5 personal loan myths debunked
Some of us may have found ourselves in unenviable financial positions before, and Andy was precisely caught in one such situation. Having taken on the onus of funding his younger sister’s new business, he had unfortunately had to pay for his wife’s medical fees for a small operation.
As a brother, Andy found it hard to back down from his promise to his sister in helping her with the capital to start off her import/export business. Yet, his wife, who is fully dependent on him, will need his help in paying off her medical fees. Though the operation cost about $12,000, it is still going to make a huge dent in his savings, not to mention he still has a 4-year old son to take care of.
Are you one of those who has considered applying for a personal loan but was reluctant due to some misconceptions? The fact is a personal loan can be used wisely to help with short-term cash flow problems, freeing you from a shortage of funds; it can also be abused by someone who would use the money unwisely, ending up in accumulating more unnecessary debt.
You might associate taking up a personal loan with certain stigma, or have heard some myths about it that are preventing you from seeking a loan that can better your life. Let us explore the facts and debunk some of these personal loan myths.
1. Personal loans are the most expensive loans
Generally speaking, the more specific the loan, the cheaper it is. Take for instance, a mortgage loan. Going at just about 2% on average in the current market, it is definitely a lot cheaper than a personal loan or even a car loan. Because you can use a personal loan for whichever purpose you need, it is priced slightly higher than the rest, but it is still much cheaper compared to taking a cash advance on a credit card.
To lower the rates further, you can explore taking up a secured loan with which you put up a collateral.
2. Personal loan rates are the same across the banks
Personal loan rates, like other types of loans, can vary between banks and even different applicants! You may be charged higher loan rates if your credit score isn’t exactly great, or perhaps your loan tenor is shorter. Not only do banks not charge the same rates across, licensed moneylenders charge differently as well. This is why it is extremely important to do your research when looking for a suitable loan.
When comparing loan rates, remember to take into account other fees and charges, as well as the effective interest rate so that you can find the best loan on a holistic basis.
3. The application process for a personal loan is tedious
Unlike decades ago where you’d need to physically go to a bank and to get ready all the hard-copy income documents, the digitalisation of finance has greatly helped loan applicants save time. Nowadays, you not only can compare loans online, you can apply it online as well! Simply upload a soft-copy of all the required documents online, fill in your particulars and you will even receive your approval via email or a call. If all goes well, your application may even be approved within 24 hours!
4. People who take up personal loans are desperate
The ideal situation for everyone is to have enough money for everything they need in life. However, this is seldom the case, and probably only happens to those who are born with a silver spoon in their mouth.
Situations like retrenchment, having a huge medical fee to pay, having cashflow problems with your business are entirely legitimate reasons to take up a personal loan. In fact, do you know that those who make use of loans cleverly are able to even make money out of it? (eg, property investments). Don’t let the picture of a desperate man seeking a loan from a loan shark to pay off his gambling debts stigmatise the idea of taking a personal loan.
5. I can’t take up a loan with a poor credit score
Credit scores are no doubt, important for the approval of credit or loan. But depending on your situation, there could be ways to work around it. For instance, if you’ve got a few late payment issues with a bank and this has affected your loan application, you might want to seek out a loan from a licensed moneylender instead. This is because legal moneylenders in Singapore use the Moneylenders Credit Bureau instead of the Credit Bureau Singapore which works with banks.
Need a loan but not sure which one is suitable? Let us do the hard work and help you find the best deal!