Contrast of a personal loan over credit cards

A personal loan is perhaps one of the most applied for loans in the financial market today. The reason behind this is perhaps the borrower need not specify for what purpose he or she would use the loan for, unlike if one would apply for a home or car loans. Personal loans in a sense are a form of credit whose purpose is general in nature like purchasing appliances, electronic devices, buying women’s clothing online stores or to cover vacation costs and/or any other type of expenses that may need to be paid by the borrower.

Unlike the credit card, a personal loan will allow you to use the cash provided by the lender to pay whatever expense is needed to be paid instead of using a credit card to cover the cost. However, like in the credit card, payment for the loan shall be amortized on a monthly basis or in whatever repayment terms the lender and borrower have agreed upon.

You must understand that unlike other type of financial help, personal loan are usually not as flexible as a credit card and usually do not carry additional benefits such as warranties and purchase protection, rewards, travel benefits and other incentives given by other type of loans. What is beneficial with most of the personal loans offered by financial institutions is that the interest rates charged are usually fixed and reasonably low and most of the time is never covered by collateral.

In Singapore, applying and availing for almost all sorts of personal loans is very common among its residents and more often than not used to cover personal expenses or to purchase personal items, gadgets, and appliances. However, lately, Singaporeans have started to discover new ways of using personal loans more constructively. For instance, personal loans are used today to consolidate current debts of an individual. This type of personal loan is usually defined as a debt consolidation loan, usually accomplished by applying for a single type of bank loan or through your credit card company to cover two or more types of debt.

In general, Personal loans are availed to cover any kind of personal expense that cannot be met by the borrower’s current income status. In some instances, borrowers who are at the same time old and reliable clients of particular financial institutions can even get a large amount of personal loan to cover large expenses such as home renovation or even to use the fund as a down payment for a new vehicle. In olden times financial assistance was given by a loan company such as a conventional bank usually refers to this type of financial help as character loan and this is simply because the borrower’s personal character and status are quite well known with the bank or personal loan lending company.

Type of lenders you should avoid before applying for a loan

The well and richly developed economic situation that exists in Singapore today have allowed the residents to be secured in applying for financial assistance from both public and private financial institutions. A high percentage of individuals and families here earn enough income to allow them to apply for the type of loans to cover purchases of homes and other properties or to use the funds for additional or unexpected expenses. Because seeking financial assistance from lenders in Singapore has become common, various lending institutions other than banks and conventional lending companies have mushroomed in the country.

This situation speaks well of the financial condition of Singapore but like any other well-developed countries, it gave rise to some problems one of which is the presence of unscrupulous lending companies that prey on unsuspecting borrowers. I will try and give you some pointers that will in one way or another tell you the type of lenders you should avoid. However, let me point out that these types of lenders are mostly the unconventional lenders and whose main intentions are to simply lend out money to those in needs.

  1. First, make sure to avoid unlicensed moneylenders when thinking of applying for even small loans. You may have an easier time applying and having your loan approved from these types of moneylenders but you can bet your life that the interest rate is going to be very high and its repayment options very difficult to comply with. You must understand that a person or entity, whether licensed or not have the right to lend another individual money, but the unlicensed one is not bound by Singaporean laws covering money lending activities. You are therefore a lot safer by borrowing money from licensed lending institutions.
  2. Second, avoid moneylenders that advertise their services in the form of telemarketing or through SMS marketing. Legal moneylenders in Singapore are never allowed to do this as per instructions of the IPTO rules and privacy acts of the country. Illegal money lender uses these marketing strategies to reach out to clienteles so it would be best to avoid these lenders.
  3. Third, when applying for a personal loan, avoid moneylenders that claim to have the power to approve your loan and remit the loan amount via bank transfers. Most of these claims are bogus because the moment you have paid the fees and other charges for your loan, in all probability, there will be no cash that will be transferred to any of your bank accounts.
  4. Finally, avoid money lenders that would require you to disclose personal information over the phone. Some money lenders would trick prospective clients into disclosing personal data when the latter would call for some information relative to applying for a loan. Immediately avoid this type of lenders.

Not So Hidden Advantages of a small loan

A good credit standing will always be a basis in getting your loans approved (i.e. personal, business, auto, home or bank loan) how to maintain a good credit standing is simple enough by repaying your loans on time and by finishing them at the soonest possible time.

The best way to achieve this is not to apply for any type of loan that is beyond your capacity to pay. Another is applying for small loans which are better and easier to manage, provided you had done your research and it is the best deal possible.

Small loans are easier to pay off even if there is a higher interest rate, a small amount with a high-interest rate would still end up small. While large sums tend to get mismanaged a small loan tends to go exactly where it should go. While interest rates play a big part on how long a loan get paid, a good deal on a loan gives premium to overpayments and payments made earlier than their due date.

Keeping this in mind small loans are easier to pay off so that it would be wiser to pay them off at a shorter time, lesser payment schemes would help allow an earlier renewal date for your loan.

Rates play a huge part in applying for a loan, as for small loan better rates can easily help finish loans early and boost a person’s credit standing. A person with good credit standing can easily avail of any loan from any creditor. The advantage of small loans as it easier and faster to pay, it would not take long to boost your credit standing.

A person’s capacity to pay his or her loans duly on time helps that person acquire large loan amounts because of having a good credit rating. Though procuring large loan amounts is harder to pay off it would still be wise to do so only if a loan is badly needed.

Small loan amounts lead to lesser payments in lesser time frames which also helps a person to boost his or her spending power and budget. As much as possible it is better to stay liquid rather than spending a long time frame paying off creditors.

Loans with small amounts tend to be a better deal in terms of repayment as there is a compressed time frame in which you can pay and as it is easier to add extra payment to finish the loan as soon as possible, and if the said loan amount is not enough through good credit rating even if a person’s original loan has not yet matured he or she with good credit rating will be able to acquire a new loan easily with his or her credit status.

Common types of loans in the market

Type of loans available in the financial market today is many and classified into various categories depending on the loan requirement. I will just try and discuss with you some of the more common loan types that are usually availed by most individuals and businesses here in Asia.

Singapore has been known to have one of the most active and well-developed economies in Southeast Asia, and this is perhaps the reason why its population is very active in applying for monetary assistance when it comes to financing purchases of properties, cars and other important necessities such as appliances, and other comforts in life. It’s quite common for its citizenry to apply for various kinds of loans and this has become a normal day to day activity between Singaporeans and money lending institutions here. Personal, car, home, Payday, business and surprisingly foreigner loans are some of the most common types of loans being applied for in this country.

  • The fastest cash loan is perhaps the most common among the all loans being availed by most individuals here in Singapore. Because borrowers don’t need to specify where he’s going to use the money for, the financial assistance is also referred to as a multi-purpose loan. The money involved in this transaction is normally small but there are cases wherein large sums are involved, but this is more of an exception to the rule and will depend entirely on the agreement between the lender and the borrower.
  • Being a multi-purpose loan, the money is commonly used to add to the borrower’s money to buy a car or to purchase appliances, electronic devices, or to cover other small to medium scale expenses. The cash borrowed from this loan can be as much as four months of the borrower’s monthly income and the interest rate is usually fixed. Repayment options are usually short-term and the amount of amortization paid each month is fixed.
  • The payday loan is a new type of financial assistance and allows the lending of the small amount of money. The interest rate for the loan is unusually high and needs to be paid within thirty days.
  • Business loans are usually provided to various types of trades such as corporations or individual businesses. The assistance is usually used to solve business cash flow problems. Repayment terms and interest usually varies for this type of loan.
  • A foreigner loan, on the other hand, is provided to expats and legal foreign workers in Singapore. Normally the loan needs to be secured with collateral but the approval of the loan is usually fast and carries a very low-interest rate.