When it comes to personal loans, there will always be a fine line between their pros and cons. In a bustling metropolis like Singapore with a rising cost of living, the reality is that you may find yourself in need of extra cash for unforeseen circumstances at any point in time. In this case, a personal loan might be a good option for you. In this article, we weigh some pros and cons of a personal loan, and how it could potentially benefit you.
Personal loans in a nutshell
A personal loan is designed to fund different needs and uses such as medical emergencies, housing loans, renovation loans, vacation loans, and so on. It is usually an unsecured loan, which means you don’t need collateral to secure funds. Its flexibility is what makes it so attractive. When managed responsibly, it can be a great short-term solution to help individuals through a financial crisis or emergency.
A personal loan might be right for you if…
You are looking for a flexible loan solution
A personal loan can be used for a wide variety of reasons. If you are looking for a flexible solution to finance a major purchase or emergency without being locked down to a fixed usage, a personal loan can be a great option to consider.
You are looking for a low-interest rate loan
Personal loans generally offer lower interest rates than credit cards. They also have flexible repayment plans that can stretch up to 12 or 24 months, depending on the moneylender, with a fixed interest rate. This would be a more financially stable option for people taking out a huge loan for personal reasons.
You are looking for a quick loan solution
One of the pros of taking out a personal loan is its ease of application and fast turnaround. If you are looking for a quick loan solution in an emergency, you should consider a personal loan. Some moneylenders even offer quick loans within 24 hours.
You are looking for unsecured loans
As most personal loans are unsecured, you need not provide a collateral or security deposit. This poses less risk for the borrower as your assets are kept safe. This also opens up a loan solution for people who do not own assets such as a car or a home.
A personal loan might not be for you if…
You are unable to commit to a fixed payment schedule
Despite their apparent benefits, a personal loan may be deemed as a bane if not managed wisely. For people who are unable to commit to a fixed payment schedule and have the tendency to make late payments, a personal loan might not be the best option. Most moneylenders do not allow partial payments as the installments and payment terms would have been agreed upon during the application stage.
You have a poor credit score
It can be tricky applying for a personal loan if you have a low credit score. Most financial institutions and moneylenders would insist on their borrowers having a good credit score. However, there are still some instances where moneylenders are agreeable to a loan. They might impose stricter repayment terms and eligibility procedures on these borrowers based on their credit rating.
Is a personal loan right for you?
When used in different circumstances, a personal loan can be a boon or a bane. If you need a quick cash solution, personal loans are your best bet if you have a good credit rating. However, if you are already in debt and have a habit of overspending, personal loans might not be a viable solution. It is still a form of debt after all. Before taking out any form of loans, you’ll want to consider your finances and repayment ability. Having a plan in place can help you make a more informed decision. Remember, how good or bad a thing largely depends on each individual’s circumstances.