You probably have some questions in your head when it comes to borrowing money from a licensed moneylender in Singapore. With this in mind, allow us to present to you these myths that revolve around taking out a loan from a moneylender, so you can decide better if this is what suits your needs.
1. Taking out a loan even without financial inadequacy concerns
Perhaps you have a sufficient amount of money for you to get by your daily life situation. But at the same time, you may have some needs to be met, yet you have no intention of limiting your cash flow because of these financial issues. It may be as simple as paying off a credit card bill or settling your hospital expenses while preserving your savings. If you want to address these immediate concerns without impacting the amount of money you currently have in the bank, then it should not be too bad having to take out a loan for such short-term needs.
2. Some emergencies that make it viable to take a loan out
There will always be instances when a personal loan may be necessary even when you have some money in the bank. For instance, you might have been considering buying a car or a house, and you have already saved enough money for the most part of your payments. But due to some unforeseen situations, a more urgent need has to be addressed, which also means having to get some money you have been saving for your project. If this is where you are at this point, it does not make sense waiting a very long time by saving a sufficient amount before you can address your immediate needs. Taking a loan out is practical and sensible, as long as you are certain that you have no problem with repaying the loaned amount.
3. Situations that lead to the need to consider applying for a loan
The market fluctuates all the time. If you want to take a loan out, the best time to do this is once the market prices have gone down, which also reduces the percentage of borrowing. This is the perfect time to borrow some money at a cheaper interest rate, so you can finally purchase that car, appliance, or home that you have been keeping your eye out for.
4. Taking out a loan even when your salary is enough
You want to save up with your investment plans that provide you with an interest featuring a compounded basis. Thus, the interest rises as the duration and amount of your savvings go up. When you save money over a long period of time, you can also expect higher returns – sometimes even higher than your loan’s interest rate. This is why it does not make any sense to sacrifice your savings that are currently growing if you plan on purchasing an important property. Just take a loan out to get the amount you need, then let your savings grow continuously.
5. There is extra income coming in from house rental since you live with your parents
Do you want to buy another home? Then, taking a mortgage on this property and repaying the loan from the rental income you are making is worth it. But this all depends on where your property is located, and you may even gain a higher amount than what you are spending to py your mortgage instead of hiking up the rental fees. In this way, you can even gain additional income through your loan. Plus, you no longer have to wait forever until you have sufficient cash to buy your home in cash.
6. Buying a piece of land and taking out a loan
Homes and lands are assets that go up in value over time. So, if you decide to buy land that is worth $100,000 righ now, the value can go up 2 percent each year. This is why you can make more money from your investment, and this makes your loaned amount worth it. You can even use the land to generate income that will cover your loan payments and other needs. Your cashflow increases over time, but be sure to settle your loan repayments on time to avoid penalties from your lender.
7. Different types of loans available
In Singapore, you can find 2 different types of loans such as the secured and the unsecured. If you opt for a secured loan, your collateral may be taken away from you in case you fail to settle the loaned amount within the time stated in the contract. But if it is an unsecured loan, the lender will not be able to take control of your property, but with the exception of cases that a judge goes with this court action.
8. Closer look at a secured loan
Not all assets are considered as a collateral before you may obtain a loan. Mainly, the value of your asset must cost much more than what you are borrowing including the full interest that needs to be settled. Assets that may be considered as collateral include your car, real estate property, or home. Once you have signed over your personal rights to such assets, there is a lien placed by the lender on these properties. You no longer hold the title to your assets, and there are also transfer forms duly signed by you, which are handed to the lender. So, if you default on the amounts you have borrowed, there is nothing for you to come back to. Banks offer secured loans, as they do not want to suffer from any loss in case the borrower fails to repay the loan. This is why if you need a huge amount of money, a secured loan is an option to consider. If the asset value has decreased and gone below the amount left on your loan, a lump sum payment may be required from you to settle the cash you owe from the lending institution.
9. Pros and cons of a secured loan to consider
Secured loans generally come with a lower interest rate, so there is not much to worry about when you need to settle the amount plus the interest. You may also qualify for a higher amount of money from taking out a secured loan. There are also lenient repayment schedules, which make it appealing to borrowers.
On the other hand, you might as well forget about reclaiming your assets once you have defaulted on your loan. There are limits when it comes to the type of asset that is considered as collateral, so you cannot have a guarantee of obtaining a loan if your property does not count as security. Most importantly, the processing time for a secured loan is longer because of the extensive paperwork involved such as transfer transactions and asset valuation. So, a secured loan is certainly not the quickest solution to taking out a loan.
10. What you should know about an unsecured loan
There are no assets to think about or to give up if you want to take out an unsecured loan. You will also receive an order from the court to settle the outstanding amount that you owe in case you default. But, if you are bankrupt, you may be forced by the court to sell your properties just to settle the loaned amount.
Basically, money lenders are not guaranteed of regaining the investment since there is no collateral put down. The risk of lending is indeed much higher, which is the main reason why the amounts lenders can offer to clients are also limited. It may only be 2 to 4 times the monthly income, which may not amount to so much as what borrowers need. Moneylenders usually offer payday loans and personal loans to their clients, which are examples of an unsecured loan.
Before taking out an unsecured loan, always check the background of the moneylender. Go with licensed and reputable ones to avoid further problems with borrowing the amount you need.