If you are a Singaporean or resident in Singapore and looking forward to borrowing some money, one of the questions running through your mind might be, “Which is the best option?”
Let us face it; all loans are not structured the same way. Some have lower interest rates, while others charge higher rates. If your credit score is poor, you will likely get loans with higher interest rates because of the perceived high risk of defaulting. Keep reading to understand the four common types of loans that you can get in Singapore.
Personal Loans in Singapore
A personal loan is a form of unsecured credit that allows you to use the cash the way you want. This implies that whether you want to use the cash for medical reasons or buying assets, there are no restrictions. Personal loans in Singapore can further be broken down into two categories:
- Term Loan: This type of personal loan has a fixed tenure and monthly installments. You must clear the loan by the close of the loan period.
- Revolving Loan: This type of loan provides limits that you can use within a specific period. If you have expenses that need to be met periodically, such as monthly or annually, this might be a good option to consider.
Renovation Loans in Singapore
These are unsecured loans that homeowners take to renovate their houses.
The loans tend to attract lower interest rates compared to personal loans and have tenures of between one and five years.
When the loan is approved, the funds are directed to the contractor who is supposed to renovate the house. The lender might also follow up to ensure that the renovations were actually carried out.
If you are looking forward to buying a car and do not have enough funds, a car loan might come in handy. Singapore lenders offer car loans to help you purchase either a brand new or pre-owned vehicle.
If you are buying a vehicle worth less than SG$20,000, you can only be loaned 60% of the buying price. However, the amount you can get for a vehicle valued more than SG$20,000 is 50%.
In addition to the amount you can get, it is important to also think about interest rates and the loan tenure. If the loan interest is high and the tenure long, the amount payable is likely to be very high. This is an important consideration that you should factor in to avoid paying more than the vehicle’s value.
Debt Consolidation Loan
If you have multiple high-interest debts and paying them is becoming a challenge, using a debt consolidation loan might be a good idea. By following an appropriate debt consolidation plan, you are able to roll all the existing debts into a single debt, a move that can help to significantly push the interest rate down.
Furthermore, it reduces the stress of having to deal with multiple creditors.
To qualify for a debt consolidation loan in Singapore, the debt should be more than 12 times your monthly salary. Once the loan is approved, you will not be able to apply for another loan or credit card until the debt reduces to eight times your monthly salary.
If you are short of funds, taking a loan is one of the good options to fill the gap, but it is important to go for the option that best suits your situation. Particularly, you should go only for the loan that you can repay comfortably and with low interest rates. Consider using a good loan and lender comparison site to understand more about the loans in Singapore and pick the right option.