Personal loans, also called consumer loans, provide a sum of money for personal expenses, compared to a business loan or a home loan. A few financial institutions offer personal loans to banks, pawnbrokers, and peer-to-peer (P2P) lending. Virtual banks and financial institutions can also obtain personal loans, with crypto loans being a recent innovation.
According to Finder Singapore, in 2020, “Covering Basic Expenses” is the top reason people take out a personal loan at around 13%with 11% of Singaporeans take out personal loans to “keep afloat or to help family and friends”. ‘Finance a mortgage’ is another popular reason for needing a loan, along with ‘buying a car’ or ‘paying off credit card debt‘, with 1 in 10 Singaporeans (10%) taking out a loan for each of these reasons.
Another finding they gathered from their sources is that middle-income earners (those earning between $6,000 and $8,999 and between $9,000 and $11,999) are the most likely to take out a personal loan, although low-income Singaporeans are bearing “the brunt of the economic impact of the pandemic”. This isn’t as surprising as many assume, since financing middle-class lifestyle items requires more capital.
In this article, we’ll go over some of the benefits of getting a personal loan and why you should consider them when you need extra money over alternatives.
Personal loans are one of the most flexible types of money loans on the market. There are several reasons why their flexibility is a strength over other types of loans.
Personal loans do not require collateral
Personal loans are unsecured loans, unlike mortgages and business loans (i.e. secured loans) which require collateral such as houses, land or other assets that can be repossessed by the bank or the financial institution in the event of loan, bank or finance company default. the institutions will only provide the funds and calculate your interest based on the assessment of your credit rating and repayment capacity. This unsecured nature of personal loans means that none of your assets will be at risk if you cannot repay the interest on the personal loan.
Despite the absence of loan collateral, borrow at your own risk; the lack of collateral that facilitates borrowing can be tempting for people to borrow all the time.
Loan repayment period is not as rigid
The term of the personal loan depends on the principal and the interest rate. You will receive a wide range of payment options, ranging from one to five years, and some banks even allow a longer term of up to ten years. Unlike other forms of repayment, where the loan is asset dependent and not as flexible as personal loans.
You can also negotiate tenure terms with banks and lenders so that both parties can work out a deal.
No restrictions on obtaining personal loans
One of the best things about personal loans is that you are free to use the money however you want after you get the money. You must use your loan proceeds to buy a home when you take out a mortgage. However, personal loans work differently and you are not limited to using them to purchase a specific asset, as you are under no obligation to obtain the asset. Instead, you can take out a personal loan and use your proceeds for anything from home repairs to vacations.
Once the loan is approved, you can use the money as you see fit. If you originally intended to buy a car with the loan but buy furniture instead, you are free to do so compared to a traditional car loan.
Compared to other forms of financing and credit, personal loans make it easier to obtain and use the loan amount.
Quick and easy application
When applying for a personal loan in Singapore, the last thing you want is to have to prepare dozens of documents. In Singapore, the documentation is quite simple when applying for a personal loan; all you need is ID, address, recent payslips and a bank statement for 3-6 months (depending on the bank). If you opt for a personal loan with a bank, you will have to present these documents in their branches. The application may take you less than 20 minutes to complete.
Easy and fast processing
Most of our banks take less than 24 hours to process personal loans in Singapore. Once you have completed our personal or consumer loan application form and provided all the required documents, our partner banks decide to approve your loan almost instantly. This makes personal loans very convenient, especially if you are looking for urgent cash.
Quick loan credit to your account
After final approval of a personal loan (which takes place at the bank’s office), the funds are deposited into your account immediately on the spot. Please note that some banks are closed on public holidays or weekend days, which affects the speed of disbursement. If you are a former customer of the lending financial institution, the money will be credited to your account even faster.
Borrowing on personal loans tends to be more profitable than their alternative counterparts, such as credit card loans, personal lines of credit and more.
Reduce financial burden
Here’s how personal loans can reduce your financial burden. When a personal loan is approved, funds are released in a lump sum to your account and repayment is made in monthly installments. This means that pawnbrokers will not burden you with having to pay large sums of money all the time. However, the total amount payable will be higher if you take longer to repay a personal loan. This monthly payment program is less restrictive than the other types of loans available.
Lower relative APR than credit card loans
Although credit card loans are quick and easy to obtain, a personal loan is a better option because it is cheaper. Interest rates on credit cards are very high, while personal loans in Singapore can go down to 5% per annum. The interest rate on credit cards can go up to 30% per year, which can be unsustainable.
Unlike credit card loans, lenders can only charge limited interest for their products, which makes personal loans less risky and volatile.
Fixed interest rates
Some borrowing products, such as credit cards and lines of credit (LCDs), have variable interest rates, which means the interest you start paying on your debt can change over time.
A personal loan can lock in a fixed interest rate and pay off your debt in equal installments. You’ll have predictable monthly payments to look forward to, which is especially important now. It also means that personal loans are less sensitive to changes in interest rates over time, which can affect other forms of credit.
It pays to consider a personal loan as a viable option. Even if your credit score needs improvement, you may still qualify for a personal loan, but at a higher interest rate. If you have a high credit score, you may find that a personal loan is your most affordable borrowing option. To view the best interest rates for personal loans, click here.
Finally, unlike other forms of credit, personal loans tend to offer more variety in their products; this is also related to their flexibility.
Different forms of loans are available for everyone
Personal loans are not fixed plans; they come in many loan packages designed to suit each party. Most lending institutions offer personal loans aimed at professionals in various industries, such as doctors, lawyers, investors, and engineers. Due to their social characteristics, farmers and women also benefit from low interest rate schemes on personal loans. You don’t need to have a business plan or get a house to apply for a business loan, which makes it accessible.
Different types of personal loans
There are different types of personal loans you can take out compared to other types of credit and financing programs. This can range in their specialty from student or educational loans to home improvement loans, cash loans, wedding loans, quick/urgent loans and even unsecured auto loans where the car will not be the collateral.
Since personal loans are much simpler, virtual and real banks and online and offline financial institutions, such as approved lenders or Peer-to-Peer lenders, support personal loans. Unlike secured loans, where there are usually more legal barriers to business entry.
Personal loans can have advantages over other forms of credit, such as ease of getting and applying for a loan, flexibility in term and what you can do about it, and relatively lower rates. expensive available in the market. However, always borrow within your own means and adopt safe borrowing habits and financial habits. Click here to find out more about the best personal loans available in Singapore.