Ravi Chandran
Personal loans useful as one of the most widely chosen options, in case you are in a spot and need some urgent cash. However, personal loans are tricky and you need to know as much as possible about their basics before applying for one.
Personal loans useful but what are some common questions about them?
Table of Contents
What is a personal loan?
Personal loan is credit that is granted to the borrower for personal use. These loans are usually unsecured (no security or collateral required/asked) and is based solely on the borrower’s integrity and ability to pay.
If personal loans useful, who is eligible for a personal loan?
The eligibility criteria and their specific details may differ from lender to lender based on their perception of the risks associated with given out personal loans. However, nearly all lenders divide the potential borrowers into three categories:
- Salaried individuals
- Self employed individuals
- Self employed professionals
Other factors which are taken into consideration are, age, residence, work experience, repayment capacity, past obligations and place of work.
What kinds of interest rates are offered on personal loans?
Personal loans are offered in:
- Fixed rate
- Floating rate
- Flat rate
Of the three, flat rates turn out to be the most expensive since the other two are calculated on a reducing balance basis.
What is the average interest rate for personal loans?
The interest rate for a personal loan is decided on the basis of your credit repayment capability and history. Depending on this, interest rates could be anywhere between 18% and 25%, depending on the financial institution.
What documents are required for personal loans?
Personal loans require the least number of documents, making it the fastest to be approved. Typically, financial institutions would require proof of identity, residence, income and also 3 to 6 months of your bank statements. Some banks also require guarantors and the same set of their documents.
How is a personal loan repaid? Is prepayment of a personal loans useful or possible?
Normally, personal loans are offered between 3 to 5 years. The loan is repaid with Equal Monthly Installments. Prepayment is possible but will generally carry a significant prepayment charge.
When getting a personal loan it is important to ask yourself ‘Will I be able to pay it off?’ Some things which can help you pay back your personal loans are:
- Pay off your credit cards: Try to pay off your credit cards as soon as possible, since credit card debts inadvertently hamper loan payments.
- Budget your spending: Once you have taken a loan, ensure that you budget your spending, so that if in any unforeseen circumstance you cannot make a monthly payment, your savings will help you out.
- Personal loans if not utilized and repaid properly, can become a curse in disguise. Make your decisions prudently to ensure a safe financial future.
Most personal loans are granted as unsecured loans. Borrowers don’t necessarily need to have the best credit or even any type of collateral as that is not the primary concern for the providers of these types of loans. Unsecured loans are provided more on good faith and what lenders need to provide are their name, social security and income verification.
If you are in a bit of a pinch and all the doors appear to have closed, you can also consider licensed moneylenders for personal loans. Moneylenders in Singapore have to be registered and licensed with the Registry of Moneylenders. Most moneylenders operate with the goal of offering instant cash loans to Singaporeans, Permanent Residents and foreigners in Singapore. Moneylenders offer fast, hassle-free and efficient services to their clients.
Licensed moneylenders are useful to people who may find it highly challenging to procure a significant amount of money in a short span of time. Licensed moneylenders being providers of non conventional personal loans will simplify your application process thereby making the cash loan more readily available.
But before you approach a licensed money lender, consider other alternatives, such as the various financial assistance schemes offered by various Government agencies. As you are legally obliged to fulfill any loan contract you enter into with a licensed moneylender, consider whether you are able to abide by the contractual terms, bearing in mind your income and financial obligations.
Borrow only what you need and are able to repay. Be mindful that if you are unable to meet the contractual terms, the late payment fees and interest payment will be a financial strain not just on yourself but also on your family. The law requires moneylenders to explain the terms of a loan to you in a language you understand and to provide you with a copy of the loan contract. Make sure you fully understand the terms of the contract, in particular, the repayment schedule, the interest rate charged and the fees applicable.
Regardless of how much of a financial crunch you are in, you should always shop around different moneylenders for the most favourable terms. You should not rush into and commit yourself to a loan until you are satisfied with the terms and conditions.
But whatever your financial difficulty may be, never, ever borrow from unlicensed money lenders. The loans they offer are predatory in nature, with much higher interest rates, and will entrap you.
How to Secure Personal Loans Quickly
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If you are looking for a new home loan or to refinance, our Mortgage brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us for your business expansion needs.
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