Personal Loan

Personal Loans: What You Need to Know

Many may deem personal loans unnecessary as it only tempts us to spend money that we don’t have but let’s be honest—we have other needs aside from big expenditures such as home construction and automobile procurement. Things that fall under this category are major medical expenses, bills payment, home improvement that are not covered by home loans, and even debt consolidation as well as other unexpected financial binds. It is also a good remedy for budget crises since it can be approved faster than any other loans.

What is a Personal Loan?

A personal loan is a kind of loan that you can use for virtually anything. It is categorized into two types: the secured and unsecured personal loans. Secured Loans – A loan is considered secured if it is protected by an asset or that requires collateral of some sort. Properties that can be used as collateral include a car, house or any personal property that is of worth. Non-tangible items such as stocks and/or bonds can also be used for secured loans. Such is required for secured loans because it generally involves borrowing a huge amount of money. The collateral is used to guarantee that the loan will be paid. Unsecured loans – This kind of loan is the opposite of secured loans. It does not require collateral and usually involves a smaller amount of money. Approval of such personal loans is based solely on the borrower’s creditworthiness or credit history. This is why people who get unsecured loans are subjected to credit investigation prior to loan approval.

Personal Loan Interest Rates

There are two kinds of interest rates applicable for personal loans: the variable interest and fixed interest. Variable interest often appears more attractive for people applying for personal loans as it starts out low when the loan is taken out. However, fixed interest rates provide the safest bet since it keeps your loan payments as is from the beginning to the end of the loan period unlike the variable interest which changes, resulting to erratic changes in your loan payment amount. Things to Remember When Applying for a Personal Loan

  • While it is the most flexible kind of loan there is, personal loans tend to be smaller in amount compared to home and car loans. Like other kinds of loans, the amount of a personal loan depends on a person’s monthly income. Money lenders can provide two to six times the amount of your monthly earnings or as much as SG$200,000.
  • Some money lenders provide a repayment penalties clause for personal loans. This clause often provide penalties for personal loans that are paid off earlier than what was agreed upon. This is because money lenders gain less interest from loans that are paid early. This instance often occurs with term loans because of the pre-defined loan payment period.
  • Personal loans allow people to break free of their debts even if the person has a bad credit record so long as he or she is earning or employed. However, people with bad credit are usually granted personal loans with higher interest rates.
  • Regular payments for personal loans can also improve a person’s credit history as each installment paid on time would gradually push his or her credit record to an acceptable level.

Do check out the trusted list of licensed money lenders and their reviews at Loansingapore.sg by customers before deciding on one.