Given the cost of owning a car and a home in Singapore, taking out a car or housing loan is rather usual. However, some Singaporeans generally view taking out a personal loan as a sign of bad money management. The truth is taking out a personal loan in Singapore might be better than most people think it is, depending on the purpose. For instance, you can acquire a personal loan to clear off your debts if you have a lot of unpaid expenses due to unforeseen events.
You can obtain a personal loan in Singapore from a bank. However, the bank may not approve your personal loan application if you have poor credit in Singapore. There is yet another choice. A registered lender can give you a personal loan.
And sure, many people have false misconceptions about getting a loan of any kind, let alone personal loans from a private lender. This post aims to dispel these myths.
To be Approved or Accepted for a Personal Loan, You Must Earn at Least S$30,000 Each Year.
To guarantee debt repayment, you must fulfill several requirements before applying for a personal loan. To apply for a personal loan with most Singaporean banks, applicants must typically earn at least S$30,000 annually. Additionally, this implies that individuals making less than S$30,000 annually may not be eligible for a bank loan.
This does not, however, preclude them from obtaining a personal loan in Singapore. Licensed lenders will consider lending you money even if your yearly income is less than S$30,000. However, remember that your annual income level determines the ability to repay your loan and how much money you can borrow. Therefore, the maximum quantity of money that you can borrow increases as your income level does.
Personal Loans Negatively Impact Your Credit Score
A personal loan affects your credit score as a borrower, but this normally reverses itself after you avoid a late payment or debt default. You might believe that getting a loan when already in debt is counterproductive. Instead, getting a personal loan like one for debt consolidation makes it more manageable for you to keep up with payments.
Additionally, since your income and payment history both represent your dependability and financial capacity, credit bureaus place more emphasis on these two factors. However, just because the lender has approved you for a loan application doesn’t mean you should always borrow the maximum amount available.
You Must Give Collateral to Obtain a Personal Loan.
A personal loan is unsecured, meaning any kind of collateral does not secure it. The appealing aspect is that you won’t need to offer collateral like your home when applying for a personal loan in Singapore. A collateral is not required for unsecured loans because the amount is minimal (in comparison to house loans), and your credit score determines them.
The lender won’t be able to seize your assets (your home or car) if you are unable to repay your personal loan as a result. However, it does not imply you have a free pass from prosecution. Defaulting your loan payment can harm your credit score, which evaluates your likelihood of repaying debt and is based on credit data submitted to the Credit Bureau Singapore (CBS) by your credit providers, such as banks and finance businesses. A low credit score might harm your future borrowing and even job prospects.
In more severe situations, if the bank believes you are purposefully withholding payment, they may file a lawsuit against you.
Low Credit Scores May Affect Your Eligibility to Obtain a Loan.
The loan approval procedure indeed considers your credit. However, that doesn’t mean your application will be rejected outright if you have an unpaid loan and a low credit score. Your ability to obtain a personal loan in Singapore with a low credit score will depend on your income level. In this case, a licensed money lender will likely be able to approve you more quickly than a bank.
However, your credit score influences the amount you can borrow and the associated interest rates. A higher credit score implies you are more likely to remit your debts on time and will thus be eligible for loans with greater principal amounts and lower interest rates. Conversely, you’re typically susceptible to a higher interest rate and a borrowing cap if you have a low credit score.
If you wish to acquire a personal loan but have bad credit, you can start by borrowing a small amount and repaying it on time. Your credit score will be better as a result. As your credit score rises, you’ll have more loan options and better chances of obtaining larger loans with lower interest rates.
Borrowing the Maximum Amount is Okay.
Who wouldn’t want more money on hand, just in case? It is not a prudent financial move to borrow the maximum amount of a personal loan in Singapore to get a new TV or smartphone. You should use your salary or savings to cover these expenditures.
While it feels fantastic that lenders trust you with a large sum, remember that the funds continue to accrue interest until the principal has been paid in full. Limit your spending to what is essential to pay off current debt or an immediate life expense. When faced with the overwhelming possibility of receiving a sizable loan, consider if you could still make your monthly repayments if you encountered issues like a sick family member or an unexpected financial difficulty.
The Interest Rate is the Same Across Lenders.
This is untrue because licensed moneylenders and banks employ different standards to evaluate loan applications. Banks are stricter in preventing high-risk borrowers than licensed moneylenders. When comparing various loan offers, be sure to take the effective interest rate (EIR) and annual interest rate into consideration. Depending on several variables, including your credit history and loan length, the EIR in Singapore typically ranges between 9% and 26% annually.
Conclusion
Researching is essential to learn more about personal loans before considering one.
