Some people assume that getting loan in Singapore are always a bad thing. There are different connotations they associate with these loans, which are actually not true at all. It is these personal loans myths that tend to impact their decision of acquiring additional funds, so they choose different routes to cover their emergency expenses.
But the thing is, there is nothing wrong about personal loans at all. In fact, if you only use this type of loan the right way, you can even benefit from it. There are people who assume that financial products are scary and even unnecessary as these tend to put them in greater debts. Thus, they avoid borrowing money from banks, without even understanding that loans are not exactly that bad. The truth is that a loan is an effective tool that you can use when you are short on cash. As long as you use it the proper way, there should be no worries to come your way once you decide to take out a loan.
So, we present to you some common myths that Singaporeans have about loans, which we further explain below.
1. When you are short on cash, that is the only time you should take out a personal loan
It is true that there are times in your life when you may find yourself low on cash. Some surprises may come your way whether it is an emergency medical bill that needs to be paid, a rental payment, car repair, or any other urgent expense you should take care of. But the problem is, what if you have insufficient funds to pay for these bills?
This is exactly why personal loans exist. You can use this type of loan from licensed money lenders in Singapore when you have emergency expenses that can no longer wait, particularly if there is a serious penalty awaiting you if you miss a payment. Instead of borrowing money from family and friends that tend to put you in an awkward situation, you can use a personal loan for your urgent needs. This loan type even comes in handy for debt consolidation or just when you need additional funds instead of getting cash advances with high interest rates.
Related: (You may wish to read on: Times When Personal Loan Could Save Your Ass)
2. Personal loans will cause you to accumulate more debts
The truth is that the only time you will get more debts is when you miss a payment. This is the problem that some people find themselves into with their loans because they are unable to settle their debt payments due to insufficient funds. The best way to avoid this is by taking a good look at your current financial situation. Determine how much you need to pay monthly for your loan before you even decide to take one out. If possible, you may even try to lengthen the duration of the loan to further minimise your loan payments. Just do your best to pay on time every month, and you should not have any worry about penalties and fees that come with missed payments on your loan.
3. Getting more cash than what you need is the best way to use a personal loan
Always remember that a loan is something you need to repay sooner than later. So, if you have a massive loan, then that is the amount of money that must be settled based on the deadline set by the financial institution. This is why it is important to really think about the amount you want to borrow since you will have to worry about the payments you need to make for it when the time comes.
There are many reasons why people take out a fast approval loan, and they may even be eligible for a higher amount of money depending on their salary and credit score. But at the same time, it is not at all ideal to take out a huge amount of cash if this is not even necessary. Just think about the interest rate that comes with your loan, which you need to pay on top of the principal amount. This makes things tougher for you, particularly if you only require a few hundred dollars instead of a thousand dollars or more.
Before you submit that loan application form, check the amount you really need and do not go beyond it. Then, you should be all good once you need to start paying off your loan.
4. People in debt should not even get a personal loan anymore
Do you find yourself in a difficult financial crisis? Perhaps you are already buried in debt, and you feel that the last thing you need is to borrow more money, right? This is why you are probably wondering if a personal loan is even necessary at this point in your life. But the fact remains that if you use your loaned amount the right way, then there is nothing wrong with borrowing extra money if you intend to use it for a good purpose. If you want to consolidate your debts by using a personal loan, then you are free to do so – and it may even do you good this way.
Think about it – credit cards charge a 24 percent interest rate per annum. So, if you have debts on several multiple credit cards, just figure out how much you need to pay for each credit card debt. It is indeed a lot of money, which can make things overwhelming and stressful for you.
With a personal loan that is the same amount as all your credit card debts, you can simply pay them off all at once and free yourself from massive interest rates. You just need to focus on paying off your personal loan with a smaller interest rate of about 6 to 8 percent, and the payments you make each month do not even have to be very expensive. The longer the duration of the loan, the smaller monthly payments you will make. Now that makes things easier for you, doesn’t it?
5. Better to take out a personal loan than use your credit card
Some Singaporeans assume that it is more practical to take out a personal loan than to use a credit card. They find the fixed repayment terms per month more appealing, so they think it is the most practical way to get some extra funds.
But the fact is that credit cards come with a grace period, which means that you are not charged with any interest or fee on your borrowed amount unless you make a late payment. So, if you pay your credit card bills on time, there is nothing to worry about high interest rates and penalties. Thus, if you think about it more, a credit card may come in handy if you know how to use it well.
6. Borrowing cash from a moneylender is more practical to do in case I fail to meet the bank’s minimum income requirement
It is true that banks require a minimum income for loan applicants. Usually, the amount is at $30,000 (annual income), yet it is higher for a foreigner applying for a loan. This is the amount that a potential borrower must be making, so he or she can be eligible for a personal loan. But then again, there are banks that offer lower income requirements at around $20,000. You may want to search for banks that require a lower amount for the salary requirement, so you do not have to worry about not being approved of a loan. After all, approaching a licensed moneylender Singapore may mean having to pay higher interest rates, which can make repayment much tougher than you think.
With all these things in mind, personal loans are not all that bad when the money is used in a practical way. If you want to consolidate your debts or there is an urgent need for cash, taking out a personal loan may even be beneficial to your situation. Just be sure to make prompt payments to avoid penalties that will only add to your worries.