It is a common misconception that only people who are in dire need of money apply for personal loans. This is a myth. There are many wealthy people who also apply for loans and here is why – applying for a personal loan gives you leverage and liquidity. A personal loan is a loan used for all intent and purpose. For instance when you want to pay for your higher education, you have education loan or when you want to pay for a new car, you have a car, you cannot use your education loan and go on a shopping tour because for specific loans such as the ones mentioned above, the bank will send the loan amount directly to the merchant. But with a personal loan, you can use the money for whatever strikes you’re fancy. When you have hard cash in your hands, you can spend it many ways that make it more advantageous for you.
Credit cards usually charge very high rates of interest on amounts that remain unpaid after the due date of payment. Multiple credit card debts make your monthly expenses overbearing.Loans taken from other sources such as moneylenders may have higher interest rates, making monthly instalment amounts higher and more difficult to pay.
Personal loans on the other hand, have much lower rates of interest compared to credit cards. This is how they can help you save money:
You should ideally save up every month for your tax payments at the end of the year. Paying your taxes on time helps you avoid penalties and additional charges from the government.If you have failed to set aside funds to pay your taxes, you can take a personal loan to pay the government on time. It is better than taking an advance on your credit card since credit cards charge much higher rates of interest.
Updating your knowledge and skills from time to time can help you stay ahead of the pack at work. Better credentials result in faster career growth.You can use personal loans in Singapore to pay for your higher education and even courses, workshops, certifications, and seminars that help improve your skills.Taking a personal loan means you have to repay it in instalments. But the fact that you stand a good chance of getting a promotion or a better salary makes it worthwhile.
Business loans help entrepreneurs fund their businesses, but typically require them to show a year or two’s worth of successful functioning in order to be eligible.Personal loans don’t have any such requirements. You can get the funds you need right away and invest them in your business. Most small businesses manage to pay instalments on such loans on their own after one year of operations. This should make your business self-reliant in a year or so.
There are many options available from various banks in Singapore. Review all the available options and apply directly to the bank you feel offers the best rate of interest and repayment options.
Banks usually look at your credit score before they offer you a personalised plan. Maintaining a good credit score will help you get personal loans for larger amounts with better interest rates. However, if your credit score is bad, the bank may not approve your application.
If you have a bad credit rating, you should try and improve it. This will help banks approve your application. Some ways to improve your credit score are:
Other sources of term loans:
It is very important to choose the right institution to apply for your loan. Don’t go straight for the bank that advertises the lowest interest rate. Consider the Effective Interest Rate (EIR) rather than the advertised rate.This is because EIR shows you the true cost of borrowing as it takes into account the various other charges such as processing fees and administrative charges. Also look for other features such as the period of repayment and instalment amount.The aim is to pay off the loan as soon as possible but shorter tenures have larger instalments. Larger instalments may strain your monthly budget. You don’t want to pay large instalments that leave you without money for monthly expenses.
But shorter repayment periods also mean lower interest payments, and longer tenures mean you pay more towards interest. Choose the best lender based on a combination of a suitable EIR and tenure.
All said and done, personal loans are helpful if you use them wisely. They help you get emergency cash to cover immediate expenses. But also keep in mind that you need to be responsible with your repayments.
Some points to consider:
Personal loans are useful when you need cash urgently, helping you pay off other debts and dues. However, taking multiple term loans can become a habit, putting you in danger of not being able to pay them back on time. Be sure to handle your loans responsibly and not to borrow more than you need.