Taking out a loan is something that we all need to prepare for before actually getting one and especially in Singapore. For an average individual, it may look pretty complicated from the outside looking in. But if you know what to look for, then things get much simpler than you’d expect!
So today we are going to talk about the factors you need to consider before applying for loans in Singapore. You can loan different amounts, depending on your annual income and other extenuating factors, and also choose from a range of loan types depending on your eligibility. This sounds like a lot to take in, and it can be. So today, we have rounded up just 5 factors you should look at before taking out a loan to help you along your way.
Your first and very important step is to determine the loan amount because you will have to repay this sum plus interest at the end of the day. You should take time to quantify in certainty, the loan sum you truly need, and not go in with a vague idea, and end up loaning more than necessary.
On top of this, you will not be able to borrow a loan sum that exceeds your limits which are determined by the collateral you can put against your loan as well as your annual income. For example, if you are earning $36,000 annually then you can typically only get a personal loan sum of up to 6 months of your monthly salary which is $12,000, so you should be prepared for this.
Types of loans
Once you determine the loan sum you need, you can start to assess the type of loan you may wish to take out. If you’re in need of a loan urgently, you may consider a payday loan–but this is given you do not require a large sum. If you find that you need a larger loan sum, and can wait a tad longer for the money to come in, you may opt for a personal loan instead.
On top of how fast you get the loan sum, the different loan types also have different interest rates pegged to it, which we will look into in the following point. The type of loan you select can also be determined by what you intend to use the loan sum for, be it for business or personal purposes. There are even wedding loans available specifically for couples looking to fund their special day!
Loan Interest Rate
Whatever type of loan you choose, you need to keep an eye out for the interest rate that comes with whichever type you choose. As mentioned, some loans come with higher rates, depending on other extenuating factors such as the repayment period, and how fast you get your cash.
The interest rate plays an important role in determining your ability to repay your loan according to your agreed-upon repayment terms. If you fail to repay the sum on time, you can end up incurring extra penalty fees, which can make your loan very costly, so it’s important to be certain that you can afford to make your repayments with interest.
The repayment period attached to your loan will be determined between you and your chosen licensed money lender, and depends on many things such as the type of loan, interest rate and the total sum of the loan. Repayment periods also depend on your monthly income, and you should always take out loans which you are certain you can pay in time.
This amount should also not be a huge burden on your finances, so to get a clearer idea of how much you can afford to repay a month, don’t just look at your monthly income, but your average monthly expenditure as well.
There are many different loan types on the market, and all with unique terms and conditions. Similarly, many potential borrowers that are looking to take out a loan in Singapore have their unique financial needs. So begin by assessing your personal situation, and then reach out an authorised money lender that you can trust.
If you’re still unsure after reading this article and need more assistance, leave us a comment below, or contact us on our hotlines: (+65) 62244746 (Yishun) and (+65) 62244749 (Tampines).