Applying for a personal loan in Singapore may look like a daunting undertaking. However, with accurate information and research, you will recognize a variety of personal loans Singapore financial industry offers. The multitude of choices may be beneficial because it will allow you to consider various factors before deciding which loans to get. In this article, you will be presented with information on the types of loans, financial institutions, and standard practices you shall use to start that loan application.
4 Types of Personal Loan
1. Personal instalment loans
This is the most common type of personal loan Singapore. The idea is that you borrow a particular amount of money with the obligation of paying it back on a monthly basis. The amount to be paid every month is fixed, which should include the interest rate. The period of payment of this loan usually takes about 12 to 60 months. This type of personal loan is ideal because it has disciplined and regulated terms of payment.
2. Line of credit
Line of credit is a loan that only charges the borrower interest rate on the specific amount withdrawn. Hence, when there’s no money withdrawn, then there can be no interest rate to accrue. Remember that this type of loan charges an expensive interest rate compared to other loan types. It’s also referred to as a standby cash facility because wise customers only use this loan as a last resort in times of financial need or emergency. Paying up the loan amount as soon as possible can save you what could otherwise become excessive interest charges.
3. Balance transfer
Balance Transfer is a loan type that’s usually used to pay up credit card debts but without the interest for a particular period. This typically ranges from six to twelve months. Once this period has elapsed and the loan amount has not been paid, the interest rate will set in.
The interest of this type of loan is very high when you loan a significant amount, expect to pay significantly higher than the loan amount. So it’s either you pay up immediately or be ready to be charged interest rates between 18% to 29%. You’ll be charged a processing fee for every approved balance transfer transaction.
4. Debt consolidation plan
Debt consolidation is a type of personal loan that is probably the best option you have when you have unmanageable open, unsecured credit like credit card bills, personal loan, or credit line. It combines all of these open, unsecured credit into a single loan. In other words, you let go of all your old credit cards and other loans in exchange for a new credit card. This new credit card shall pay all your debts.
What Are Some of the Primary Considerations of a Personal Loan?
1. Repayment period
Do not forget to make the required payment every repayment period. This should save you some money because late payment could mean additional charges apart from the required interest. Make sure to settle everything within the agreed term.
2. Loan installment
Get a personal loan when you need a relatively large loan amount with reasonable interest rates. However, you have to be mindful of the installments you have to make and when to make them. When you determine that such installments are burdensome and impossible to meet, then back out at once and find other banks with better installment offers.
3. Interest rate and other fees
The interest rate may differ from one bank to another. Typically, banks charge between 3.5% to 10.8% per annum. Take note that personal loan also entails charges other than interest and processing fee.
Late payment fee accrues when one defaults monthly repayment. Change of tenor fee is charged when loan tenure is changed. The cancellation fee is incurred when you unilaterally terminate the loan. When you repay the loan amount before the term ends, early repayment fee accrues.
4. Minimum loan amount
This depends mostly on customers’ monthly income. Ordinarily, one can secure a credit limit up to 4 times his or her monthly salary. However, banks may also decide to set the maximum loan regardless of income instead. Whatever banks choose to do, you must be backed by a regular income source to repay what you owed.
Difference Between the Annual Interest Rate and Effective Interest Rate (EIR)
Do not be deceived by the upfront annual interest rate that banks advertise. In reality, you would have to pay more than that. Focus your attention on the effective interest rate (EIR) instead. EIR takes into consideration all other factors like administrative fees and transaction fees, which the annual interest rate does not.
How Does Personal Loan Work?
You have to go through the application process with the bank of choice. The first thing that is asked from you is to fill in all the necessary information in the application form. The bank would then assess you based on the documents you have provided. Your credit history would be checked.
When the bank decides to grant you a personal loan, it would determine the down payment, loan term, repayment schedule, and repayment amounts. Aside from the processing fees, the bank may also charge cancellation or early repayment penalty if you decide to terminate the contract or settle the loan before the agreed term.
How to Apply for a Personal Loan?
The application process for a personal loan may differ from bank to bank, and from a financial institution to financial institution. You may look for exact information regarding their processes and requirements from their website. However, these are the most common steps that you need to take in applying for a loan:
- Determine the amount of money that you need. Take a look at your bank deposit account and decide how short you are in your finances. Your personal loan and loans, in general, should be based on need and not caprice.
- After determining the amount, decide on the type of personal loan that you will take and the type of financial institution that you will turn to. Consider the loan tenure, interest rates, and payment term, credit limit, among other considerations. You can also choose among banks, private financial institutions, or a credit co-operative limited usually to its members.
- Check your credit score and the requirements of your chosen financial institutions. These things should match so that you will have a higher chance of getting approved.
- It is also for the best to take time in comparing the offers and requirements of different financial institutions. These will help you make an informed decision.
- Gather all of the documents that are usually required in the loan application. These are government-issued IDs, proof of income, statements from banks where you keep a deposit account, and other documents that the financial institutions will ask for validation purposes.
How Do Banks or Financial Institutions Decide My Loan Amount?
Do not mindlessly apply for a personal loan. Go to the bank’s website to check for its eligibility requirements. These requirements are usually the borrower’s annual income, credit rating, credit history, and debt-to-income ratio. When you want to increase your chances of getting approved, you may opt for a joint application.
Find a joint applicant that can potentially make up for your bad credit standing. It may be wise to choose a bank where you keep a deposit account. Your account will be helpful for them in determining your financial wealth and can also be used for validation purposes.
How Long Does it Take to Get a Personal Installment Loan Approved?
It may only take an average of 3 working days before your loan Singapore gets approved. Loan disbursement, on the other hand, usually takes about 5 to 7 working days. This can be possible only when all requirements for loan application are complied with.
The loan application can be a very tedious process, especially when one does not know where to start. Instant loan is a finance directory website that helps people in need of loans and loan providers to find their perfect matches. It readily displays relevant and updated information about various loan providers and their financial products.
More interestingly, Instant Loan already does the initiative of matching borrowers’ eligibility qualifications to potential financial institutions in Singapore. It inputs the address as well as the website link of the banks and financial institutions.
By applying throug Instant Loan, it will make it easier to find a loan provider to give you the best offers. Your propensity of getting deceived by loan sharks is lesser because Instant Loan already gives you a list of legitimate loan providers.