Should you apply for a credit card? Consider these points first

credit cards in Singapore

So, you’re thinking of applying for a credit card?

It’s a decision that should not be taken lightly. Before you fill out that application, take a step back and assess your financial situation.

Are you in a good place to handle another monthly bill? Do you have a plan for how you will pay off your credit card balance each month? Can you afford to pay the annual fee? These are just some of the questions you need to ask yourself before applying for a credit card.

If you can answer yes to all of the questions above, then applying for a credit card may be a good idea. But if there are any lingering doubts or concerns, it might be best to hold off on submitting that application.

Not everyone should apply for a credit card

If you’re not good at managing your finances, then getting a credit card is only going to lead to trouble.

Are you aware of the fees and interest rates that come with credit cards? Many people get blindsided by these charges and end up paying a lot more than they expected.

Also, think about why you’re wanting a credit card. If it’s just to have another form of payment, then there might be better options out there for you. A credit card is only going to serve you right if you use it responsibly.

You should consider these points before applying for a credit card

When you’re considering applying for a credit card, there are a few things you should take into account:

  • Financial history

You should carefully consider your financial history before applying for a credit card.

If you have a history of trouble paying your bills on time, then you’re not ready for a credit card. Take some time to assess your financial habits and your ability to repay your debts. If you’re not sure, it might be best to hold off on applying for a credit card until you’re ready.

  • Spending habits
paying via credit card

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Are you somebody who likes to spend money freely?

If you answered yes, then you should probably avoid applying for a credit card.

The reason being is that you’re more likely to get into debt if you already tend to spend recklessly.

But if you’re cautious with your spending, then a credit card can be a wonderful way to build up your credit score. Just make sure that you’re always paying your bills on time and that you’re not borrowing more money than you can afford to pay back.

  • Debt-to-income ratio

Debt-to-income ratio is simply a measure of how much debt you have compared to how much money you make.

If your debt-to-income ratio is high, that means you’re already struggling to make ends meet. In this case, it’s probably not a good idea to take on more debt by applying for a credit card. You need to get your finances in order before you can be responsible for another monthly payment.

On the other hand, if your debt-to-income ratio is low, that means you have more room to take on more debt. But this doesn’t mean you should go out and apply for every credit card out there! You still need to be mindful of how much credit you’re using and make sure you can afford to pay your bill each month.

Credit cards can be helpful if used correctly

At their core, credit cards are simply a way to borrow money. And like any form of debt, they should be used with caution.

But if you do your research and find the right card for you, credit cards can be a helpful tool for building your credit history and improving your credit score. They can also provide you with some great perks, bonuses, and rewards.

Just be sure to always pay your balance in full each month, and never charge more than you can afford to pay off. That way, you can enjoy the benefits of a credit card without any of the headaches.

As we close, you should not apply for a credit card if you have any of the following characteristics: a low credit score, a spending addiction, or a lack of financial discipline. If you’re responsible with your money and have a good credit score, then a credit card can be a smart way to earn rewards and build your credit history. Just be sure to read the terms and conditions carefully so you know what you’re getting into.

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Five Things You Need Before Applying for Mortgages in Canada

Getting ready to buy your own home is a rewarding process. Soon, you will have the comfort that investment in your own piece of real estate will provide.

However, a less comforting part of the process is applying for mortgage loans. The application process is full of stress about how you will afford your mortgage, if you will get approved, and if you are going with the right lender. You can get preapproved, so you know up-front what you are eligible for, but preapproval requires a lot of paperwork.

Putting your paperwork together requires some time, but it will make the rest of the process much easier. Here are the documents you will need.

1. Proof of Identification

The first step is providing proof of identification to your mortgage broker or lender. The entity lending you money wants to know that you are exactly who you say you are and not someone attempting to commit fraud.

Any government-issued ID will help with proof of identification. However, it needs to have your current address on it, so make sure all of your address information is up to date. You will also need to provide your SIN number.

2. Proof of Employment and Income

The next important step in the mortgage process is proving to the lender that you are employed. Mortgage loans are investments by lenders in you, so they want reassurance that you will be able to pay that money back. The most reliable proof is proof of employment.

You have to prove that you are employed at a reliably paying job, preferably one where you have been for a year or two and that your income is enough to afford the mortgage. Documents that fit in this category are pay stubs, tax forms such as a T1 or T4, or even a letter of employment. If you have none of these documents because you are self-employed, you will need to submit detailed proof of income going back several years.

3. Information About Other Debts

When mortgage lenders agree to give you a loan, they want to know that you don’t have too many other debts that will get in the way of your ability to pay your mortgage. If you have regular car loans or student loan payments but can still afford a mortgage, that won’t affect your chances, but you will need to share information about them.

Mortgage lenders will also look at your credit score.

4. Proof That You Can Afford the Down Payment

Besides paying your mortgage, there are other expenses involved in buying a house, such as the down payment and closing costs. You may be able to afford a monthly mortgage payment, but banks want to know if you have the savings to afford a down payment as well.

You can prove that you have the money for a down payment by showing statements from savings accounts or investment accounts or proof that you have sold your existing house and will use that money for a down payment. If this is your first time buying a house in Canada, you can apply for the RRSP Home Buyer’s Plan and use that as proof of down payment.

5. Information About the Property

Finally, your mortgage lender wants to know the details of the property you will be buying to know the value. Documents include the real estate listing and accepted purchase and sale agreement.

Putting together the relevant documents for applying for a mortgage in Canada is difficult, but keep these categories in mind and start gathering paperwork today.

 

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Having a Credit Card is Not a License to Spend

Convincing yourself that you are not spending real money is easy when you charge for items on your credit card. Technically, you are correct! You are not spending money, in fact, you are borrowing money.

Using your credit card means that you will have to pay the bill eventually. The promise of small minimum payments can entice you into thinking that these purchases are bargains. Unless you pay back the purchase immediately, you will not feel the pain of the bill for another month.

Be responsible with your credit card by treating it like cash and swiping only what you know you can pay back in full. You can reap its benefits by using your credit card in the following situations.

#1: GROWING YOUR REWARD POINTS

Many credit cards provide reward points for certain categories of spending like groceries, gasoline, air fares, and restaurants. When earning thresholds are reached, points can be redeemed for travel, shopping, and more. Choose a card that best suits your spending patterns.

#2: PAYING RECURRING BILLS

As long as you make payments on time, recurring payments will keep that line of credit open so you can continue to maintain or boost your credit score. Any recurring payments you have such as subscription on Spotify or Netflix can be paid through your credit card.

#3: SHIELDING YOU FROM EMERGENCY

Are you ready for unexpected expenses? When this happens, you need some time to cushion the blow. You can use your credit card in case of an emergency, including fixing, changing your tire or repairing a broken window. Be sure to repay more than the minimum on your credit card payments to avoid unnecessary interest.

Image Credits: unsplash.com

#4: SHOPPING ONLINE

Senior Industry Analyst at CreditCards.com once said: “Chip-enabled cards are very good at deterring in-person fraud but that doesn’t help you online, and that’s where most of the fraud has gone.” You can use your credit card when shopping online instead of shopping with your debit card.

Check your browser and shopping apps to ensure that your debit card is not saved on any of these platforms. You can either add your credit card information or delete all your card information to make it harder for you to overspend online.

Sources: 1, 2, & 3

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Top 5 Things You Should Know About Getting a Home Loan

Getting a home loan can be one of the most important financial decisions you’ll ever make, and while the process can seem overwhelming, it doesn’t have to be. If you know what to expect and how to prepare, you’ll be better equipped to get the best deal on your mortgage and secure your home faster than ever before. Here are five things you should know about getting a home loan.

Top 5 Things You Should Know About Getting a Home Loan

1) Understand the process

The home loan process can be confusing and even overwhelming at times, but it doesn’t have to be. First, get your paperwork in order: gather your pay stubs, credit report (including your latest report), bank statements, property tax records, homeowners insurance records and any other supporting documents that may help with qualifying for a mortgage. Remember that the amount of loan you need and will receive will depend on the type of home you are looking to purchase, for instance if you are looking for places that have indoor gas fireplaces versus a small one bedroom with no windows, the insurance amounts among other variables will differ, hence impacting the overall loan.

2) Save for your down payment

One of the most important things to know about getting a home loan is that you will need to save for a down payment. The amount you will need to save will depend on the type of loan you get and the lender you use, but it is typically around 3-5% of the purchase price of the home. If you have questions about how much your down payment should be, talk with a real estate agent or mortgage broker to see what they recommend. They can also help you figure out if you are able to afford the monthly payments and provide more information about what kind of loan might work best for you.

3) Calculate how much your monthly mortgage payment will be

When you’re ready to buy a home, one of the first things you’ll need to do is get pre-approved for a mortgage. This will give you an idea of how much money you can borrow and what your monthly payments will be. Here are the top five things you should know about getting a home loan. Before buying a house, it’s important to understand how much you can afford. That’s why pre-approval is such an important step in the process. It will tell you what kind of house you can afford and the size of mortgage payment that would be best for your budget.

4) Choose your mortgage type (Fixed, variable, interest only or offset)

If you’re looking to purchase a home, you’ll likely need to obtain a mortgage. There are many different types of mortgages available, and each has its own pros and cons. Fixed-rate mortgages, for example, have a fixed interest rate for the life of the loan, but this means your monthly payments will be higher. Variable-rate mortgages have an interest rate that is adjusted periodically at set intervals or whenever the bank changes their prime lending rate. It can fluctuate up or down as well. Interest only mortgages allow you to pay only the interest on your loan during the first few years while the principal stays unchanged. Offset mortgages allow you to offset your savings account against the outstanding balance on your mortgage so that when you make repayments, it reduces both what’s owing on your mortgage and what’s in your savings account by the same amount.

5) Have patience

The process of getting a home loan can be long and frustrating, but it’s important to be patient and understand that the lender is just trying to protect their investment.

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5 Things to Consider Before Getting a Personal Loan

Personal loan is one of the most sought-after loans in Singapore. With a personal loan, you can borrow funds from a financial institution and pay them back in fixed instalments over an agreed period. However, you typically need to meet a minimum income requirement and to pass a background check on your credit history.

Generally, it is much cheaper to get a personal loan rather than borrowing money from a moneylender. Moreover, you will need to submit a lesser number of documents compared to other types of loans such as car or home loans. These factors contribute to the popularity of personal loans.

Apart from these, consider the following points before getting a personal loan.

#1: PERSONAL LOAN HAS A MINIMUM INCOME REQUIREMENT

The eligibility for personal loan incorporates your income and your age. You need to pass the minimum income requirement (e.g., S$30,000 per annum) and the age requirement (i.e., usually under 60 years old). These strict requirements ensure that you will be capable of paying off the loans and that you will be paying on time.

#2: PERSONAL LOAN IS NOT FOR EVERYONE

Now that you know the basics of personal loans, you must remember that it is not for everyone. You need to contemplate the purpose of the loan before getting one. Compute for the monthly fees and other charges.

You see, it is better to use your extra funds if you intend to use the loan for lifestyle desires. Lifestyle desires include purchasing a new gadget or booking an international cruise. On the other hand, you need to carefully assess your business plan and financial situation if you intend to use the money for business and investment.

#3: PERSONAL LOANS CAN MAKE OR BREAK YOUR CREDIT STANDING

Examine your credit standing as it affects your personal loan application. Paying your dues on time is one way to keep your credit score on the good side. In contrast, accumulated monthly charges and overdue payments add red flags to your credit score. As a new applicant, carefully consider the terms and conditions of the bank.

#4: PERSONAL LOANS COME WITH SERVICE FEES AND OTHER CHARGES

Do not be fooled by the attractive loan prices flashed by the banks and financial institutions. You can end up paying more money due to service fees and other charges. You will pay the monthly fees along with the effective interest rates. If you plan to pay by cheques, returned checks can also be charged. Thus, new applicants must consider other forms of payment such as mobile banking.

#5: PERSONAL LOANS SHOULD BE YOUR LAST RESORT

Building an emergency fund is a part of the fundamentals of being financially savvy. When an unfortunate event takes a toll on your finances, you still have reserves. If your emergency funds have depleted, personal loans should be your last resort.

Avoid spending your personal loan to impress other people with your new gadget or with a grand getaway. Spend your extra funds on your lifestyle desires instead of borrowing money.

Personal loans have a variety of advantages and disadvantages. We hope that you can manage your finances well if you decide to avail yourself of a personal loan in the future.

Sources: 1 & 2

 

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