As a newbie, applying for a loan in Singapore can be quite daunting. There are many things to consider from the type of loan to getting an approval and these differ for everyone. For someone who is new to money loans, understanding the basics of what you will be getting yourself into is vital for your own financial management and stability in the long run. With a clear understanding of what to look out for, be it interest rate charges or the repayment plan, you will then be able to make a more informed decision and find the best loans from an authorised establishment. Before applying for your first loan, here is a quick breakdown of everything you need to know.
Where to Get a Loan
The first thing you need to know is where to go to apply for a loan in Singapore. Your best options are a local bank or a licensed moneylender. Many mistake licensed moneylenders for loan sharks but these two are a far cry from each other. Loan sharks are illegal and resort to threatening ways of harassment when it comes to their clients. On the other hand, licensed moneylenders are permitted to operate under the ministry of law with an authorised badge number. Refrain from ever approaching an illegal moneylender as this could result in adverse circumstances if not properly handled.
Types of Loans Available
There are two main types of money loans available and they are secured and unsecured loans. The main difference between the two is that unsecured loans are not supported by any collateral such as property or other security bonds. Therefore, you do not need to declare your assets in order to obtain an unsecured loan while a secured loan will definitely require you to do so. When applying for a loan, you must also decide what type of loan is needed for your current needs. For example, there is a wide variety of loans available such as payday, personal, business, study, renovation and even wedding loans.
While both banks and moneylenders offer unsecured and secured loans, the urgency of your situation could affect the lender you choose. Licensed moneylenders tend to be more lenient when it comes to your credit score for an unsecured loan. This means that they do not overly scrutinise your credit history and can present you a loan within an hour compared to banks where it takes a few days to carry out a background check on each client before approving the loan.
Qualifications Needed to Get a Loan
Even though you have found an appropriate loan in Singapore from your lender of choice, you have to take into consideration if you are even eligible for one. For any bank loans or secured loans, your creditworthiness must be up to par. This means your debt and repayment history as well as your financial standing must meet the criteria of the lender before they approve of your loan. As mentioned before, licensed moneylender are less stringent about this when applying for an unsecured loan.
One factor that both banks and moneylenders will examine before permitting a loan is your annual income. Depending on your salary, your allowed loan amount will vary with moneylenders providing loans six times your monthly salary and banks offering up to 10 times your monthly income. Usually, banks only offer personal loans to those with a minimum yearly income of $20,000 while licensed moneylenders will provide a smaller loan even if your annual income is less than $10,000.
Be Familiar With the Repayment Plan
Choosing the best loan repayment plan that complements your financial capabilities is extremely important in preventing an accumulation of debts. Therefore, you must be familiar with the interest rate charges, the duration of the repayment scheme, and the possible extra fees that could be charged for late payment. Depending on the bank, bank loans usually have an interest rate between 3.5% to 10.8% per annum, whereas licensed moneylenders have a cap of 4% per month, according to Singapore law. You should also take note of the duration of your repayment plan as banks usually have a loan period of a few years while a personal loan from a moneylender usually ends after 12 months. Do also be aware that if you are not diligent in your repayment to an authorised moneylender, you can be charged a maximum fee of $60 for each late month.