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.

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