Four Types of Personal loans | Apply for Personal Loans Singapore

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In this blog, we give you an overview of the four types of personal loans, including interest rates, one-time processing fees, loan terms, and when you should apply for each.

Four Types of Personal loans

Personal Installment Loan 

The first is a traditional personal installment loan. It goes by different names at different banks, but the principle is the same: you borrow a certain amount, pay a one-time processing fee (which is usually waived), and agree to repay the amount in fixed monthly installments for up to 60 months. Personal Instalment Loans work by allowing you to borrow money and repay it in equal monthly installments. The interest and fees for the entire loan term are calculated and added to the total loan amount.

Fees: One-time processing fees range from $0 to 3%. Interest rates vary by bank and start at 3% (Effective Interest Rate at 6.96%) and go up from there. During promotional periods, banks may waive the processing fee and offer exclusive interest rates.

Loan amount: The loan amount is determined by the available credit limit in your personal loan or line of credit account. The maximum amount is usually four times your monthly salary. If your annual income exceeds $120,000 and you have a good credit history, this can be increased to 10x your monthly salary.

Loan repayment period: Loan repayment periods typically range from 12 to 60 months.

Personal Instalment Loans are useful when you need a large sum of money to cover a large-ticket expense that will take a long time to pay off.

Line of Credit

A line of credit is a type of personal loan that is an overdraft facility that only charges interest when you withdraw from the account. Once approved, funds can be withdrawn via ATM, check, internet banking, or by visiting a physical bank branch. When you withdraw funds, you are charged interest. There is no interest charged when you repay the funds.

Fees: Annual fees for lines of credit typically range from $60 to $120. Before any promotional offer, interest rates are typically between 18% and 22% p.a.

Loan amount: Banks typically offer a credit limit of 2x your monthly salary, but this can increase to 4x or 6x when other credit facilities are included.

Loan tenure: There is no set duration. You have access to the facility for as long as you want. When you use it, you pay interest, and vice versa.

A line of credit can be used as a reserve fund for unexpected expenses. If you need money quickly, you can withdraw cash without waiting for approval. However, the trick is to only withdraw these funds when absolutely necessary.

Balance Transfer

A Funds Transfer (FT) or Balance Transfer is the third type of personal loan (BT). This loan facility makes use of the credit available on your credit card. You pay a one-time processing fee and receive a very low or 0% interest rate for 3 to 12 months. Following that, you either settle the total amount owed or face interest rates ranging from 18% to 29%, depending on the credit facility from which the funds were drawn.

A balance transfer allows you to transfer an outstanding balance from one or more credit cards to a low or no interest account or credit line. It provides you with immediate cash in times of need or emergency. There is a one-time processing fee of 1% of the approved transfer amount.

Fees: For balance transfer offers, banks typically charge a one-time processing fee ranging from 1% to 5% of the approved loan amount. This processing fee is usually waived with the best balance transfer offers.

Loan amount: Typical balance transfer loans start at S$500 and can go up to 10X your monthly salary if you have a high income and a good credit history.

Loan repayment period: The typical repayment period is 6 to 12 months before a high-interest rate kicks in.

Balance transfers are ideal if you need money quickly or have a large, short-term expense coming up and want to avoid paying high-interest rates on other types of loan facilities. Typical use cases include consolidating repayment on multiple credit cards or emergency car repair or medical bills, as well as investment or business opportunities. Also, keep in mind that the best balance transfer offers on the market can either completely waive or offset the processing fee through incentives or cashback.

Debt Consolidation Plan 

The fourth type of personal loan is the Debt Consolidation Plan, which is a government-approved scheme offered by all major Singapore banks. If you have several open unsecured loans, such as lines of credit and credit cards, and you’re having trouble keeping up with all of the repayments, consider a Debt Consolidation Plan. It consolidates all of your open unsecured credit under one roof, making repayment and debt management easier. You only have one repayment due date to remember, and the interest rates are lower than those of a traditional personal loan.

A DCP is only applicable to credit cards, credit lines, and personal loans. Once approved, the new bank will take over all other banks’ loans. All amounts, including fees and charges, will be paid in full. Those accounts will be closed or suspended temporarily. You must make monthly payments to the new bank that set up the DCP until the entire amount is paid off. After 3 months, you can refinance your DCP with a new bank if you have a prior agreement with the previous bank’s DCP.

Fees: A one-time processing fee will be charged. The Effective Interest Rate ranges from 6.7 percent to 12 percent per annum, depending on the bank and promotional rates.

The loan amount is the total amount owed on your credit cards, credit lines, and personal loans. Before you can apply for the DCP, you must have at least 12 times your monthly salary in outstanding debt.

Loan terms: Loan terms range from one to ten years.

If you are having difficulty making loan payments and have a significant amount of debt, a rough guideline is 12x your monthly salary. a significant amount of debt to repay It not only lowers your interest rates but also forces you to follow a strict repayment schedule. You are less likely to accumulate more debts because your other facilities are closed or suspended unless you repay the entire loan.

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