From time to time you might need to get a loan to help take care of some urgent financial issues. The loans offered may range from loans used to buy a new car, loan to buy or build a home, fund a study program (study loans), or a personal loan to help manage some personal urgent financial issue.
Most people give more urgency and importance to loans obtained for purposes such as for education or even buying a home than to personal loans. Rather than take personal loans, most people choose to utilize their credit cards. The unwillingness to get personal loans is due to the impression that taking a loan shows hopeless or a desperate financial situation. Other Singaporeans also get the feeling that their search to get personal loans could be denied due to a range of reasons.
To help you understand the various issues that pertain to loans and moneylender in Singapore. Here are some misconceptions that most people hold. A number of these mistaken ideas that many Singaporeans have concerning loans are clearly explained below:
Misconception 1: All Moneylenders Offer Borrowers Similar Interest Rates
It is easy to think that the different money lending institution that offers loans to borrowers will choose to charge same rates of interest. This is on their loans in order to keep a healthy as well as a more competitive business framework within the economy. Unfortunately, such a belief is removed from the truth.
Also, there are some other basic factors that help determine the rates that will be charged on your loan. This is based on the loan type that you are applying for.
The money lending institution will consider different factors ahead of settling on the specific percentage to be their lending rate of interest. Some of these factors will include an analysis of the credit risk level, investigation of your ability to repay the loan taken following the given timelines, the extent of the financial requirements and your ability to put in security or collateral for the loan taken. The rates of interest charged will be derived from all these elements.
These factors may, of course, differ from one borrower to another and also from one loan type to another. Thus it will attract various lending rates of interest.
Misconception 2: A Healthy Credit Score Is Necessary To Qualify For a Loan
When you are in need of a loan from lenders in Singapore, considering your credit score is really important. This is particularly so when you deal with a banking institution when getting a loan. Even so, there are some alternatives that are available to borrowers. They also can get the loans they want from legal moneylenders that have been licensed to offer loans.
These lenders are legally authorized by the Singaporean Law Ministry (MLAW). Also, ensure that you check the moneylender list to verify this before you decide to visit their offices for a loan. The moneylenders are normally more understanding and lenient when compared to the banks. This is when it pertains issues of a borrowers credit scores.
The other thing that makes moneylenders even better is since they have a different credit score rating body. This works independently from that of banks. Therefore, you will be assured to access a personal loan from these lenders. All you need to do is have a payment history from the previous loans you had borrowed.
Misconception 3: You Need To Be Employed In Order To Access a Loan
Having a steady employment will certainly give you the added advantage when it comes to getting a specific loan. Even then, it is crucial that you be aware that even individuals who do not have jobs also would like to take loans. Their situations and financial requirements could actually be more urgent. This is when compared to the individuals who have jobs in stable yet formal jobs.
Take, for example, start-up entrepreneurs who would like to take out a loan to help fund new businesses. They might not have sufficient savings to cover the costs. Or those individuals who have been in business for a few days and are facing a period of some financial challenges.
These individuals would wish to get some funds which will help them overcome the economic challenges. These people will be needing to get loans more urgently than those in employment.
Misconception 4: Always Choose a Loan That Charges The Lowest Interest Rate
It is also crucial that you consider the rates of interest charged on a loan. This is since it helps determine the total loan amount that you will end up paying back for your loan eventually. Even then, this is among other key factors that you need to look as you are taking out a loan from any money lending company.
Finally, the loan that you will settle on should only be once you have done an assessment and analysis of the other elements. This is in addition to that of the rate of interest. Some of this factors you need to consider include the time period set for the repayment of your loan, the fees related to administering and processing of the said loan.
Also, consider the presence of prepayment penalties of your loan when you make any. Not forgetting the convenience and ease of the application process of the loan.
Considering that you can be charged lower interest when you choose a longer repayment tenure, for example. You will then need to see whether you need the longer repayment time period in order to settle a loan amount of about $5,000. This is as you are paying this loan at a slightly lower interest rate.
On the other hand, you could take a shorter time and have to pay higher interests for the same loan amount. Even then, you will need to consider the one option that is convenient for you and will not cause you any financial strain.
Since most Singaporeans choose to use credit cards instead of getting personal loans. Many are unwilling to take personal loans due to the beliefs they have regarding taking loans. Even then some life circumstance can sometimes have you needing some extra cash. In such situations, loans can prove to be helpful.