Today, an increasingly higher number of Singaporeans have realized that taking out a loan is a great way to achieve financial flexibility. It also comes as no surprise that a country like Singapore offers its people a number of credit options to choose from.
A wedding on the horizon or a debt to pay off? Not sure how to arrange for the money? Well, a personal loan can help you fund any of these expenses and more. Knowing that personal loans can be of different types will help in ensuring that you get the most out of the funds that you borrow. Let us look at some of main types of personal loans available:
This is the most common type of personal loan. With term loans, you get a one-time disbursement of cash. This means that you get the amount in one go. Term loans work in a simple way. You borrow a certain amount from the bank at a particular rate of interest. Once the funds are disbursed to your account, you can use it for anything that you wish. The repayment of this loan is fixed over a period of time in monthly instalments and includes the principal amount along with the interest.
The easiest way to understand what a personal line of credit is to think of it as a credit card. Like a credit card, a personal line of credit has a credit limit from which you can draw cash. You also pay interest only on the amount that you borrow.
That is where the similarities end because personal lines of credit do not charge you when you withdraw cash. Credit lines are flexible and are especially useful for entrepreneurs, new businesses, and even students who probably need some cash to tide over their university expenses.
Credit lines are good if you are looking for funds for a short-term. Interest rates are low and since it is paid only on the amount borrowed, it is convenient. Eligibility for a credit line is simpler than term loans since you need a minimum annual income of S$20,000 upwards.
This is also a revolving loan or a line of credit, but it is a secured personal loan as opposed to the commonly seen unsecured personal loan. The amount you will be allowed to borrow will depend on the collateral you pledge to the bank. Overdrafts can be taken against securities such as fixed deposit and structured deposit accounts, shares, unit trusts, and investment-linked insurance plans.
If you have several open unsecured loans – such as lines of credit and credit cards – and you’re finding it difficult to manage all the repayments, go for a Debt Consolidation Plan. This is a government-approved scheme that is available with all leading banks in Singapore. You can bring together all your open unsecured credit under one umbrella, which in turn means easier repayment and debt management. You need to remember only one repayment due date, and the interest rates are way lower than a regular personal loan.
Money shouldn’t be a deterrent when it comes to pursuing your educational dreams. You don’t need to have an income to get an education loan. All you need is a guarantor, like an immediate family member, with an annual income of at least S$30,000. Repayment for study loans, in some cases, begin only once you graduate. This type of borrowing not only provides you with the funds required to pay tuition fees, but some banks also provide money for books, laptop/computers, and even living expenses as part of the loan.
Personal loans are unsecured (you don’t need to pledge any asset), and they are flexible because you don’t need to show a particular reason to get the loan. You could take any of the above types of personal loan for, well, personal purposes. The common reasons why people take a personal loan are listed below:
Whether your wedding is one that everyone would talk about or small and intimate, rising costs have led to high wedding expenses. Before applying for a wedding loan, consider your current financial health, the amount that you are looking to borrow, the lowest interest rates available in the market, and your repayment capability. Remember that taking a wedding loan means that you are starting a new life with debt in hand.
At times, your medical insurance might not cover certain pre-existing medical conditions. In such cases, taking out a personal loan is useful to help you take care of these expenses. The funds from this loan can even be used to pay for medicines since some insurance policies require prepaid medical bills before they can reimburse the amount. Low-interest personal loans are ideal to cover medical expenses.
Want to travel the world, but the only thing stopping you from taking the next flight is the expense that comes with a vacation? A way to make your travel dreams come true is taking out a personal loan for travel. You can cover not just flight tickets through the loan, but also accommodation, food, sightseeing expenses, and more. You can fund your travel through loans from banks or licensed money lenders in Singapore. Some banks even have tailor-made travel loans.
The loss of a loved one can hit you hard emotionally. To complicate matters the expenses associated with funerals can add to your problems. If the life or health insurance policy of the deceased does not cover funeral expenses then you can always apply for a small personal loan. Funeral loans offer financial assistance in your time of grief so that due respect can be provided for the deceased.
The government of Singapore provides personal loans exclusively for active and retired civil servants and national servicemen. This form of borrowing doesn’t require any collateral and in some banks, early repayment of the loan does not attract any penalties. Moreover, interest rates offered are lower than other types of personal loans. In fact, interest-free loans may be taken out from the Air Force, Navy, Army, and the Singapore Civil Defence Force. The loan amount can be used for any reason and the application process is simple.
Apart from these loans, banks in Singapore also offer personal loans such as payday loans, credit loans, and cash advance loans. All of these loans can be taken out if you require funds for a short term. The interest rate charged on these, however, are almost always higher than on other forms of personal loans.
Whether you are looking to go on a vacation or pay up your credit card debt, personal loans are extremely useful. However, understanding the purpose behind taking out your loan ensures that you are able to make the most of the funds.