Why Personal Loan Is Not As Daunting As It Sounds

All is fine and dandy when your life is nicely panned out for you, but as Singaporeans, we can never be too cautious. What if a once-in-a-lifetime opportunity knocks, and you suddenly require a larger-than-expected sum of money to seize this opportunity?

Opportunities can come in different forms in your various stages in life. There may be investment opportunities, a chance to go abroad on an exchange programme, or a chance to further develop your skill sets.

If you find yourself short on cash and need a sum of money to tide you over a short period of time, a personal loan can come in useful.

When we think about loans, most would frown upon it. We would assume that borrowers are incapable of managing their own finances, or that they are financially irresponsible. That is but a misconception, as personal loans are merely tools that can improve our lives if used in a responsible and wise manner.

As compared to home loans, car loans or educational loans which have specific purposes, personal loans are a more flexible type of loan which can be used for almost any purposes you wish. The most straightforward of which are personal instalment loans, where you borrow a lump sum of money from a bank. You can use the borrowed cash for any reason you like. Payment is in fixed monthly payments over a specified time period.

You never know when you might need a loan, but it’s always good to be aware that there is this option out there without breaking the bank. A loan can be useful in the following situations:

  • A buffer for depleting all your savings – taking a personal loan instead of using up your emergency savings in case of, well, emergencies, and you need the savings
  • Seizing opportunities with smaller cash outlays – taking a personal loan for immediate cash to enrol in a workshop or class to improve your skill sets and employability, which will result in an eventual higher return
  • Fulfilling aspirations – perhaps an exchange abroad, a hobby you’ve always wanted to master or even an important bucket list item
  • Repaying a high-interest loan first – taking a personal loan to pay off higher-interest loans, such as credit card bills

Not all banks and money lenders are created equal. Different financial institutions offer different incentives – some offer lower interest rates while others have lower minimum criteria.

Ultimately, it’s always good to compare loans before applying for one, so you end up with the best bang for your buck for your personal goals and budget – one that has the lowest interest rate, the lowest fees, meets your requirements and has the best welcome offers.

SingSaver offers a convenient platform for comparing between different financial institutions. For a limited time only, get the first 3 months of interest FREE when you apply from SingSaver’s website. That’s not all — SingSaver has also partnered OCBC to offer 0% interest free loan applicable for loan with 2 years tenure.

Not only does choosing the right loan mean meeting your goals earlier, it also means that you can pay off your loans faster.

So while you’re all up for borrowing, be aware of the higher interest rates accounts that you’re liable to paying, so that you clear off those loans first.

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How to find the best personal loan without damaging your credit rating

A personal loan can help you amass funds that you would require to pay for pressing expenses. However, if you have a poor credit score, you are likely to find it very difficult to get a personal loan approved. A bad credit rating will spoil your chances of acquiring a personal loan. A poor credit score or a poor credit history indicates your failure to pay back your loan amounts. Hence, if you are finding it difficult to get a personal loan approved, you should improve your credit history first.

Often we make the error of assuming that specific factors affect our credit rating when they have no impact. Factors such as your debit card usage, marital status and age have no role in determining your credit score. Other details such as your employment status, bank balance and income have no direct impact on your score, though it might influence your approval.

You will have to give individual attention to the factors that are likely to impact your credit score and the chances of getting a personal loan. Simply getting an appropriate personal loan is not sufficient as you also must have a decent credit rating to benefit from it. If you are looking for a personal loan by taking on a trial-and-error method it will be destructive and fruitless.

Let us look at some tips you can follow to find a personal loan without hurting your credit score:

Pay your dues on time

Even if you fail to pay your credit card bills and other dues on time, try to pay it within a month of the due date. Making payments within 30 days past the due date is accepted normally. By doing so, you can opt for the personal loan of your liking, without worrying about getting rejected. It will also have a positive influence on your credit score.

Avoid applying for personal loans from different lenders

If you are applying for multiple personal loans at the same time, your credit rating is likely to take a hit. This indicates your lack of confidence in obtaining a loan and which will reflect badly on your credit rating. Instead of applying for personal loans from multiple lenders, you must check the prospective rate of interest and eligibility by using a Personal Loan Eligibility Calculator.

Get a quote from the lender of your choice

If you apply for a personal loan formally, the lender will carry out a credit check. It is likely to leave a negative score on your rating. If this takes place often, your score will go down drastically. So, find out if you are eligible for a loan before applying by talking to the moneylender in person and going through the eligibility criteria.

Compare the fees charged by different lenders

Many banks offer low-interest rates but charge substantial supplementary fees. These include high prepayment penalties, excessive processing fees, arbitrary upkeep charges and more. These charges are likely to raise your burden and may lead you to miss a monthly instalment that may eventually damage your credit rating. So before applying, compare the charges and fees imposed on personal loans.

Seek help from non-banking financial institutions

Your chances of getting a loan will enhance significantly if you widen your pool of options. Apart from banks, approach non-banking financial institutions. These institutions are listed with Monetary Authority of Singapore and offer a wide range of loans. Like banks, these institutions also depend on your credit score and history to evaluate your risk as a debtor. However, these institutions may have different packages for different risk appetites.

Your credit score is the most significant financial tool to get the best personal loan. If you have the right credit score, you will easily get the approval for loans at the best available interest rates. As a result, it is very important that you make sure your lender offers you competitive interest rates and simple personal loan eligibility calculator together with other sufrepplementary benefits.

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4 Types Of Car Loans In Singapore

1. BANK’S CAR LOANS

Bank car loans are the most accepted, traditional, and typical route consumers take. Due to their traditional nature, loaning money in the bank requires the completion of fixed procedures that attest your financial stability.

You will be asked to complete a loan application that may include: your name, NRIC, date of birth, address, current and previous employers, length of employment, occupation, sources of income, total monthly income, and information about existing credit accounts. This along with your application shall help the bank decide if you are trustworthy and credible enough to pay the loan. This is why you must have a stable income and good financial history if you are considering this option.

The interest rates for bank car loans can go as low as 2.28% (DBS Car Loans) or 3.25% per annum (Maybank Car Loan).

2. FINANCE COMPANY’S CAR LOANS

Finance companies, licensed under the Finance Companies Act, are focused on providing saving deposits and credit facilities to individuals and firms.

They typically work with banks, insurance companies, and auto dealers to give the best possible deals to their clients. If you are striving for the cheapest price for a used car, get a loan from a finance company that is also an auto dealer. Such company purchases vehicles from various sellers for resale. Aside from this, finance companies are a great source for refinancing loans.

For example, Speed Credit Pte Ltd offers a car-refinancing loan with a maximum amount of 80% of its Prevailing Quota Premium.

3. LICENSED MONEY LENDER’S LOANS

Licensed money lenders are businesses that are regulated by the country’s law. Unlike the loan sharks that lend with high interest rates, licensed money lenders’ fees are controlled by the parameters of the law, which means you can expect to have a fair deal. Some of the known money lenders in Singapore are Max Credit and CashMax Credit.

It is important to realize that the loans offered by the licensed money lenders are heavily influenced by your annual income. If your annual income is more than S$30,000 but does not exceed $120,000 then you can loan up to 4 times the amount of your monthly income. And if your annual income is at least S$120,000, you can loan as much as you want.

So if your annual income is less than S$20,000, licensed money lenders are the ideal option for smaller loans such as repairing your existing car.

4. SELLER’S CAR LOAN

An unconventional loan option is arranging a deal directly with the seller. You can either pay the seller in installments or pay the seller with a deposit. By paying in installments, you can only get the full ownership of the used car once you have paid the complete amount. By paying the seller with a deposit equal to what he has paid in the bank, the balance will be your responsibility after transferring the ownership to you.

Image Credits: pixabay.com (CC0 Public Domain)

Image Credits: pixabay.com (CC0 Public Domain)

This option only applies to used cars.

Sources: 1, 2, 3

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Smartest and Dumbest Ways to Use Credit Cards

Credit Cards

Here’s the truth: whether you like it or not, we are living a life that has been accustomed to using credit cards. They seem to be rampant everywhere. There are even some places that only take payments via credit or debit cards. And it is also a given fact that most of us have at least one credit card in our wallets.

But take note that accessing credit cards is not a right but a privilege. If you make mistakes, you might just end up in a sea of debt that you’ll find very hard to clear.

With the advent of credit cards comes the dumbest and smartest ways to use it. Here’s a quick list of the dumbest moves that will surely leave you with a lot of credit debt.

Making late payments

Never mistake a due date as a guideline.  It is your responsibility to execute timely payments for your credit use. Remember that although there are rules that must be followed, credit card issuers remain to have the right to raise rates when it comes to late payments.  When you pay late, the following will apply to you:

  • You will be obliged to pay a late fee, and
  • Higher interest rates may apply to your future purchases. In some cases there may be an interest rate adjustment, but this is not an absolute fact.

Paying minimum for your credit card use

If you are paying the minimum in your credit debt now and then, it’s not actually a big deal, but it won’t be good at all anymore if you make it a habit.  Paying only the minimum can dramatically increase your credit debt.

Abusing credit card cash advances

While there may be emergencies where your only option is to take cash advances, always remember that it is not a cheap deal.  In general, licensed moneylenders can be a quick fix for your financial needs but it can incur up to 48% interest per annum. You can consider a personal loan before considering cash advance.  There are several free personal loan calculators that can help you assess which will help you save more.

If there are dumb ways to use your credit cards, there are also considerably smart ways to utilise them. Credit cards offer valuable rewards when utilised properly.  Here are the smartest ways you can utilise your credit card.

Earn credit rewards for spending

When you use rewards credit cards, it can earn valuable points, air miles and even cashback for up to 6% of your purchases.  This might be a meager amount but some card holders earn a few hundred dollars with cashback rewards on a yearly basis.  The best cashback credit cards in Singapore are usually just within reach.

Credit cards as a payment method

Paying your credit card statements within the grace period will help you avoid credit charges.  When your credit cards are used as a payment method, it will allow you to enjoy a handful of benefits at no cost to you.

As your protection from devious merchants

When the merchant fails to deliver the services or items you have purchased, you can get help from your credit card provider during this dispute. If your credit card provider can verify your claim and block your payment, you just might be able to get your money back. However, keep in mind that this is only applicable with certain products. Always check the terms and conditions before applying for a credit card.

As a way to build your credit

Building your credit score is the best way you can do to qualify for the most affordable rates when doing big purchases.  Observing how your credit card score affects your chances of getting a loan approval.  If your credit score is bad, you don’t get approval on a loan.  At most you will get a higher loan quantum with a good credit score. The best way still to improve your credit score is to get a personal instalment loan and pay it back consistently.

(This article is brought to you by SingSaver.)

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Personal Loan 101: Golden Information You Should Know

Like a kid in a candy store, consumers have various loans to choose from. From education loan to home loan, we shall look at personal loan through a microscope.

Personal loans are used for family emergencies, home furnishings, or consolidating other debts. These loans are often short-term.

1. APPLICATION PROCESS

You will be asked to complete a loan application that may include: your name, NRIC, date of birth, address, current and previous employers, length of employment, occupation, sources of income, total monthly income, and information about existing credit accounts.

Image Credits: Chris Potter via Flickr, (stockmonkeys.com)

Image Credits: Chris Potter via Flickr, (stockmonkeys.com)

Your credit card report includes your bill-paying history, amount and type of accounts you have, late payments, collection actions, outstanding debt, and so on. This along with your application shall help the bank decide if you are trustworthy and credible enough to pay the personal loan.

2. THE MORE PARTICULAR IT IS, THE CHEAPER IT GETS

When getting loans, be as specific as possible. The reason behind it is that loans that are particular often have lower interest rates. So, do not take up a personal loan to pay for a school debt when you can just apply for an education loan.

Personal loans tend to charge about 6% to 8% interest while Renovation Loan, Education Loans and etc. tend to have interest rates that are as low as 2%. Know what is best for your situation.

3. REVIEW YOUR OPTIONS

You may be tempted to immediately contact your current bank but that may bite you in the back. Personal loans and its interest change outrageously across time.

When there is less people borrowing from the banks (e.g., bad economy), they tend to lower the interest rates or give more lenient payment terms. So, look for a bank that is willing to give you the best offer and the maximum rewards.

4. WHAT HAPPENS WHEN YOU PAY LATE

Before venturing in, you must find out the clause of the payment penalties first. Like credit cards, it is not impossible to get an “interest adjustment” for a late payment.

Frets not…banks understand that certain circumstances such as unemployment or chronic illness can make it difficult to meet the bills. If this happens, contact your creditor, explain your situation and work out a repayment schedule together.

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