Credit & Loan Archives | Page 6 of 17

A car loan is perhaps one of the best loans to be ever created by lenders. It allows you to finance a vehicle easily that can help you cut down on commute costs in the long run. If managed properly, you will end up a proud owner of a new or used car. However, if you mishandle the loan and make delays in the monthly payments, you might end up in emotional and financial stress.

You could be struggling to reach a decision. We are sharing a list of pros and cons to help you make an informed decision.

Pros

You Get a Card Without Paying a Dime Out of Your Pocket

Technically, the car you buy is paid for by the bank. Financing this loan 100% has now become a common practice. Not everyone can buy a car no matter how much money they have in their savings account. Hence, a car loan is such an attractive option.

It Improves Your Credit History

Unlike small loans that don’t add much to your credit score, a car loan allows you to improve your credit history. As long as you keep making the monthly payments on time, you will see your score increase gradually. The improvement in your credit score will help you get approved for a home loan later.

Low Rates

In most cases, a car loan is secured. Banks or lenders, such as Jacaranda Finance, typically offer a 5-year term. On a $25,000 loan at a 3.5% interest rate, you will only have to pay a few thousand dollars. Plus, with the extended period, you can divide the payments either by weeks or months.

Tax Deductions

If the car you purchase is for business, the cost of running the car and its interest payments will be tax-deductible. Your claim for the business portion cost depends on how the car is used for work-related errands.

Cons

The Bank Owns the Car Until Your Make the Full Payment

A car loan is secured where the collateral is the car itself. Meaning: if you fail to make the full payment, the lender or bank will repose the car. This could also affect your credit score and leave a negative marking on your credit history.

Depreciation

As time passes, your car’s value depreciates. The depreciation rate depends on the model of the car. In some cases, the remaining amount of the loan is higher compared to the car’s market value, which means you are paying more than its price tag. If you decide to sell the car and get another one, you will have to cover the difference between what you make from the car’s sale and the remaining loan amount you owe to the lender, and this can pose a problem.

So, you now know all the intricate details of a car loan. The pros outweigh the cons, which, in our opinion, makes the loan a great option. Just imagine getting in your car every morning rather than waiting for the bus and then finding no seat.

Don’t do these things during a recession

According to a senior economist from DBS bank, Singapore is very likely out of a full-fledged recession. To be exact, a recent news report in April this year revealed that our economy grew by 0.2% in the first quarter.

While it’s good news, it might be too early to rejoice over the numbers. Economists noted that the trend does not necessarily mean that the economy is doing well. But it’s on its baby steps to pre-pandemic levels.

Since COVID-19 has been with us for 1.5 years and will eventually become endemic, it’s always wise to prepare for rainy weather. If you share the same sentiments, don’t do these things during a recession.

#1: Accept the request to be a cosigner

Maybe your long-time best friend or a family member has requested your help to be a cosigner for a loan they’re planning to take. But in uncertain times, it’s better not to accept the plea.

No matter how much you can vouch for the person’s personality to repay the loan, nothing is an absolute guarantee. Just think about the possible consequences should the borrower disappears or is simply unable to pay back the loan due to sudden unemployment or downward spiralling financial status.

#2: Taking out a personal loan

Image Credits: fortunecredit.com.sg

Speaking of debts, it’s advisable that you don’t pick up a personal loan when the economy is terrible.

That new car you’ve been dreaming of having or that private housing you would like to own with your future spouse can wait. During a recession, you may lose your job on short notice, which will significantly affect your ability to repay your monthly loans. The worse thing is to be faced with bankruptcy should the situation aggravates.

#3: Slack on your job

Unless you’re planning to force your superior to fire you, now’s not the time to slack on your job.

Yes, working from home is still the default as Singapore slowly moves to Phase 3 (Heightened Alert). But that doesn’t mean you can take this opportunity to produce mediocre work. If you want to prove that you’re worthy of the salary or position you’re holding, be sure to demonstrate that you’re an indispensable team member.

#4: Make sudden investments

It may be tempting to put your money into investments right now, considering that you don’t want to be working your arse off and still possibly be on the company’s chopping board when there’s an economic slowdown.

However, don’t make sudden investments without prior extensive research. Be sure that you’re able to weather the storm if your money’s gone up in a cloud of smoke due to unforeseen circumstances. Remember that the stock market will always be volatile. Don’t play the game just because everyone else is doing so.

Perhaps now’s apt to relook into your monthly budget or consider running a side business to boost income?

A brief look at debt settlement options in Singapore

Do you know that the average household debt in Singapore is about S$55,000 per capita?

With a value that high, there’s no doubt that it’s about time to learn how to manage your debt and minimise it as much as you can. Financial freedom is within reach if you’re able to settle your debt in time the right way.

Here’s a brief look at various debt settlement options available on our sunny island.

#1: Self-Administration

One of the easiest ways to manage your debt is to directly discuss with your creditors to see if you can potentially negotiate or appeal for a cheaper instalment repayment plan.

However, you need to approach them with some research done beforehand. In your written appeal, fully flesh out your financial situation and suggest a repayment amount that’s okay for you.

Don’t forget to include documental proof like income and CPF statements whenever applicable to bolster your appeal.

#2: Discounted Lump Sum Settlement

Image Credits: business-standard.com

Once you’ve accumulated enough financial capital, you can ask your creditors about repaying your debt in a discounted lump sum.

A quick way to build up your lump sum is to consider selling off several assets or taking a low-interest personal loan from a reputable company or financial institution. Then, pull out those negotiating skills to seek a discount.

#3: Debt Consolidation Plan (DCP)

Under this refinancing program, you’re able to pool together all your unsecured debts using one financial organisation.

You should note that some unsecured debts are not allowed, such as medical loans, joint account debts, and more. Unless you don’t fit the DCP criteria, you’re eligible to apply directly at your participating financial institution.

Once your application passes, your unsecured credit facilities will close, and a revolving credit facility will open to aid you in payments.

#4: Debt Management Program (DMP)

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Whenever heavy financial stress hits and you’re unable to pay your debt back, not all hope is lost.

The Credit Counseling Singapore (CCS) runs a DMP that provides financial counselling sessions to examine your payback ability and ideally settle your debts in one decade.

The CCS will help create a repayment plan with lower interest rates and more extended repayment periods to enable you to pay back those debts. Among other benefits, the program is perfect for you only if you qualify.

#5: Bankruptcy

As an individual or a business, you can file for bankruptcy with the High Court if you’re unable to repay a debt. This is commonly the last resort because you will face some strict consequences if you pursue this option.

You will be assigned a Private Trustee-in-Bankruptcy (PTIB) or Official Assignee (OA) who can help assess your situation and figure out a target contribution on your behalf to repay your creditors.

#6: Debt Repayment Scheme (DRS)

Image Credits: myfrugalhome.com

As we come to a close, there is a way to avoid bankruptcy – your OA can lead you through a DRS.

But because you’re not allowed to apply for this option directly, only your OA can approve you after previewing your bankruptcy application. Upon fulfilling the necessary criteria, you will not be labelled as bankrupt.

However, you must commit to a repayment plan that spans at least five years. For more information on DRS, you may head to the Ministry of Law Insolvency Office’s webpage.

Final thoughts

Debt settlement can be scary if you do not possess sufficient knowledge on the topic. Why not speak to a trained professional if you need help resolving your debt problems?

Folks who need 1-to-1 financial counselling can book an appointment with the CCS. Do note that there’s a one-time fee of S$30, but no further fees required for subsequent meetings (if necessary).

Nothing is impossible to solve. Take heart!

8 questions to ask yourself before getting a personal loan

Are you in need of quick cash for an emergency? One of the most important factors when considering applying for a personal loan is the interest rate.

Whether you’re planning to go for the Standard Chartered CashOne Personal Loan (as low as 3.48% p.a.) or CIMB CashLite (3.5% p.a.), pause for a moment to think it through.

Ask yourself these questions before getting a personal loan.

#1: Why do you need the money?

There are many reasons you may wish to borrow money. Maybe you’re faced with medical bills or unexpected home renovations.

For those looking to pay off high-interest debt, applying for a personal loan would make sense too. For example, if you have a credit card debt at a 25% interest rate per year, it would be wise to take up a personal loan with a 7% interest rate to consolidate your debts and pay it off first.

Go ahead and get that personal loan if you know it’s for a good cause, such as reducing the interest.

#2: What is the interest rate?

Image Credits: Investopedia

Speaking of interest, here’s our next point.

Before you borrow money, understand that the lender will make a profit by charging you interest. According to Investopedia, interest is a charge applied to you, expressed as a principal percentage. And, of course, a lower interest rate is better for you as the borrower.

However, it’s not as simple as it seems. There are two rates to consider: Applied Rate (AR) and Effective Interest Rate (EIR). In short, AR keeps the loan principal as a constant over the life of the loan. In contrast, EIR calculates the reduction in principal as you pay down the sum.

Do more research if you are unsure of the terms.

#3: Are there other charges?

In addition to interest, there may be additional fees.

Possible charges include a fixed annual fee tagged to borrowing, a late payment fee if you miss a payment, or a change fee if you need to renegotiate your loan terms.

Some banks even charge an early repayment fee as early repayments affect a portion of their predicted profits. Be aware of these possible charges before you move forward with the application.

#4: Can you manage the loan repayments?

Image Credits: The Economic Times

When considering whether to take up a personal loan, you must decide if you can handle the repayments.

Once you know the interest rate, extra fees, and anticipated monthly repayment amount, make necessary calculations from your income to see if you can afford to pay it back.

To do so, you want to write out a detailed budget including your spending needs on groceries, household bills, and miscellaneous expenses. From the breakdown, see if you have enough leftovers to weather an unforeseen financial storm.

Yes, that’s for your rainy days.

#5: How will it affect your credit score?

Lenders use credit scores to decide whether to issue you a loan. Credit scores affect loan terms such as interest rates, tenure, and principal limits.

Your payment history, the ratio of debt to credit, the age and quantity of your accounts you own, and any derogatory reports such as loan defaults can affect your credit score.

If you think you can do without a personal loan this time around, then skip it. Ensuring that your credit is in good shape will help you get a better loan in the future when you seriously need it.

#6: What is your borrowing limit?

Image Credits: Yahoo Finance

Are you aware that The Monetary Authority of Singapore (MAS) has established a Credit Limit Management Measure (CLMM)?

It prevents financial institutions from lending new credit facilities to borrowers with debts greater than six times their monthly income. This credit limit helps to protect borrowers from getting into high debts too much to bear.

And of course, other than CLMM implemented by the authorities, other factors will also affect your borrowing limit. This includes your credit score, monthly salary, and the relationship you have with the bank.

#7: How reliable is the lender?

Be mindful that some people and institutions may not be worth your time and transaction in any situation involving money.

If a lender fails to run a credit check, seems disorganised, or cannot answer basic questions, be wary. You want to deal with a reputable banking institution and not one that agrees to a loan without reviewing your credit history.

#8: When will you get the funds?

Image Credits: Jmc Accounts

Most people seeking personal loans are racing against time. If that is a factor, you want to find out how long is the approval process. From approval to disbursement of the loan, speeds will vary from bank to bank.

Here are three personal loans promising instant processing times:

Final thoughts

The decision to borrow money should be considered carefully. Evaluating and understanding your loan’s reasons, the interest rates, loan repayments, and more mentioned in this article can help you make the best decision possible when seeking a personal loan.

Top tips on how to pay off credit card debt quickly

Getting your first credit card is often a liberating experience for many. The idea of having that financial freedom in your wallet and being able to buy almost anything on credit is exciting but sometimes dangerous.

Without financial discipline and careful planning, debt can rack up fast. One missed payment can turn into two, and suddenly interest pools up until you’re staring at a balance you can’t imagine paying back.

Here are some top tips on how to pay off your credit card debt quickly, if that is you.

#1: Settle smaller debts first

Having several debts to pay is a stressful encounter. We could all do with a little motivation, no?

Organising your debt priorities from the smallest to the largest can help nudge you to continue paying off your credit card debts and reap the rewards of a debt-free life in the future.

#2: Go past minimum payments

Image Credits: The New Savvy

Maybe you’ve read somewhere or heard from someone that minimum payments are sufficient to help you “get by”. But merely making minimum payments every month is a dangerous practice.

What you want to do is to go beyond minimum payments to prevent your credit card from accumulating a tremendous amount of debt over time. It will also keep your credit card debt from growing out of control.

Over time, these payments will help break down your “debt snowball” and keep things at a manageable level.

#3: Take advantage of a balance transfer

Interest rates are among the quickest ways we see credit card debt expand without our knowledge or awareness. If you have a large credit card debt you can’t anticipate paying off any time soon, but it’s gathering a lot of interest, you can apply for a balance transfer credit card.

So what’s a balance transfer? A balance transfer is similar to a short-term (up to 24 months) 0% interest loan, often via a credit card or credit line account. It will allow you to transfer your debts to an interest-free account and stop collecting high interest on your existing debts.

The main idea here is that you’re kind of taking a short-term loan with an interest-free grace period so you can avoid paying rolling interest payments on your credit card debts.

Speaking of which, you can also consider taking out a personal loan.

#4: Apply for a personal loan

Image Credits: Friday Finance

You can apply for a personal loan if you are seriously in a pinch and need to get rid of your credit card debt fast.

Upon approval, you will receive a cheque that you can use to pay off all of your outstanding credit card debts. However, you will be responsible for paying back that loan, which usually relies on its own set of repayment requirements.

The advantages of getting a personal loan include a possible lower interest rate on your debt and a fixed repayment period (up to 84 months) to clear it off. With that said, usually, individuals with excellent credit scores, high salaries, or loan amounts can enjoy the lowest rates.

You can refer to more pros and cons of using a personal loan to pay off your credit card debts here before deciding if it’s suitable for you.

#5: Opt for debt settlements

If you’re sure that you won’t be able to pay back the entire balance of your credit card but want to try and eliminate them, it might be time to write an appeal letter to your creditor.

Also known as debt settlement appeal, it’s the most fuss-free form of debt settlement, and you won’t need a lawyer for it. But do prepare supporting documents like your income and CPF statements to accompany your written appeal.

Apart from debt settlement appeal, these are other debt settlement options in Singapore:

Discounted lump sum settlement

Instead of an instalment payment plan, you will negotiate with the creditor for a lower total amount that your owed sum. As the name suggests, you must pay the agreed amount in one bulk quantity.

Debt consolidation plan

By choosing this method, a single bank or financial institution will settle your outstanding debts on your behalf. In return, you will pay back the bank in fixed monthly instalments. This plan is only applicable for Singapore citizens and permanent residents with a specific income cap and assets value.

Debt management program

Credit Counselling Singapore (CCS) provides this program for borrowers in severe financial hardship and cannot pay for unsecured loans due to banks and authorised moneylenders.

Debt repayment scheme / Bankruptcy

Bankruptcy is often the last resort after you’ve exhausted all your options. One may also be placed on a debt repayment scheme, a pre-bankruptcy scheme, to avoid bankruptcy.

For more details, please click here.

Final thoughts

until debt tear us apart graffiti on a brick wall

Image Credits: unsplash.com

Though a credit card can be a significant source of financial relief, the debt can build up quickly and cause enormous problems for people who don’t know how to manage it.

Tackle your credit card debt head-on and pay them off quickly using the abovementioned trustworthy techniques to minimise the odds of you reaching bankruptcy.