We all earn money and save it in the bank to lead a good life. However, the income of a person does not remain static throughout their life. There may arise a need or a situation when a person may need some extra money. People may need it for education or pursuing their dream business, wedding or even travelling. It is during these circumstances when they ask for loans.
Most of the time, individuals take their loans from the bank. There are a few factors that a person should consider before taking a loan. This article will discuss the key considerations that one needs to take when applying for loans in Singapore.
Types of loans
First, one needs to know the different types of loans that are available. There are personal loans, business loans, education/ students loans, equity loans, mortgages, etc. These loans are for different purposes and provisions.
- Personal loans-It is of two types: secured loans, where the collateral is compulsory. And unsecured loans, where the collateral is not necessary.
- Business loans-There are different types of business loans available-
- Term loans
- Short-term loans
- Equipment financing
- Lines of credit
- Small business administration loans.
- Student loans- Helps students to study abroad and fulfil their dreams.
- Mortgages- There are two types: conventional mortgages and government mortgages
- Equity loans- These loans are of three types:
- Home equity loans
- Home equity lines of credit
- Home improvement equity loans.
Thus loan is an amount of money taken from a bank or legal money lenders for a particular period. It has a rate of interest. At the end of the period, the person needs to give back the money with interest. They give it to the bank or legal money lender, who has lent the money.
Things to consider when applying for loans
But the key factors that a person should consider before taking Singapore loans are mentioned below-
- Rates of Interest- Before applying for a loan, one needs to know the correct interest rates. The rate of interest determines the amount of money that one needs to pay back in the end. You can check different banks and find the best interest that suits you. You should also find out that the rates are free from other additional hidden fees. These hidden fees will not increase your rate of interest. Instead, you will have to pay an enormous amount every month.
Therefore if you are taking any personal loan from a legal money lender in Singapore, note that the interest rate is not more than 4% per month. If they offer you more than that, it means you are dealing with the wrong lender.
- Time of the loan- It is another factor that one should consider before taking the loan. It also determines the amount of money you need to pay back when the loan ends. Sometimes you need to pay some extra money if you pay the loan before time. It is called a prepayment penalty. Therefore before taking a loan, you should get detailed information on all these. So that, in the end, you need not pay any extra money.
In Singapore, if you fail to give back the money within the time. You need to pay a late fee. If you have taken a personal loan, this fee does not exceed S$60 every month and 4% for late interest every month. The time that the Singapore bank gives is at least one year. Other licensed money lenders provide a much shorter and more flexible period.
- Down payments- Not all sorts of loans require down payments. You need to know where you can get these facilities. The down payment helps to lower your monthly payments. Thus you need to contact your bank to get the details.
- Financial situation- You also need to consider your financial situation. It helps to determine the best loan that you can get. In Singapore, to get a personal loan, you need to have S$ 30,000 income annually. But other licensed money lenders give loans even if you have less annual income.
- Age limit- Another essential criterion for taking a loan in Singapore includes an age limit. You should be a minimum of 21 years of age, or else you will not get a personal loan in Singapore. If you are taking a home loan in Singapore, the maximum age limit is 65. Any person above that cannot get a home loan.
- Repayment of the loan- One of the most vital things to consider before taking any loan. After adding the interest. And time to the principal. The amount that one needs to pay back increases at the end. For many people, repayment of the loan becomes difficult. Thus they take more loans to repay the previous loans. This process naturally increases their debt.
Therefore, for different types of loans in Singapore, the criteria are also different. It includes the rate of interest, time, and other factors. It is also important to note that apart from banks, the licensed money lenders also give you loans in Singapore. But the criteria that they require to provide the loan are less harsh than the bank.
Different reasons to take a loan
People take loans in their lifetime for their different requirements at different times.
- Some people may take a housing loan to buy their dream house.
- Some may take a car loan to buy their favourite care.
- Some may take an education loan to pursue higher education. These loans are mainly required when someone tries to go abroad for their higher education.
- Some people may take personal loans for their wedding or travelling etc.
- People also take business loans.
To sum up
It’s not always conducive to borrow money from your friends and relatives. Thanks to the banks and the legal money lenders who provide the loans. They help people to fulfil their desires or sometimes help them in difficult conditions.
Thus this discussion can help you to choose the right loan. And can also help to get a nice sum of money.