If you want to accomplish one of your major goals in life that requires more financial commitment than your current savings or if you are in a sudden dire situation where you need more than the regular flow of money that keeps you afloat every month, chances are you will look at the option to apply a personal loan.
Before you dive into the subject of personal loans in Singapore it is best to be equipped with a beginner’s knowledge of what it entails to apply and get approved for a loan.
What is a personal loan?
But first things first, what really is a personal loan? It is an unsecured loan which simply means that you obtain this loan not because you put your assets as collateral but because the bank deems it fit to lend you some loan amount. Also, a personal loan does not come with a clause on how you must use the loan. Once the loan is issued you are free to put it to any of your uses you deem fit.
How to get a personal loan in Singapore?
Once you realise that you need a personal loan, the first step is to find a bank or licensed money lender who can give you the right guidance. The second step is to fill out an application form stating your details and intent. Once you apply a personal loan, the money lender will do its due diligence to attest if you should be granted the loan. Once the loan is approved you will get the cash in a lump sum and you are expected to repay the sum in easy instalments. As a return for the service, the lender offers you a processing fee along with an interest on the amount you borrowed to be repaid.
An important point to note here is that in case you require a loan but your credit history is not the strongest, do not feel dejected as with the help of a co-signer you can still apply for a personal loan . A co-signer serves as an alternate in case the primary borrower fails to make a payment. However, you may need to inquire if the lender you are borrowing from provides the provision of a co-signer as not everyone does.
Based on your need, there can be three types of personal loans:
Personal instalment loan: A personal instalment loan allows you to borrow a specific amount of money to be repaid over a period of time. There is an agreed fixed interest over the amount along with a fixed repayment plan over a fixed interval. Depending on your financial liabilities you can choose the period of repayment. The longer you take to repay the loan the more interest you may end up paying. Many banks in Singapore allow you to borrow the loan amount many times the salary you draw each month.
Credit loan: This is a type of loan that allows you to borrow an amount much more than your salary without giving any reasoning on why and what you require the money for. All you need is to call your credit card provider and ask for the money. You can also do the same online. You are allowed to repay this sum over a period of time that suits you as long as you repay a certain percentage of the loan amount you borrowed.
But before you think of credit line loans as heaven-sent for all your sudden money requirements, remember they are better suited for emergencies as typically they have an interest rate much higher than personal loans.
Balance transfer: These are similar to short-term loans that may come at a 0% interest and are offered on a credit card or credit line account. The good thing about the balance transfers is that you can skip paying the high-interest rates, which makes the loan process sometimes difficult. This simply works by the fact that all your debts are consolidated in one account.
The bottom line for this type of loan is that if you are confident about repaying the amount on time you can take advantage of the balance transfer. Remember since a balance transfer is a service offered to you because of your credit card or credit line balance, it often works in a way that the bank will open a new credit card or a credit line for you to be able to avail of the balance transfer.
In the end, it is best to choose a type of loan that best helps you in your given situation. Depending upon the amount of money you need at a particular moment and the term within which you can repay it, you can choose a loan and decide what is beneficial for you.