Every person faces some situation or the other that requires emergency cash. If you have enough savings you can always withdraw from it to get through difficult times. But what happens if you don’t have enough saved up to meet your financial urgency? That’s when personal loans come in. Personal loans offer a convenient way to get quick funds for any purpose, emergency or otherwise. Read on to understand everything you should know about personal loans.
It is an unsecured loan issued by both banks and non-banking financial institutions. You can use the money at your discretion to finance any purchase you feel is necessary. Being unsecured loans, they don’t require you to furnish any collateral or security. Lenders consider your credit score before they approve your loan application. If you have a good credit score, they tend to approve higher loan amounts and give you better interest rates with flexible repayment periods.
Quick and Easy way to get Personal Loan
On the other hand, if your credit rating is low or if you have a bad history of repaying loans, you may find it hard to get loans from banks. Even if a bank does approve a loan, it could be for a smaller amount since they will be wary of your repayment ability.
Personal loans are really personal - meaning you can use them for any purpose. However, that doesn’t mean you should use a personal loan for any situation. Check out some situations when using a personal loan is generally considered a good idea.
There are a few ways that can help you get a personal loan even if your credit is bad. The first step is to regain your bank’s trust by taking smaller loans and paying them back on time. If you maintain flawless repayment schedules over multiple smaller loans, it will help improve your credit rating. Another way is to get professional financial advice and restructure your existing debts into a single loan that has a better interest rate and repayment options. This should help you be more systematic with your instalment payments.
Certain non-banking financial institutions also offer such loans to individuals with bad credit. Moneylenders in Singapore are another option to get personal loans if you have bad credit. They also consider your ability to repay the loan but are usually more flexible. However, they charge very high rates of interest. Make sure to borrow only from a licensed moneylender.
Features and benefits:
These types of loans are the perfect solution for emergencies.
Credit cards charge much higher interest rates than personal loans. But that doesn’t mean that they are not the right choice for you. Both options have their advantages that make them suitable for different situations.
For example, a cash advance gives you cash right away within a few minutes or hours. It is a good option if you need a loan of only a few hundred dollars and if you are sure of paying it back as soon as possible.
On the other hand, getting cash through a personal loan may take up to a day or two. But you can borrow thousands of dollars and take a longer time (a year or more) to repay the debt at your own pace. It is always best to compare the various factors that affect different loan options to see which one best suits your needs.
These types of loans generally have a fixed rate of interest. But this is the flat annual rate and is usually low. It does not take into consideration the various fees such as processing fees, late payment fees, and early repayment fees. The better rate to consider is the Effective Interest Rate (EIR). EIR is a more comprehensive rate since it considers all the other fees and charges involved in the loan. Therefore, the Effective Interest Rate is higher than the advertised rate. It gives you the true cost of borrowing. Before you compare various personal loans, ask the banks for their respective EIRs. This will help you understand how much you will actually pay for each loan.
Personal loans are attractive and offer cash when needed. But there are a few points you must keep in mind to avoid getting stuck in a vicious debt-cycle.
If used wisely and re-paid regularly, a personal loan can help you finance your expenses without straining your monthly budget.