In Singapore, there is a growing number of people who are taking out personal loan. Whenever there is a medical emergency or a lack of money to support a basic necessity, it may seem as a viable option to borrow some cash using this type of loan. But the question is, are you really better off with a personal loan? Some people assume that since this is a debt, it may be tough to get out of it in the long run. Hence, a string of misconceptions about a personal loan from licensed money lender, has been impacting people’s opinion of it
A personal loan does not require you to present a collateral since it is an unsecured loan. There are also no limits as well as a number of questions asked by the lender or a bank when you submit your loan application. You can use it for whatever purpose you have in mind, which makes it rather convenient to obtain. Yet, it is worth noting that there are so many misconceptions revolving about a personal loan. This is why if you are contemplating on taking out some cash for your personal loan, it may be worth reading the following details about this loan type
1. You can pay off your credit card bills using a personal loan as it is the best option available
Back then, a personal loan has become widely used to pay off people’s credit card bills. For those who have been accumulating enormous debts for their credit card, they decide to take out a personal loan as a payment for these. The MAS has introduced a technique such as debt consolidation, and this is a spinoff version of a personal loan. This means that the loan may be utilised as a payment option for your debts. But then again, debt consolidation comes with a more particular use when paying your loan off. This is the reason behind the lower interest that comes with this feature. In HSBC, as an example, debt consolidation plans and personal loans both have low interest rates. But between the two, debt consolidation comes with a lower interest rate by about 0.1 to 0.8 percent than a personal loan. This is the case with personal loans that are good for a period of 1 to 7 years. Additionally, if you have a loaned amount of $20,000, there is a mean difference in the interest rate by about $60 to as much as $420. The cost surely adds up in the long run
2. The most expensive loan type is a personal loan
There are varied interest rates that come with all types of loans whether it is an unsecured or secured loan. But between the two, a personal loan has a higher interest rate, as compared to a car loan or a housing loan. This is due to the fact that there is no collateral required, unlike with a secured loan
But then again, it is indeed worth a shot to take out a personal loan when the option for extra cash is limited. The truth remains that even if there are slight hoops to get into before a loan is approved to you, you will always appreciate the speed and efficiency when it is time that you take out a loan. If you are in a rush to get cash, a personal loan may be the best choice you’ve got for some additional money no matter what purpose you have in mind
3. If you are looking to buy just about anything you need and want, a personal loan is your excellent choice
Some people may suddenly have an urge to buy any item they want whether it is a designer bg, pair of expensive shoes, or even gadgets. When they do not feel like using their credit card, or they barely have extra money to buy these luxuries in life, their immediate action is to take out a personal loan. But is it really the best thing to do
While a personal loan is easy to obtain, this does not mean that you should simply take one out just whenever you feel like it. If you get into the habit of taking out a loan on a whim, then your financial health is truly in deep trouble. There is no doubt that a personal loan is much cheaper that using a credit card and accumulating debts on it. But the fact remains that it is still expensive to rely on a personal loan for just a random item you want to buy. But there are truly some situations when a personal loan is necessary. These include emergencies that come our way whether it is a surgical procedure you need to go through, a wedding expense, or a honeymoon. However, this does not mean that you should simply go ahead and take out a personal loan whenever you feel like it. You need to keep your finances in check and make it a point that you have a steady income source that will allow you to make your monthly loan payments without any hassle.
On the other hand, if you have a number of financial obligations to deal with such as mortgages and other loans, then you may only find yourself in serious trouble by taking out another loan. This will prevent you from having to save money because of the additional expense you need to think of such as your debt payments for your personal loan. The last thing you want is another stressor in your life, while limiting opportunities to save money
4. All moneylenders offer the same interest rates for their loan packages
There is this misconception that moneylenders all offer the same fees and interest rates. But you see, this is quite far from the reality because they also operate in the same way as banks do when it comes to their interests and fees. This means that some lenders may offer a lower interest rate than others. Based on studies, the effective interest rate varies between 9 percent and 26 percent annually, which means you may want to shop around and weigh your options when attempting to take out a personal loan. As you look for a moneylender in Singapore, make it a point to check first their EIR of the loan offered. You may also want to double-check the penalty fees and other charges in case you pay your debts late. This way, you can prevent added fees that will only cause you to worry and stress out once the loan payment deadline arrives
5. Only those who have a high credit score can qualify for a personal loan
Just because your credit score is less than perfect, this does not mean you can never take out a personal loan. In fact, your credit rating is not the sole basis that lenders look into when they assess an individual who is trying to borrow some cash. Banks, for instance, consider your annual salary when they determine your eligibility instead of simply zeroing in to your credit score. But of course, the important thing is that your credit score is not dismal. Otherwise, your chances of being approved of a personal loan is quite slim. Also, loans may be available for individuals who make about $30,000 or more, but with less options for people who have a lower income. Standard Chartered, as an example, offers reasonable rates on their personal loan for borrowers who earn within $20,000 to $30,000 per year.
Just be sure to check carefully the moneylender who are planning to work with before you submit your loan application. Always consider the reputation and the credibility of the lender, as well as the proven track record it possesses. This way, you can steer clear of fraudulent lenders, as well as give you an opportunity to make the most out of your overall experience when trying to take out a personal loan for your financial concerns
Related article: A Savvy Guide to Obtaining a Good Credit Score in Singapore
