Borrowing money is one thing that we wish to avoid as much as possible, so long as we have the money to support our needs. However, things might go differently. For example, we can experience an emergency in the family. Sometimes, we might face unexpected expenses and unemployment. Or we can start planning for a new milestone like planning a big wedding or buying a house or car.
During these situations, taking a loan might feel like a huge risk or a taboo. However, with careful considerations, there are times when loans can be the only solution to your problems. The most important factor is for you to assess the situation. Decide whether you can take the loan safely. Determine if it will land you in more financial trouble in the end. As such, before taking on the loan, here are the things that can help you:
Know the Different Kinds of Loan
People need to borrow some funds for various reasons. As such, there are different kinds of loans to meet your needs.
The unsecured personal loan refers to the type of loan wherein the lender or bank will agree to let you borrow the money without any collateral. In case you can’t meet your repayments, the lending company will not repossess your house or car. This type of loan can be used to finance any type of purchase. It can help you consolidate your existing debts or fund your holiday trip.
The secured loan refers to the type of loan that you can use to buy another large asset or finance a car. This will involve putting a collateral in case you default on your loan. With these loans, they become less of a risk for the lender. As such, the interest rates are lower than the unsecured loan.
Car loans Singapore are designed to finance your car purchase. This is the same with secured loans since the car will be used as a guarantee for the loan. However, car loans are usually restricted to the purchase of new cars. This is because it ensures that security is a valuable asset.
Finally, a payday loan is the type of loan that is for small amounts. This is designed to cover you until the next payday. The repayments are under your pay frequency. You have to pay the entire payday loan immediately that normally takes place between 16 to 60 days.
Check Your Credit
Before you apply for the loan, it is also important to know where you stand. Your application for the personal loan will depend mostly on your creditworthiness. Your credit score will determine your loan interest rate.
As early as possible, start reviewing your credit score. The report card will let you know how you’ve been doing in different areas that will make up your credit score. If you have a low score, then you might have difficulties qualifying for the loan. Make positive changes that will improve your score before applying for an unsecured personal loan.
Know How Much Money You Need
The amount that you need is based on the expense you’re trying to raise and your current income. It is best to determine how much you spend per month. Make sure to borrow less than your maximum so you can avoid financial problems in the end.
Sometimes, you can get offers for larger amounts. However, if you cannot afford the payments, these loans Singapore are not for you. You don’t want to suffer unnecessary debt in the end.
As such, make sure to consider your financial situation before you apply for a personal loan. See to it that you review your finances. Think realistically about where you will be in the future. Understand how your credit plus other factors will determine the cost of your personal loan.
Consider the loan amount that you will need. Take note of the monthly payment that you can afford. Sometimes, larger loan amounts might be hard to qualify for. This is true if you have bad credit. Meanwhile, a lower loan amount with a low-interest rate will be easier to pay off especially when the finances are limited.
Find the Right Type of Lender
Financial institutions like credit unions and bank can offer more hands-on experience to their customers. Sometimes, current customers can also get discounted rates. However, they take much longer to process your application versus online lenders. They would also require more documents and the application tends to be more complicated.
Apart from the financial companies, you can also consider the non-banking financial institutions. Examples are payday lenders, peer-to-peer lenders, insurance companies, and other non-bank entities. These companies can offer lower interest rates, especially if your credit is good. Discover more about personal loan application here.