Have you ever found yourself living from pay check to pay check? Well, if yes, you’re not alone. This is probably the life of every other Singapore resident!
Saving most times becomes hard when responsibilities hit. You have to strive hard to pay every bill and keep yourself happy. Affording luxury can be a thing of the past when your pay slip barely covers your essential needs.
However, the saviour for most people is loans! This will help you meet your financial obligations easily.
Before taking a loan in Singapore, you need to keep some essential things in mind. This information will help you decide on the right loan, whether to borrow from aprivate loan lender or a bank, and more.
Today’s article takes you through the necessary items you should do before taking a loan! Let’s dive in!
Considering to Take a Loan? Check out these Essential Things!
1. Assess Your Financial Situation
First, you must check your financial situation before taking a loan. Can you afford to take the loan, and is the timing correct? These are simple but vital questions you should ask yourself before taking a loan.
Loans really come through for us, but only when we are in dire need! Ask yourself whether it is indispensable for you to take the loan or not. If you have valid reasons, then go for it!
Otherwise, if your situation is not urgent, look for other financing options other than loans. You should know that you are increasing your future debt by opting for a loan. Only take a loan when you are sure that you meet all the basic requirements and can manage to repay it seamlessly in the future.
2. Check Your Credit Score
Your creditworthiness is another crucial factor to consider before taking a loan. It typically determines whether you pay your credit obligations on time.
You have a good credit score and a higher chance of securing a loan. Some lenders also look at your credit score to determine the interest rates to impose on you. You will likely get a loan at lower rates if you have a good score.
3. DetermineThe Type of Loan
After assessing your financial situation and creditworthiness, determine the type of loan you want. There are many types of loans available in Singapore that you can acquire. You might want apersonal, car,business, payday loan, and more.
So, your exact purpose for taking a loan should determine the kind you acquire. If you want to finance your business, then go for a business loan and if you are looking to purchase a car, go for a car loan. In short, be specific about your demands and understand the different functions of loans available in the market.
4. Evaluate The Interest Rate
After identifying the specific loan you want, check the interest rates. It determines the overall amount you pay back to your lender after acquiring the loan.
You need to go through different creditors. Check the amount of loan they offer and the interest rates attached to them, then compare. Once you have all the necessary borrowing information, settle for the lender with favourable rates.
5. Check Whether There Are Hidden Fees?
In addition to the interest rate, you might incur other fees that you ought to know about. The licensed money lenders will charge you an administration fee which you only pay after loan approval.
It’s also important to note that if you are dealing with a legit money lender, they will not ask for an annual fee. Furthermore, they will inform you of any costs you’ll incur in acquiring the loan.
6. Ascertain on Collateral Requirements
When getting your loan from a licensed lender, you must ask whether you’re required to produce any collateral. It technically acts as a security that you place upon getting a loan.
Majorly collateral will come in the form of a secured loan. It applies to borrowers with a poor credit history. So your lender will demand an asset before giving you the loan just for security in case of loan default.
On the other hand, if you have a good credit score, you will get anunsecured loan. It has no collateral requirements.
7. Determine When Funds Will be Dispatched
When borrowing, you need to consider the period you will receive your funds. The lender must clearly define when the loan is approved and sent to your account.
Of course, the time taken to deliver the funds to you differs from lender to lender – So find out this information from your bank before applying for the loan.
8. Determine the Loan Repayment Period
Checking the loan term is a must for any borrower. The time your lender allows you to pay for the loan plays a massive role in determining the amount you’ll eventually pay.
Figure out whether the loan you are about to take is long-term or short-term. In most cases, a long-term loan requires more time to repay and, at the same time, attracts a higher interest rate. Therefore, you end up paying more.
On the other hand, if you choose a short-term loan, it means that you intend to repay it within the shortest time possible. You incur a lesser interest rate, so your overall debt won’t be as much.
You need to check your current financial needs and the situations around you. This will tell you whether you require a longer-term or short-term loan.
9. Check Instalments Required
Instalments are pretty crucial in loans.
Can you afford the said instalment for the particular loan you are about to take? If you can, well and good. However, if you feel you will struggle to raise the monthly amounts required, opt out of that loan!
Again, your financial situation should guide you in determining whether you can pay the monthly instalments. Remember, failure to pay the loan at any point and time negatively affects your credit score.
Go for a loan only for the right reasons and when you have a payment plan laid out beforehand. Furthermore, ensure that you can rely on your lender to send your money in time, and their interest rates should be favourable.Su Credit will help you in case you require any loan. We guarantee an easy time when accessing a loan from us!