Are you looking into getting a personal loan to finance a large purchase? Or maybe you need extra funds for emergency expenses? Before you get in touch with any financial institution, you need to know what you’re getting into.
A personal loan is a type of unsecured loan. With this type of loan, you’ll have to pay fixed monthly repayments for a certain period.
When applying for a personal loan, most borrowers focus on the cost of a loan. But there are other things you need to know about to make better financial decisions.
Your Credit Score and Credit History
Before applying for a loan, you must first get your credit history report. In doing so, you can check if any errors could affect your score. If you have a bad credit score, it’s best to make adjustments before applying for a loan.
Your credit history report will show banks or moneylenders that you can pay your obligations on time. The higher your credit score, the better your chances of getting approved for a loan. In fact, with a good score, you can enjoy low-interest rates, which means higher savings.
The interest rate is the number used to get the total interest you need to pay based on the principal loan amount.
For example, you’re taking out a $5000 loan with an interest rate of 4% per year. The interest to be paid per year will be $200. That said, if you have a long loan tenure, say 10 years, you’ll need to pay more interest. This leads to higher total loan costs.
Remember, if you’re borrowing from a licensed moneylender, the total interest rate they can charge is only up to 4% per month. The Singapore government has set a cap to prevent moneylenders from charging too high-interest rates, minimizing the financial burden of borrowers.
Loan tenure refers to how long you need to repay the loan. This will affect your monthly installment amount, interest, and total cost.
The loan tenure can vary depending on the financial institution. But the longer loan tenure, the more interest you’ll need to pay- the higher the total cost.
Other Fees and Charges
Here are some fees to watch out for:
- Processing fees
- Late repayment fees
- Early repayment fees
- Legal costs
Fees and charges vary depending on the financial institution that issues the loan. So it’s best to inquire about these fees before applying for a personal loan.
Licensed moneylenders in Singapore are only permitted to charge the following fees:
- A late repayment fee not exceeding $60.
- A processing fee of 10% of the principal loan once the loan is approved.
This is one of the most important things you need to know before applying for a personal loan. Banks have different eligibility requirements, especially when it comes to the borrower’s minimum income.
But generally, you’ll need to be at least 21 years old to qualify. Additionally, most banks require you to have at least $30,000 annual income to take out a personal loan. With licensed moneylenders, eligible applicants must be 18 years old and minimum monthly income of S$1500.
While a personal loan is a useful financial tool to help you address immediate financial needs, do your research first. Taking out a personal loan needs proper consideration and preparation. Make sure you have the best deals by comparing loan packages.
But what if you don’t qualify for a personal loan in banks? Don’t fret. There are licensed moneylender personal loans near Changi with less rigorous criteria.
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