It’s impossible to imagine Singapore’s financial lending industry today without instant personal loans. These loans play a significant role in helping households meet consumer demands, sort out medical emergencies, fund major life events, and consolidate debt. However, there’s still a grey area regarding these powerful lending tools. Who are they for? What are the costs of taking personal loans?
Keep reading to discover some surprising facts about private personal loans.
- How do Private Personal Loans work?
In simple terms, a private personal loan is a type of installment loan offered by licensed lenders that exclude banks and government institutions. These loans tend to be unsecured and come with a fixed interest rate. They’re unsecured in the sense that lenders don’t expect you to produce a car to act as loan security.
- Personal loans can help you save money
You’re probably asking yourself – how can these loans save me money yet they’re another form of debt? Well, it narrows down to how you utilize these funds. For instance, one of the smartest ways to obtain instant personal loans is when they’re used to consolidate credit card debt. Anyone who lives in Singapore knows that the convenience of swiping credit cards can quickly morph into a debt menace. Most credit card companies charge interest rates of between 26 and 28% p.a, not to mention the sneaky late payment fees they transfer to users. Before you know it, you have a massive pile of credit card debt that makes it challenging to live life.
And this is where private personal loans come in. Most licensed lenders offer a particular category of loans called Debt consolidation loans. The primary intent of these loans is to offset the high-interest debt. This shortens the life of credit card loans, hence saving borrowers money in terms of interest.
More so, if your credit score is superb, obtaining a lower-interest loan than your credit card loan should be pretty straightforward.
- You can use Private Personal Loans to improve your credit score
Speaking of credit scores, instant personal loans offer a golden chance to fill the void in your credit report. If you’re eyeing more significant loans like a mortgage or auto loan, your credit score is a crucial determinant of your credibility. Some of the main factors that the Credit Bureau of Singapore uses to calculate credit scores include:
- Spending activity- Have you made any big purchases lately?
- Credit activity- Do you have any existing loans?
- Credit History- Do you have a history of defaulting?
A high credit score of up to 2000 (AA) reflects a positive credit demeanor, while a poor score depicts difficult or bad lending habits. Got a poor or average score, and you want to scale higher? It’s as simple as borrowing small amounts of money and repaying them before the deadline. While doing this, be careful not to borrow from multiple facilities at a go.
- Personal loan interest rates are not the only aspect to consider when applying
While interest rates play a huge role in determining the viability of a personal loan, more meets the eye. Besides the personal loan interest rates, borrowers should consider other fees that might escalate the total cost of borrowing. The interest rate plus extra loan fees culminate into the APR of the loan, which is the single most crucial factor to consider. For instance, we have lenders that don’t require any origination fees or prepayment penalties—such options tend to have a lower APR, making them cheaper in the long run.
- Personal loan lenders are not the same
It’s crucial to sift licensed lenders from loan sharks. The former refers to lending companies registered on the Ministry of Law’s website, while the latter are illegal lenders, popularly known as scammers. A quick fact check will save you from falling prey to illegal lenders.
Also, while multiple institutions can offer instant personal loans, they differ in their terms. Before applying, it’s imperative to go through the company’s approval metrics and see if you stand a chance. For instance, what minimum credit score do you need? What types of loans do they offer? What are their interest rates? Shopping around for different personal loan terms helps you gain access to various loans and more favorable deals.