Singaporeans often turn to personal loans because it enables them to utilize the money they borrowed for any need they may have. Although there are other types of loans in the market for specific money needs, personal loans are more common, easy to locate, and easy to apply for.
However, while it is an asset that would help anyone with financial problems, a majority of the public often make a mistake with personal loans because of the myths they often believe about it.
Before you go to a moneylender to seek out a loan, it is best you learn about the myths and debunk them.
Myth 1: Personal loans are ideal to eliminate credit card debt
Previously, personal loans were the best way to pay one’s credit card debt. You can simply ask a moneylender or a bank the amount of your credit card debt then use the loan to pay it in full. Once that is paid, you can pay the personal loans as agreed upon with your moneylender or bank.
However, in recent years, the MAS launched a new financial service, known as the debt consolidation plan. The service is simply a special type of personal loan which can only be used to pay off other debts or liabilities. Although personal loans can enable you to pay your expenses and other bills, debt consolidation plans come with lower interest rates and assist you to pay off everything you owe.
Myth 2: Personal loans are expensive than other types of loans
When you look for loans, you may find yourself confused as to how you can determine which loan is least expensive to pay for. Usually, if you compare it to collateral loans like car loans or house loans, personal loans are expensive. However, when you start comparing it to unsecured loans, it is quite cheaper.
There are loans that are more expensive than other loans. The most notable are payday loans and credit card debts. Although many people tend to stray away from personal loans due to their high interest, it is still ideal to avail than other loans.
Credit card debt interest tends to cost around 24% every year. By comparison, you only need to worry about 12% interests per year when you get personal loans.
Myth 3: Personal loans can be used for luxury items
Although personal loans from moneylenders or banks do not have limitations as to how you can use the personal loans, it doesn’t mean you can use it for more expenses or liabilities.
If you compared both personal loans or credit card debts, personal loans are cheaper. However, this does not mean it is something to be used for liabilities. It should be used for emergencies or immediate bills and not for personal luxuries.
Before you check in a personal loan, you do need to check your financial capacity to repay it accordingly. If you are capable of paying the loans, you can go apply for it.
You should check into the monthly payments of the personal loans and see if you can manage it monthly with your regular expenses, you can go apply for one.
Stop your thinking when you will just apply for a personal loan for shopping or luxuries because you are just adding more stress to your financial problems.
Myth 4: All licensed moneylenders charge the same interest rates
It is often assumed by many people that a majority of the licensed moneylenders in Singapore, as well as the banks, would charge the same interest rate for their personal loan offerings. However, this is not true.
Like most countries around the world, Singapore’s moneylenders and financial institutions tend to vary when it comes to the interest rates they charge for their loans. Interest rates in the country can be from 9% per year to 26% per year.
Since the interest rates vary per moneylender and financial institutions, it is important that one compares them off before applying for a personal loan. You need to also check the penalties for late payments and all the other fees that will be included in the loan. When you reviewed the expenses, you will be able to check out which moneylender or institution will offer you a personal loan that matches your needs.
Myth 5: Only those with high credit scores can get personal loans
It is often a misconception that people with high credit score are the only ones who can apply for personal loans.
Banks and moneylenders actually just look into your salary and earning capacity when reviewing your personal loan applications. You also only need to have average or above average credit score to get a personal loan successfully. If you have an income of around SGD $30,000 per year in Singapore, personal loans can be obtained easily.
For those who have poor credit scores or no credit scores, there are moneylenders that offer personal loans fitting for them which is flexible and matches your capacity. However, it is crucial that you double check their credentials before applying because you may accidentally be applying with an unlicensed moneylender or financial institution.
Double checking their prices must also be done because there might be extra fees included in the plans that you may not understand.
Personal loans can save you when you need funds for emergencies or sudden expenses, which is why it is important you know everything about it before availing one.
Remember: Personal loans are still liabilities you need to pay for monthly once you paid off your expenses or debts with it. Before you get one, learn everything you know about it, if you are capable of paying it, and debunk the myths that surround it before you get one for your specific need. You also need to double check if the moneylender or financial institution you are applying for is trustworthy to prevent possible mishaps.
When you get everything down and your need is really great, go to your selected licensed moneylender and apply for the personal loan you need.