More and more people from all over the world have been on using credit to pay for their finances. There are different types of loans which are available to the public. These include: Open-ended, close-ended, secured, unsecured, and conventional loans. A personal loan falls under the unsecured loan because it does not require collateral and its interest rates are usually higher compared to other types of loan.
A personal loan is a type of loan which is available for persons who belong to the Singapore workforce. A loan is often granted to an individual who has the ability to pay back the loan since applying for a loan would automatically mean that there would be some sort of interest rate for it. Since this loan is a one that does not require collateral, the amount of money lent is significantly smaller in size in comparison to other types of loans. Since these financial aids contain risks it is a must to research about these products before applying for any of them.
Follow these steps to ensure you know what you are getting yourself into.
Compare the interest rates of different institutions that offer financial aid and make sure that you are capable of meeting the requirements of these lenders.
• Thoroughly read though a loan contract
It is a must to read and understand every word in a loan contract so that you will not be fooled by the contents of the contract. Make sure that you also read the fine print because it contains some of the most important information and it is a mistake for borrowers to disregard the fine print.
• Avoid payment penalties
If the borrower pays off the loan too early he/she incurs charges. These charges are called prepayment penalties or exit penalties. The lender usually has a planned out timeline for the payment of the debt and if the borrower pays too early it could mess up the lender’s profit, so it is always best to pay on time rather than being too early or too late.
• Check your credit score
If you are looking to apply for a loan, you must make sure that you have a good credit standing. Having a bad credit score will limit your loan options since lenders often do background checks as so not to lose money. Having a good credit score will mean that more lenders will feel confident in approving your loan and this can help establish a good relationship between the lender and the borrower.
• Borrow more
Borrowing more money usually seems like a bad idea but for a personal loan it can be beneficial for the borrower since interest rates are significantly lower for bigger amounts of money. The logic is that the smaller the amount of money borrowed, the higher the interest rate, and vice versa for bigger amounts of money. Less money means higher interest. More money means lower interest.