Cash woes? A personal loan to the rescue!

Why Choose Personal Loans

A personal loan helps you when you are in urgent need of some extra cash. The money you get from this loan can be used for any purpose and you do not have to provide any specific reason to your bank for borrowing this money. It could be used for many purposes: like buying your wedding ring or renovating your house. It could be also be used to pay off other debts.

As in the case of every other loan, this loan also requires you to repay the money with the rate of interest within a specific period of time. The rate of interest is decided by the bank based on a number of factors such as the amount borrowed, the time period, credit score, market rate, etc.

These loans are provided by many banks in Singapore at competitive interest rates. Some of these banks are DBS bank, HSBC Bank, Standard Chartered Bank, POSB Bank, etc.

Importance of Credit Score in Personal Loan

Personal loans are unsecured loans, which means that you do not need to provide collateral to get one. This is one of the reasons why the interest rate on these loans are higher compared to those of secured loans. Banks pay a lot of importance to credit reports and scores when it comes to issuing personal loans, as it assures them of the creditworthiness of their customers.

In order to get a lower rate of interest, a person needs to maintain a very good credit score. People with an average score will still be able to find offers but there are very few options available for individuals with low scores. There are a few lenders who will provide loans to people with lower scores, but these loans usually have a very high rate of interest. People with bad credit can get lower interest either by getting a cosigner or by providing collateral security.

As credit score plays such an important role in your loan application process, you should ensure that you have a good score before applying for a personal loan. In order to maintain a good score, you should pay off all your debts on time and check your report regularly. If you find any mistakes in your report, you should get it rectified before applying for the loan.

Useful Information About Personal Loans

Things Needed To Apply For a Personal Loan

When you apply for a personal loan, your bank will ask you to submit certain documents. Make sure that you check all the documents before submitting as any mistake can lead to the rejection of your loan application.

The documents that are commonly required by banks are your identification proof, address proof and income proof, among others. Along with this, you might also have to provide other details related to yourself and your employer.

Apart from this, you will have to specify the amount of loan you wish to take and the tenure within which you will repay it. It is advisable to repay your loans in a shorter period of time as it helps save money.

How to Find a Personal Loan with a Low Rate of Interest

Apart from having a good credit score as discussed above, follow the below steps to get a lower rate of interest on your personal loan -

  • Compare – If your credit score is really good, a lot of banks might be willing to give you a personal loan. Before finalizing a loan, ensure that you compare the offers provided by different banks and choose the one which gives you the lowest interest rate along with other benefits. You can compare using third party websites online, which allow you to see the various offers along with their features side by side.
  • Collateral – If you can provide a collateral security, then try getting a secured personal loan instead. Doing so will help you get a very low rate of interest, but remember that if you fail to repay the money back on time, your bank will take over the asset you provided as security.
  • Clear off your credit card outstanding balance – A positive impact will be seen in your credit report if you pay off the outstanding balance on your credit card before you apply for a personal loan, which can help you in getting a lower interest rate.

These are just a few simple steps, following which can benefit you a lot when you apply for a personal loan.

Tips To Follow While Taking a Personal Loan

Getting a personal loan is easy, but one should follow certain tips in order to prevent any issues in the future. Below are a few such tips –

  • Read the fine print – Do not take a personal loan without reading the fine print. Reading the fine print will give you detailed information about the loan and the fees and charges associated with it.
  • Prepayment penalty – If you pay off your loan before the fixed tenure, your lender might charge you a penalty for the same. Try and find a personal loan which does not charge this fee.
  • Overdrafts – If you have connected your checking account with your loan for automatic monthly payments, then there is a chance that you might withdraw more than your credit limit permits you to by mistake. Even though it is an accident, you might have to pay an overdraft fee to your bank. In order to avoid this, get alerts for low balance activated on your phone from your bank.
  • Beware of Scams – Before you opt for a loan, make sure you do a detailed research on your lender. Take loans from legitimate lenders only in order to avoid getting into trouble.
  • Repay the loan on time – If you do not repay your loan on time, you might get trapped in a never–ending loan cycle, which will have a negative effect on your credit report as well. So, it is best to repay your loan on time to prevent problems in the future.

In conclusion, a personal loan can prove to be invaluable if you are in need of some extra cash for a short period of time, but be sure of whether you do really need the loan before you opt for it, because at the end of the day, it is still a liability. Once the bank releases the money, you will have to repay it with interest.

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