Today, we will be tackling one of the most frequently asked concerns on the internet. Is it safe for you to make an application for a personal loan in Singapore? Numerous ideas regarding personal loans come from street word of mouth, media productions that dramatize the topic or kids’ narratives.
Because of this, your awareness concerning personal loans may not be the most exact. In this write-up, we aim to help you understand what a personal loan is and when is it beneficial to be obtained.
What is a Personal Loan?
A personal loan is a kind of credit that you can consider for personal reasons. This in practice implies that the loan is not restricted for any type of distinct use. Rather, compared to when you take home loans or vehicle loan, a personal loan enables you to utilize the credit for nearly any reason.
An additional variable that personal loan differs in is that it typically does not demand collateral. Personal loans are categorised as instalment loans. This indicates that upon approval, you would receive a lump sum of cash. From there, you would make constant payments on a monthly basis up until the loan term ends.
Are Personal Loans Dangerous?
Now that you understand what a personal loan is, we can take care of the main issue at hand. Personal loans on their own are just tools. However, depending on just how you utilize it and treat the settlement procedure, a personal loan can go poor or excellent.
Like every other kind of loan, a personal loan gives you access to instant money or funding. In exchange, you will be obligated to repay this amount in addition to interest which represents two factors:
- Opportunity cost of the lender in offering you the amount of cash
- Risk of a bad debt that the lender undertakes
As long as you have a strategy to pay back your debt within a short quantity of time, there is no cause to expect interest to dominoes out of control. Having stated that, the uses of personal loans vary considerably from individual to individual.
Questions to ask Yourself
Before you decide whether or not to apply for a personal loan, you can first ask yourself the following questions as a form of a checklist.
- Why are you applying for the loan? Is it an emergency? Are there other methods to acquire the requested sum? Are you asking for more than needed?
- Will you be able to repay the loan? Is the monthly repayment scheme amount outweigh your monthly income?
- How long will the repayment take and what amount of interest will be generated as a result?
Common uses of Personal Loans
In addition to questioning yourself about the essentialness of personal loans for yourself, here is a few common uses of the best personal loan in Singapore.
- Credit card debt consolidation when the average interest rates charged is more than the interest attached to the personal loan in question.
- Medical operation cost when the treatment is time sensitive and you do not have the required savings to afford it at the moment.
- Paying for your wedding celebration and event. Given the high costs of weddings on average in Singapore, you will be charging a huge amount to your credit card. Should the loan terms be more favourable than your credit card’s, you could consider switching over.