Low-interest personal loans are the cheapest source of credit in Singapore. Many individuals turn towards these loaning services every year for various reasons, including debt consolidation, medical emergencies, and spontaneous home renovations. But, how do these loved-up loans truly work? This article looks into the nitty grittiness of low-interest personal loans, including the costs, risks, and benefits of taking one.
1. How do personal loans differ from bank loans?
Barely ten years ago, applying and successfully getting a loan was a pain-inducing process. Long lines at banks, bulk documents, tedious trips to the bank, and worst of all, high-interest rates all made the lending market unattractive for small-scale borrowers. Fast forward almost a decade later, and private lenders have changed the ball game. Applying for a low-interest monthly loan in Singapore is as easy as clicking a website, and the rates are subsidised as well.
Best described as a form of monthly installment credit that you pay for months, personal loans are versatile enough to be applied to multiple scenarios. They also have lower interest rates than bank loans and credit cards. And finally, you don’t have to visit physical institutions like banks to acquire a low-interest personal loan. The Ministry of Law has a list of all licensed moneylenders that offer these loans and adhere to all the guidelines. All listed lenders have active websites and offer multiple types of personal loans.
2. Which are the important loan jargon to master?
Every financial service industry has its designated slang, and personal loans are no exception. Knowing these loan terminologies prior makes it easier to communicate with loan officers and shun scammers who might exploit your ignorance. With that said, here are some common loans terms that will help you navigate the personal loan market easier:
- Principal- The amount of money you borrow.
- Interest- This refers to a recurring percentage rate the lender charges on your principal.
- Debt consolidation- When you bundle up multiple loans into one monthly payment, we call it debt consolidation. There are special debt consolidation loans provided at a fixed rate for reducing various loans or paying off different loans in one go.
- Secured and unsecured loan- When taking a short-term loan in Singapore, a lender might require collateral in the form of a car, real estate, and other valuable items. These types of loans are called secured loans. Conversely, unsecured loans don’t need you to give up anything in exchange for the loan, making them riskier to the lender
- Credit score- This is a number that reflects a borrower’s likelihood to pay back debt. A credit score is arrived at after putting different factors into consideration.
3. Are there any special requirements that increase your chances of qualifying for one?
Turns out, learning the industry’s terminology isn’t enough to secure a short-term loan in Singapore. In fact, being cheap, low-interest personal loans attract thousands of potential borrowers every month. This high level of competition necessitates extra caution and focus during the application process.
For instance, you want to ensure that you meet a lender’s credit criteria before applying. Do they lend to ex-pats in Singapore? What’s their minimum credit score requirement? Will your company name raise any issues? These are a few thoughtful questions that can make or break the success of your application. To be safe, always go through the lenders’ website to know what’s expected of you. Make sure you have the essential documents such as:
- Proof of identity
- Proof of income
- Proof of address
- Credit report
4. Which factors determine a personal loan interest rate in Singapore?
As their name suggests, low-interest personal loans attract affordable rates. However, these rates vary wildly across the board. If you’re currently lender-shopping, we’re sure you’re curious about how to strike even lower interest rates than you’re presently capable of. Is it difficult? Somehow, but you’ll manage.
The first step to netting a super-affordable personal loan interest rate in Singapore is to have a high credit score. This means paying off your credit card on time, clearing student loans, and applying to one lender at a time. A high credit score depicts low-risk levels of lending you money, hence increasing your chances of getting interest rates as low as 3% per month.
Also, other factors that might convince lenders to charge you cheaper include a short loan term, a high-income level, and a high payment frequency.
Generally, acquiring a monthly loan in Singapore is cheap and painless. Not only do we have many licensed lenders in Singapore, but the internet has also fastened the application and acquisition processes. Besides the interest, your loan might incur some other fees depending on the loan contract, but it’s nothing to worry about!