Ravi Chandran
If you want to take loan, think through it thoroughly as it is a huge responsibility
Taking a loan for debt riddance is a huge responsibility, therefore you have to think through it thoroughly. Borrow only when you need to and have carefully considered how it may affect you. You need to consider some factors before taking a loan, this includes your family.
If you take loan using a cash advance on a credit card remember that this is a very expensive proposition.
There is usually a fee charged for advances along with very high interest rates that begin ticking away from the moment you initiate the advance. Cash advances are very costly, high-risk item. The cost of a cash advance from a credit card can be 500 percent or more.
In your effort in debt riddance, don’t dig one hole to fill in another. Some lenders may offer a solution for short-term emergencies, but they are not meant as a long-term fix for credit card debts. When calculated on an annual basis, their interest rates are astronomical.
Short term loans have advantages, like the possibility of getting your loan extended, no credit check and avoiding bounced checks or late fees on credit cards. But that’s where the good ends. Remember that you have to pay back the credit taken plus fees, and extending your credit can double or triple your fees. The interest rate can be as much as 100 percent or more of the amount borrowed and you could end up owing more debt after obtaining short term credit.
Before you take loan, consider other expenses such as car monthly installment, transport expenses, food, child’s education and other expenses. The best way is to write down all your expenses on a piece of paper and do the necessary calculation. After which, apply for the credit when you are sure that you have the ability to repay the loan.
If you have financial discipline and are willing to put your house at risk, home equity loan could be a fix for debt riddance. There are pluses, such as a lower interest rate and the deductibility of the interest payments. And a home equity loan can be relatively fast compared to a full-blown mortgage loan.
A home equity loan is also called cash-out refinancing, or a second mortgage. A home equity lets you borrow money, while using your house as collateral. Home equity loan is another option available to homeowners who may have a tight cash situation but have have a valuable house at their disposal, which they may sell and downgrade. But a home equity credit lets you get money out of your house, without having to lose it.
If you have to take loan remember that some loans are more quickly obtained than others
There are plenty of advantages: when your house is the collateral, the bank feels a lot more secure; they know you can’t exactly pack up your house and run away with it. Because there’s something they can foreclose on, banks consider home equity loans to be low-risk, secured credits. That means they charge a super-low interest rate, seldom above 1.3 per cent per annum. For reference, that’s less than a third of your CPF Ordinary Account rate (up to 3.5 per cent per annum), and about 1/6th of a personal loan rate (about six per cent per annum).
That super-low interest rate means home equity credits are quite cheap, and can provide a much bigger loan than you’d get through, say, a personal installment loan. Most other, unsecured loans can only lend you up to four times your monthly salary.
On top of this, the government in 2017, made regulatory changes to home equity loan restrictions. If your house is already paid up, you can borrow up to half its value, without having to meet Total Debt Servicing Ratio (TDSR) restrictions.
If you live in HDB your options to take loan is more limited
Sadly though, home equity loan can only be gotten for private a private property, HDB not allowed.
HDB says, “HDB flats can only be mortgaged to banks or financial institutions to finance the purchase of the flat itself. You are not allowed to use your HDB flat, which has been fully paid for, as collateral to banks to raise credit facilities for private reasons.“
This is how home equity loan works:
Suppose you have purchased a property in 2010 for $650,000.
Loan was 80% = $520,000 amortized over 30 years.
In 2018, a new valuation was done and the property is worth $1 million.
The current loan amount is $440,000.
If this property loan is the only one you have in Singapore, then you may qualify for 80% lending on valuation, which is $800,000.
Equity home loan amount = (80% * valuation) less current loan amount less CPF usage including accrued interest.
Assuming you have used $160,000 CPF with accrued interest, this is the home equity loan amount you would get:
$800,000 – $440,000 – $150,000 = $200,000
Together with the outstanding credit, the total debt on the property now would be $640,000.
How to Take Loan Quickly
If you have limited capital and are searching for a personal credit to expand your business, you should speak to professional consultants as they can set you up on a path where you can get it in a quick and seamless manner.
Loan consultants have close links with the best lenders in town and can help you compare various credits and settle for a package that best suits your needs. You should also find out about money saving tips.
Those seeking home equity loans should check our affordability tools which can help you make better refinancing decisions. Calculators can help you ascertain the fair value of a property and find properties below market value in Singapore.
If you are looking for a new home loan or to refinance, 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 their services are free of charge – which means it’s all worth it to secure credits through them for your cash needs.
