A personal loan is generally smaller in scale than a housing or car loan. It usually doesn’t require collateral unlike mortgages that allow you to borrow larger amounts of money since the collateral is a form of financial security for the lender. Personal loans are a form of unsecured debt, so it is expected that a limited amount of money costing only up to a few thousand dollars can be released to you. It is because of this limit that interest rates are significantly increased to adjust to the scale.
Getting a personal loan in Singapore, however small, is still a big responsibility. Loan providers are still wary, especially if they give out several of these unsecured loans, of clients who won’t be able to pay them back promptly. Loan providers may require a background check to verify your financial capacity. Be sure to provide them with valid and government issued IDs, a bank statement, billing statements, or other proofs of income. They may even call your workplace just to verify that you are an employee of that company. Once everything has been set, and the loan provider has determined that you are an ideal candidate for the loan, consider next the following:
It is important to never bite off more than you can chew. This is one of the biggest mistakes people make when they apply personal loan. The loan provider will offer you options in terms of how much the amortization will be, and for how long it will take for you to pay them back fully. The amortization is the portion of the amount you owe including interest. The bigger the amount, the longer the period of time it may become to pay back the entire amount. Some people generally go for bigger amortization values, thinking it’ll be easier to get out of debt.
Others take the safer route, going for smaller values for a longer contract period. Neither choice is necessarily the best one. It all depends on your financial situation. It is important to consider not just how much you’re earning from your current job, but also if your current job is stable. Take note that loan payments take time, and what you’re earning now may not be the same amount you’ll be earning in the future. Other financial disruptions like emergency expenses may hinder you from paying the promised amount on time. It is best to step back and think how well you’re doing at your job, and if the monthly amortization is just the right amount to fit in with your basic needs.
Another thing to consider is if you have other pending debts. It is very unwise to apply for another loan if you still have debts to fulfill. Additional debts will just add to the sinkhole that you are already forming, sucking you further in until there’s no way out. If you want to increase your credit score to be eligible for additional loans, you have to fulfill previous ones first.
Lastly, consider the main reason that made you decide to apply for the personal loan in the first place. Consider its importance and urgency, and if you can do without it. It is mainly with that consideration that makes personal loans either a nuisance or a blessing.