Been avoiding debt on your credit card, keeping track of your expenses and planning for the future? It’s great to check off the boxes when it comes to avoiding financial pitfalls, but it is crucial to be aware of how to act when one inevitably comes up. Understanding credit cards, personal loans, balance transfers and the like could help you make the best choice in a financial emergency, effectively dealing with any problems that come up.
Take, for example, personal loans. Perhaps it’s because of Asian customs that colours borrowing money a subtle shade of wrong, or perhaps because nobody thinks they’ll ever land in a situation that warrants a loan, personal loans in Singapore are considered a tricky territory to tread.
This, despite personal loans being one of the most straightforward and easy to understand products, with competitive interest rates that translate to low cost of borrowing.
Here we take an in-depth look into why and when you should use a loan.
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Why take a personal loan?
Personal loans, along with credit cards and balance transfers, are three of the most common financial tools available to retail banking customers (read, people like you and me). Of the three, personal loans offer the most stable financial solution and are the easiest and most straightforward to manage.
Fixed repayment period
Personal loans offer fixed repayment periods, which means to say they come with definite start and end dates. As long as you make your payments, you will be free of your debt by the end of the loan. This gives you a sense of certainty because you have a definite forecast for future financial goals.
Fixed interest rate
Also, personal loans feature fixed interest rates throughout the loan period, which means barring late fees or other penalties, you won’t need to spend more than the stipulated repayment amount each month. This allows you to stabilise your budget, which is crucial in getting back to financial normalcy.
Low interest rate
All things considered, personal loans in Singapore have relatively low interest rates, which is why you should consider them as one of your first choices for funding. There’s no point borrowing at a high interest rate with high repayments that you can ill afford, creating another debt trap and causing you to go from the frying pan into the fire.
Wide range on configurations
But perhaps the most favourable feature of personal loans is their wide range of configurations, giving you flexibility in the amount to borrow as well as the time range to pay it back. Longer loan periods means lower monthly payments, so you should choose a loan package that suits your ability to pay back. No point choosing a 3-year loan with monthly repayments that you struggle to meet when you will have a much easier time with a 5- or 7-year loan.
Hopefully we have cleared up the misconception that personal loans are somehow ‘evil’, showing you instead the clear advantages as a financial tool.
Here’s a look at some of the personal loans available.
Text: Alevin Chan
Additional text: Zoe Zeng
When to Use a Personal Loan
Despite popular belief, personal loans are not just for emergencies meant as a last resort. In fact, with appropriate use, they can help you navigate many a gnarly financial situations.
Here are the top six reasons to apply for a personal loan: