rate personal loan is that you are able to budget easily since you will be making the same payment from month to month. Put this figure into your budget so that you are not caught by surprise, especially if the money is debited from your account.
- Work with the effective interest rate. When making your calculations, the interest to look at is the EIR since it includes the loan costs and is a true reflection of what you will be paying.
Having carried out a personal loan comparison Singapore, you can now go out and get the loan that suits you best.