When you are in need of money, you have a few choices as to where you can get funds.
In Singapore, getting a personal loan is the most preferred way to get funds for emergencies and other financial needs aside from borrowing from your loved ones or from the bank. When you apply for a personal loan from a bank or a moneylender, you do not have to worry about where you can use the money. It can be used anywhere once your personal loan has been approved and the amount can also be high depending on your request.
However, people tend to stay away from personal loans even if it is the most recommended means to borrow money in the country. Many people fear it because of the misconceptions surrounding personal loans and where to apply for such loans. If you believe these myths, it may cause you to pick the wrong type of personal loan to get and cause further problems for you once you hit a problem with your repayments.
Fortunately, these myths can easily be debunked and here they are below:
Personal Loans Can Erase Credit Card Debt
Before Singapore has introduced the debt consolidation plan, personal loans used to be the best way to get rid of credit card debt since you can borrow the total amount you owe for your credit card through your loan. Once you pay off your credit card debts, you can focus on just paying your personal loan alone.
Debt consolidation plans are actually a special type of personal loans. However, unlike regular personal loans where you can use the money for other things, debt consolidation is only for paying off debt. Debt consolidation also has a lower interest rate, which makes it the ideal program to use for clearing debt.
Personal Loans are the Most Expensive Loans in the Market
If you compare personal loans with collateral loans, like car or house loans, personal loans are more expensive. However, if you compare it with unsecured loans, personal loans are actually cheaper.
Of course, there are certain types of personal loans which are truly expensive like payday loans. Credit card debts are also expensive because of the high-interest rate. Although personal loans have comparable interest rates with that of credit cards, there are instances where personal loans are cheaper than other loans.
Personal Loans Can Be Used for Luxury Purchases
If you get a personal loan from banks and moneylenders, you can use the loans for everything you may think of. However, it doesn’t mean you should add your liabilities with the money from the loan.
Personal loans are affordable than credit cards, but you should use the money for emergencies and crucial needs rather than luxuries. Some examples of when you should use personal loans include surgery, medical emergencies, wedding, education, and others. If you use the personal loan for luxuries, you are only putting back the debts you need to pay, which can cause more troubles for you in the long run. It will also prevent you from getting another loan should an emergency do come and you need funds.
You should make sure that the personal loan you will apply for fits your financial capacity and see if you can support this monthly addition to your budget. If you can handle it, you can consider getting a loan.
Licensed moneylenders charge the same interest
Most people assume that moneylenders – including banks and financial institutions – throughout the country charge the same interest for personal loans. However, this is not true because moneylenders, including financial institutions, can apply different interest rates which are approved by Singaporean law. In Singapore, interest rates can start at 9% per annum to 26% per annum.
With this range, it is crucial that anyone aspiring to get a personal loan should first take into consideration the offers of all the moneylenders, financial institutions, and banks and how much interest is added. You need to compare their interest rates and the penalties they charge for late payments. You must also take into account the extra fees that will be included once you are given the personal loan.
When you note all the extra charges added to personal loans offered by the moneylenders you are looking at, it will give you an idea which one is cheaper.
Personal Loans can only be used if you have a high credit score
Banks, financial institutions, and moneylenders offering personal loans and other credit services actually do not take into account your credit score when you apply. What they do take into consideration are your salary and your financial capacity. If you want to secure a personal loan, you only need to have an average or above average credit score or an income of $30,000 annually. Some banks also provide low-interest personal loans for those earning $20,000 and up yearly.
So long as you have a stable source of income, you can get approved for a personal loan even if your credit score is not that high. If you cannot get loans from banks because of your credit history, you can turn your attention to moneylenders as they have more relaxed policies on who they approve.
What to do Next?
When applying for personal loans, you must ensure that you do proper research first to learn how personal loans work and what they entail. Every personal loan is different and not all of them can fit your needs and financial capacity.
When you sign on a personal loan without knowing what it fully entails, you will not just add another liability to your monthly expenses, but it is a liability you cannot easily cancel early. You must know every aspect of personal loans before you sign up so you won’t have problems in the long run.
Don’t hesitate to call the moneylender for clarifications if you do have questions. Moneylenders are open to answering any inquiries regarding their personal loans so call now if you are considering to apply!