How Do You Manage Your Loan Repayment?

Taking out a personal loan can be a scary for some individuals. Regardless of the interest being charged, both high and low, a personal loan is a debt that might burden your finances. This can create obstacles to your journey to attaining financial freedom. Even though taking loans is often the last option on anyone’s mind, there are situations that do call for the urgent need for cash that personal loan offer.

Often times people take loans for different reasons such as to finance a business project and for the need of a home. However, once received, a lot of borrowers are troubled by the matter of managing their monthly loan repayments.

Some borrowers have shocking stories to tell regarding loans stretched out till their retirement, late EMI’s, heavy penalties and even the harassing calls received from their moneylenders. The one reason that makes people face difficulties when repaying their loans is a lack of planning their finances.

By taking a closer look at the outflow planning and financial health of your money will help you settle the matter of personal loan repayments. When you have recently taken out a loan and you have a difficult time managing them, below is a short guide that will help you manage the repayment of your personal loan.

Prepare A Monthly Budget

Having a working budget is always useful as you work towards gaining financial freedom. Drawing up a monthly budget will greatly ease your loan repayment plan. Make sure you list down your expenses for the month as well as your income, including small details of everywhere your money goes. This will come in handy as you analyze on areas that you need to cut back on to help pay back your loan much faster. Additionally, you will get an idea regarding your savings and salary that will assist you in prioritizing your loan repayments.

A key point to take note of is ensuring that your debt commitments for the month do not go above 35% of the gross monthly earnings. Always be aware of this every time you are requesting for loans as it can be useful.

Prioritise Settlement Of The High-Interest Loans

Although the repayment of a single loan is a lot easier, lots of Singaporeans face some difficulties in managing several loans. The reason for this is that many people fail to rank the repayment of their loan even after they have drawn up a budget. The reality that you hold a debt is certainly a burden, but what adds-on the pressure are the interests charged. The higher the interests charged, the more the pressure to repay the debt. Reducing the total interests being paid on all your loans can help ease up the weight of your finances.

A helpful strategy is the use of a debt avalanche. This strategy works by you putting a maximum amount against the high-interest loans without affecting the repayments of the other loans. You will first need to list all your loans along with their interests. Then allocate the highest amount of the loan that has the highest interest such as credit card bills. Once that is cleared, move to the next using the same strategy. This strategy will help simplify debt management for you.

Increase Your Regular Repayment Amount

If you have recently received a pay rise or a fat bonus you can use it to pay off some of your debts. Gains will come in a variety of ways such as bonuses, pay hikes, profits on some of your investments, tax refunds, etc. putting some of your financial gains to repay debts can help ease your financial obligations.

Every time you have extra cash to spare, contact your moneylender asking whether you can increase your instalment. If you have accumulated a good amount, you can even consider paying off in a lump sum. However, ensure that no penalty charges are attached to your early payment.

A few loans may have conditions such as penalties on increased or early repayments, therefore be giving an advanced notice ahead of increasing regular payments. Make sure you confirm with your licensed moneylender during the contract signing phase.

Use Schemes And Investments For Debt Commitments

Debts are divided into two; bad and good debts. Debts with a futuristic monetary gain or that pay you are good. But debts that don’t bring gains to your economic value are in fact a burden. Debts like car loans and credit card payments are bad and only add a load on your financial commitments. Although using other investments or your retirement savings is typically the last choice, they might be helpful if your debts go beyond and you are near insolvency.

Furthermore, Singapore provides some schemes such as Debt Management Plan, Debt Consolidation Plan, and Debt Repayment Plan to individuals who are struggling with repaying their debts. While DRP and DMP help you to repay your amount outstanding, DCP merges all your debts owed from different money lending institutions into a single debt to help you reduce your monthly commitments. Be sure to read through the conditions and terms of your investments along with those of the schemes to ensure you get the right one.

Adjust Your Lifestyle To Help Repay On Time

Expenses and your spending practices can affect the ease with which you repay your loans. Besides the above-mentioned guidelines, there are other habits that will ease your debt obligations and bring you closer to achieving financial freedom.

Check your spending practice to identify how you often use any extra cash you get. If you, however, splash your money aimlessly instead of putting it down on clearing debt then you could do with changing your lifestyle. Work towards trimming your expenses such as movies, shopping, and dinners, so that you are able to repay your debts faster.

Balanced financial habits are great, but ensure you prioritize your obligation in alignment with your goals. By being aware of these strategies it will be easy for you to manage the process of repaying your personal loans. Maintain balance is the answer. Adopting healthy financial practices will guarantee you become debt-free and achieve financial freedom

4 Misconceptions Borrowers Have About Loans

Most people do make the use of loan from time to time. It could be a home loan, study loan, personal loan or even a car loan. Although most people in Singapore consider study loans and home loans to be essential forms of loans because of the purpose and the amount.

There are individuals who will be more undecided when it comes to getting a personal loan. Them being undecided could be coming from the idea that taking out a personal loan needs to be considered as a last result. Or it could be to them getting a personal loan means a person has got into a desperate state thus they opt to use credit cards for purchases instead.

In addition to that, there are some Singaporeans who think that it will be hard for them to have their loan request approved. For varied reasons most people don’t trust that they are able to get personal loans from licensed moneylenders in Singapore. Even with the different reasons, it is important that you take the time to understand the different ways a personal loan can work for you by contacting your financial advisor or moneylender near your area.

Below is a quick look at some misconceptions that once clarified, you will be able to see the benefits of you taking out a loan.

Borrowers Require Good Credit Scores

In Singapore, having a good credit score is certainly very important, especially when you want to get a loan from the banks. What most Singaporeans fail to consider is the fact that there are other options open for them when accessing a personal loan is concerned – accredited moneylenders.

Licensed Moneylenders maintain a credit bureau of their own. And are a bit more relaxed when they are considering your creditworthiness based on your credit score. The legal moneylenders also rarely reject borrowers loan requests unless they have past records of defaulting on their repayments.

Each Lender Provides Similar Interest Rates

It is easy for many people to think that in Singapore, most money lending institutions give their borrowers the same interest on the loan in order for them to remain competitive. But this is not even the case here. Starting with personal loans to home loans, the different moneylenders available in Singapore offer varying rates. And it should not come as a surprise that other factors do come into play in affecting which loan type a borrower will eventually apply for.

Also, it is important to note that many money lending institutions will offer varying loan interests depending on the level of credit risk status you hold. This risk status may be based on your financial needs, ability to pay off loans, as well as ability to provide collaterals. The lenders in most cases want to know the risk level you are as a borrower and they are able to recover their money once it has been lend to you.

You Have To Be Employed To Get A Loan

Although having a steady job is a requirement when getting a loan from money lending institutions, it is not the state for you to qualify for a loan. As long as you can prove your ability to repay the loan taken, most moneylenders are willing to work with you in helping you find the suitable financial solution for your needs. This is in particular regarding a lot of startup entrepreneurs as they may not have adequate savings to cover them during the startup phase, or they could risk facing cash flow problems.

For those individuals who are self-employed, they are able to request for loans provided that they present income tax statements and an official proof of income to the money lender they are dealing with.

There are useful schemes available in Singapore like Business First Loan, a collateral-free business loan offered by Singapore’s SPRING Micro Loan Programmes. This programme is intended for new business startups to be able to get funding in the fastest and in a hassle-free way. It comes with a flexible repayment time of 4 years or less. However, you will need to have a guarantor and be able to let the bank review the financial status of your company.

You Must Always Get A Loan With The Lowest Interests

As earlier mentioned, it is possible for you to have more than one feature to consider when you are thinking of taking out a personal loan form a legal moneylender. Although interest rates are equally important criterion you need to consider since it determines the general borrowing costs, there are other factors that you will have to think of. These include administrative and processing fees, loan tenor, prepayment penalties as well as the ease of your application process. All these factors will greatly affect your choice of loan type you end up making use of from a moneylender.

Given that you want to take out a loan amount of $5,000 which you intend to pay off within 3 months. It is important to consider if you would rather pay a somewhat higher interest and have the loan repaid in three months or opt to stretch out your loan tenor to about a year with which you will get a slightly lower interest rate.

Bearing these aspects in mind will help you make a better-informed choice. As you will choose the one loan that will offer you the best deal, convenient loan period and manageable monthly instalments.

Conclusion

There are individuals who will be more undecided when it comes to getting a personal loan. Their indecision could be coming from varying misconceptions which will make them hesitate to take out a personal loan. Some of these misconceptions many people face in Singapore include; you have to be employed to get a loan, borrowers should have good credit scores, each lender has similar interest and you should go for loans with the lowest rate.

Even with such convictions, it is important that you gain an understanding of what your financial needs are and what a loan can mean for your financial health. And above all always take loans you are able to repay with ease and on time.

3 Situations Where A Personal Loan Could Save Your Ass

Sometimes, getting a loan is necessary.

You need to settle some medical bills and you are low on cash? Get a loan.
Have you some bills to pay before your next salary? Get a loan.
Have you to make car payments? Get a loan.

Getting a loan is a good idea. You can borrow from friends or family. You can exchange valuables at a pawn shop for some money. These are fairly easy ways to get loans. Then there are personal loans.

The hype about a personal loan makes it sound too good to be true. It can be an unsecured loan if you go to a licensed moneylender. You can get a personal loan instantly, in cash, from a licensed moneylender. Before you go for a personal loan, however, be sure that you can repay it. That said: try your possible best not to get a personal loan. Personal loans are some of the most expensive loans to get in Singapore. The fact that they can be used for just about anything shouldn’t fool you. Repaying a personal loan can be tough. If you need money for payments on your car, get a car loan. Have medical bills to pay? You should opt for insurance. An emergency sprung up out of nowhere? Borrow from a relative. Better yet, you should have an emergency fund for such situations. Need money for a vacation? You should first decide if that vacation is really necessary at this time.

Nevertheless, there are some situations where a personal loan is necessary. In these instances, personal loans are your best bet.

Here are three situations where it is advised that you obtain a personal loan.

  1. Get a Personal Loan to Get Out of Credit Card Debt

Credit card debt is a serious issue for Singaporeans. Studies suggest that it is very easy to spend money with credit cards. This is because the money isn’t physical, i.e. you can’t see the cash. So you just make purchases and overspend using your credit cards. Another thing you may not realize is that credit bills have staggering interest rates. And every month you default on repayments means another stain on your credit report. So, it is a great idea to obtain a personal loan to pay off your credit card debt.

You may think that this still leaves you with another debt. That is true. But it is preferable to repay a personal loan than credit card bills. For one thing, the interest rates on personal loans are lower.

Banks may offer the least interest on personal loans, but they are harder to acquire. Plus, you may have to pay a lot in application processing fees and annual fees. That is how the banks make up for the low interest they charge on personal loans.

A licensed moneylender is a great option for personal loans. Their requirements are minimal. Processing your loan application takes minutes. Plus, there are many licensed moneylenders to choose from. Compare their interest rates and their terms and conditions. Then you can choose the moneylender you want and set up a loan repayment plan that suits you.

You should also burn your credit cards. Use cash only. You will be less likely to overspend and fall into debt.

  1. Get a Personal Loan to Settle Huge Credit Card Payments

There are instances where you have to make huge payments using your credit card. You are someone who is very particular about paying off your bills on time. Then you have to pay a lot for something that usually requires a free 30-day trial. You decide to pay for it with your credit card, and then take out a personal loan to clear the bill. You have to know that credit card companies want you to spend a lot on your credit cards. They can charge you a lot of money as interest only when you do this.

For instance, there is a way some card companies charge you interest. Maybe you made a transaction of S$3500. That is huge. They will charge the appropriate interest on that, which is huge. After you have paid off the bill and you have S$35 to pay, the company will still charge you interest on S$3500. The interest is charged on that original transaction amount until you finish paying it off.

As such, it is cheaper to take out a personal loan and repay it. All the rewards on your credit card will still come to you this way as well.

  1. Get a Personal Loan to Settle Emergency Cases

As said earlier, you should have an emergency fund for emergencies. However, it is true that there are circumstances that delay the setting up of such a fund. And then an emergency arises. Now you need a loan.

Not every financial need requires a personal loan. You should understand this first of all. If the situation is such that you cannot delay, then a loan is a good idea. Situations such as mortgage, car repairs, or something health-related may require instant monetary attention. These are good reasons for getting a personal loan.

If the emergency is a wedding, well, most would advise against getting a personal loan for that. Weddings can be postponed. No one wants to start happily ever after paying off loans. If your emergency is a vacation, you need to take a good look at your priorities.

A licensed moneylender is a good option for getting a personal loan. You can get the cash just two hours after applying in most cases. You can compare interest rates of several moneylenders and choose one. You don’t even need to have good credit to get a personal loan from a moneylender.

Pawnshops are another option, as long as you have something valuable to exchange. The option with the lowest interest rates is banks, but you know how banks are. Assess the situation you are in critically before going for a personal loan.