Personal Loans in Singapore | Busting Personal Loan Myths for Singaporeans
Loansby Priyadarshini 6 September 2022
Think you know everything there is to know about personal loans? Read this blog if you are planning to take up a personal loan in Singapore.
Busting Personal Loan Myths – Personal Loans in Singapore
Personal loans can also be helpful when the loan interest rate can be covered by investing cash on hand instead
You cannot obtain a personal loan if you do not have a steady source of income. If you are self-employed, you may believe that banks will not give you a personal loan. This is not the case; banks are far more adaptable than you might think. With 8.4% of Singapore’s resident workforce classified as self-employed, banks recognize the importance of meeting the needs of this growing segment. So, whether you’re self-employed or employed, your chances of qualifying for a personal loan should be the same.
Personal loans are detrimental to my financial health
Personal loans are frequently regarded as detrimental to your financial health. After all, what can they do but add to your debt? Personal loans, in fact, can be used to manage debt. Debt consolidation is the process of borrowing money to pay off high-interest debts such as credit cards. Consider that the effective interest rates for personal loans in Singapore range from 7% to 15%, while credit card interest rates exceed 25%.
Consolidating your debt repayments in this manner can assist you in better managing your debt repayments. You get more than just a lower effective interest rate. By streamlining your repayments, you can strategically attack your debts faster and even improve your credit score, which is a huge benefit to your financial health.
If you cannot obtain you are eligible for a personal loan, you should always apply for more than you require
Some people, on the other hand, believe that just because you qualify for a larger personal loan amount, you should get more than you need. Extra money never hurt anyone, right? Wrong. Applying for more money than you need, regardless of your eligibility, is a bad financial decision. First, while personal loan interest rates are not as high as credit card interest rates, they are also not as low. Second, the greater the number of loans you take out, the greater the impact on your credit score. And if you find yourself falling behind on payments because you borrowed more than you needed, the consequences will be severe.
To obtain a personal loan, you must provide collateral. If your only loan experience has been with home or renovation loans, you may believe that all loans require some form of collateral. This is not the case with personal loans, the majority of which are unsecured, meaning no collateral is required.
Unsecured loans include, but are not limited to, the following:
- Credit card debt
- Lines of credit
- Loans for individuals (whether installment-based or variable repayment)
- Education loans
- Loans for renovation and furnishing
Applying for personal loans is a time-consuming and tedious process
Forms, forms, and more forms, with a lot of waiting in between. Many people still have this impression of the loan application process. While this was true in the past, it is no longer the case today. Several banks, including DBS and Standard Chartered, can also process instant approvals, which means you can get cash the next day.
Don’t bother applying for a personal loan if you have a low credit score
The truth is that your credit score has a direct impact on your ability to obtain a personal loan or any other type of loan. However, you may be overestimating how low your credit score must be before most banks refuse you a personal loan. One way around this is to apply for a lower-interest loan and pay it off on time. This will help you rebuild your credit and improve your chances of qualifying for a larger loan in the future. Non-bank financial institutions like Singapura Finance are another option but expect to pay higher interest rates.