Tips for Personal Loans | Pro Tips for Applying for Personal Loans Singapore

Personal Loans

In this blog, we give some tips for personal loans in Singapore. If you are planning to take up a personal loan in the near future, do read this article to know some pro tips. 

Tips for Personal Loans in Singapore

Keep in mind all other loans 

Avoid taking out personal loans for two to three months before taking out a major loan, such as buying a car or a house. An HDB loan is the only exception (explained below). Your DSR is an important consideration when applying for a bank loan for a car or a house (Debt Servicing Ratio). This is the percentage of your income that can be used to repay your mortgage or car loan, including other expenses (e.g. repayment for other personal loans). So the current total DSR of 55% means your loan repayments, plus repayments of any other loans you have, can’t exceed 55% of your income.

Timing is crucial

When it comes to personal loans, you must be strategic. Personal loans are usually better taken out during times of inflation rather than times of economic boom. Why? Because the value of cash declines during an inflationary period, you will be making repayments with money that was worth less prior to the inflationary period. And if you signed up for a personal loan with a bank before the inflation started, it’s even better than taking out a personal loan during the inflation season because you’ll end up having more money in your paycheque to pay off the debt even though you technically owe the same amount.

Look for alternatives

Don’t take a personal loan to renovate your house when there are renovation loan packages. Likewise, don’t take a personal loan to pay for your education, when there are education loan packages. In order to encourage you, specific loan packages often have lower interest rates. Personal loans typically have interest rates ranging from 3% to 7%, whereas specific loans (renovation loans, education loans, and so on) have rates as low as 0%. (usually comes with higher processing fees). Request that the banker tailors a package to your specific requirements. Consider it a discount for giving your bank peace of mind that your money isn’t going to a crack habit.

Check for the penalties

Because almost no one intends to pay late, almost no one checks late payment penalties. But it’s part of knowing what you’re getting yourself into, like checking interest rates or looking for a better deal. It is possible, as with credit cards, to obtain an “interest adjustment” for a single late payment. If you make a mistake, your 8% interest rate may rise to 9% – 10% from then on. Late fees can also be significant. Aside from interest, fees and, most likely, the souls of children are another source of income for a bank. When two banks offer nearly identical rates, penalties can be the deciding factor. So choose the lowest.

Tips for Personal Loans in Singapore – Compare loans 

Personal loan interest rates can fluctuate very quickly. Banks earn money by charging interest. When no one is lending to them, they become desperate. They lower interest rates, offer more flexible repayment terms, provide free luggage, and so on. 

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