A personal loan comes in handy when you need a significant amount of money to meet a personal need or emergency in the short-term.
Personal loans are a life-saver when you are faced with an unfortunate medical emergency and are strapped for cash. You can also use personal loans to realize other necessities such as vacation travels, sizeable purchases, and other large expenses.
In Singapore, financial institutions such as banks are not the only personal loan lenders available to borrowers. Licensed moneylenders also offer personal loans.
Personal loans are unsecured loans with no collateral such as a house or other assets. Financial institutions and moneylenders analyze your credit score to understand your creditworthiness.
Borrowers with a good credit score are more likely to get personal loans with low interest.
Personal loans in Singapore are well-known for their flexible terms and easy availability, which means you can get your emergencies and issues addressed without any delay.
Read further to know how personal loans work in Singapore and what you can do to get the best personal loan interest rates.
How does a Personal Loan Work?
A personal loan starts with an application process. You are required to submit essential documents for the approval process to start. Once approved, you will receive a significant amount of money, depending on the amount of loan approved.
There is a fixed rate of interest on the borrowed amount – the principal – which you are expected to repay within the scheduled time period.
When you make repayments for a personal loan, you repay not only the principal amount but also
the interest and other applicable fees. The entire amount needs to be paid within the agreed timeline.
Personal loans usually require you to pay a pre-specified fixed amount in installments, over the loan repayment period. This period can range from a few months to several years, depending on the loan amount and the lender, among other factors.
How is Interest on Personal Loan Calculated?
Most personal loans are designed for fixed monthly payments repayable over a few years, depending on the loan amount.
In most cases, personal loans come fully amortized. This means, your monthly repayments would include the principal amount as well as the interest. The principal amount is the original loan amount you are offered.
A personal loan calculator involves monthly repayment of the principal sum along with interest.
Amortized personal loans are affordable because the amortized amounts fit easily into your budget. As you will be paying monthly principal amounts, you will not have to worry about balloon payments – paying the entire loan amount at the end of the loan period.
Personal loan interest rate for licensed moneylenders in Singapore is 4% on the reducing balance. Customers are required to pay a fixed amount of money per month. The monthly repayments include both the principal amount and the interest.
How to Calculate Personal Loan Payments and Costs?
A personal loan calculator can help you determine your monthly payments with accuracy. You can also use it to compare interest rates and repayments while searching for a lender.
Extending on the example above, let us calculate the various personal loan components for the loan amount of S$20, 000:
|Annual Interest Rate||4%|
|Loan Repayment Period||4 years|
|Monthly Principal Amount||(loan amount)/(total no of months)|
$20000/48 = $416.67
|Monthly Interest||(Annual interest rate)/100/12|
4/100/12*20,000 = $66.67
|Total Monthly Loan Payment||Monthly principal + Monthly interest|
$416.67 + $66.67 = 483.34
So, for a loan amount of S$20, 000, the total monthly repayment you would need to make is about S$483.34.
When is a Personal Loan Best?
A personal loan is best when you need a generous amount of cash immediately. While there is the obligation to repay the loan over the scheduled period, a personal loan can help you meet your immediate needs.
Some life situations where the use of personal loans can be advantageous, include:
· Medical emergencies
· Family crises
· Education expenses
· Weddings and holidays
· Property renovations
· Pay off existing debts
Is a Personal Loan Good to Pay Off Existing Debt?
A personal loan can help you repay credit card debts. People with a good credit rating often choose to take a personal to clear their credit card dues.
A personal loan is also a viable solution to consolidate multiple high-interest debts into one single manageable and repayable debt. By clearing off your debts with a personal loan, you may even witness an improvement in your credit score.
Tips to Get Instant Approval on a Personal Loan
Getting the best interest rates at the lowest monthly repayments in a fast and secured way is what every personal loan borrower wishes for. This expectation need not be a dream though. You can get the best interest rates and monthly repayments with the following tips.
Choose a Licensed Moneylender
Licensed moneylenders employ technology to get things done fast. You can apply for a loan online, which moves the process faster, saving you time and efforts. When you need a personal loan for an urgent need, time is of essence and the faster the process, the better.
Loan approval is also faster with licensed moneylenders. You do not have to wait for days to know whether your loan has been approved or not. The process for loan application and approval takes only 30 minutes with a licensed moneylender in Singapore. You will receive your loan cash on the spot, upon approval.
Eligibility for loan qualification is more relaxed with licensed moneylenders in Singapore. The qualifying income range is wider and the rates of rejection are usually lower.
Your repayment capacity is the major criterion for moneylenders. Your application is less likely to be rejected if you qualify for repayment.
Loans from licensed moneylenders can be a life-saver when you are faced with crises such as accidents or medical emergencies. With their easy and flexible process, getting cash in hand within a day is not impossible.
Monitor your Credit Score
The key to getting instant loan approval is maintaining a healthy credit score. Avoid late payments, and consider keeping your credit low. Without proper credit monitoring, your debts can become unmanageable.
A good credit score also depends on your credit history, recent credits and the extent of your credit.
Plan your Finances Before Taking a Personal Loan
Be prepared with a budget beforehand to understand where you have to minimize expenses. With a plan, you will be better prepared to pay your monthly repayments. Delay or failure in monthly repayments can be prevented with a budget plan. You will also prevent the risk of going overboard with your expenses, which can lead to more debts.
Personal loans in Singapore offer multiple benefits. There are no legal restrictions specifying how borrowers can and cannot use their personal loans. The process for loan application and approval is easier and faster, and even instant in case of emergencies.
As a borrower, you get more than adequate time to repay your loan. Interest rates for personal loans are cheaper. With no collateral, the risk of your property being seized, does not practically exist.
With its many practical benefits, personal loans in Singapore are a faster and an efficient way to address your life’s needs.