There are a lot of inquiries about personal loans. What is it? What does it stand for? What makes it a good investment? Whether you are looking for a way to get your finances fixed or you just want to have a more comfortable way of dealing with everyday life, you would need to take out a personal loan.
Imagine this scenario; you are ready to get married. You look for the best engagement ring that would reflect your love for your partner. Unfortunately, your search is futile. You have no source of funds, you have a little bit of money saved up, but that is for your wedding, and you want to have the best one but you cannot because of budget constraints.
Does this sound familiar? If it does, then you need to get yourself off the sad train and do something about your needs. You need to get a personal loan or use your credit card.
What is a personal loan?
The next question that you would ask is: what is a personal loan? What does it have to do with me? A personal loan is one that is also called as an installment loan. It allows the borrower to borrow a specific amount of money over a period of time. It comes with a fixed interest payable over a period. It is much like a credit that revolves around the individual. The monthly repayment amount is fixed and is payable over a period of one year to as much as seven years or few months if you took the loan from a money lender in Singapore.
How much interest should I expect to pay?
The interest rate of the loan depends on whether you are communicating with a bank or a financial institution. The range comes between 8.5% to 10.5% depending on your credit score, but it still varies and depends on the different types.
Types of Interest Rates
There are different types of interest rates that every person should know more about, and they are the following:
- Effective interest rate (EIR); and
- Applied / Flat interest rate (AIR / FIR).
The Applied / Flat Interest Rate is the usual rate that comes with the borrowing. It is the actual rate that the bank or the financial institution is charging the borrower.
The Effective Interest Rate is something else. It refers to the actual cost of borrowing as they factor in the applicable fees that comes with such borrowing. These fees come in different forms, such as the following:
- Processing fee – how much does the bank or the financial institution charge with the processing of your application? How much does the bank required for you to pay for them to be able to process the loan? This fee cannot be prevented by any borrower, so it is always better for one to go with the flow of it.
- Late payment fee – this is an amount charged based on your loan agreement. How much should you pay the lender in case you fail to pay during the period required?
- Early repayment fee – this one is the amount which is typically a percentage of the outstanding principal or a fixed amount, whichever is higher.
Is A Personal Loan A Standalone Loan?
A personal loan does not necessarily have to be a standalone loan. Personal loans are often tied to a line of credit or a credit card. This one is the tie-up that could potentially get the individual into borrowing. The only con that comes with a tie-up just like that is the fact that there are annual fees that come with a line of credit or a credit card.
What is the Maximum Loan Amount and Loan Tenure?
If you are already looking at taking out a loan, your next question would be the maximum loan amount that you need and the loan tenure that comes with it.
Here are some facts about this part of a personal loan.
- The maximum loan amount depends on the kind of personal loan, credit score, and so many factors.
- The term typically lasts for a period of up to 5 years while some do offer up to 7 years.
How Do I Become Eligible?
For you to become eligible, you need to do the following:
- You should be at least 21 years old for you to be able to take out the loan.
- You should have a steady source of income, and you should have a minimum annual income of $20,000.
- For you to be eligible to borrow, the usual rule of thumb is a minimum annual income of $30,000 a year would get you up to 4 x your monthly income loan.
- If you are a foreigner living in Singapore, you may still get a personal loan given that your income must be at the common range between $40,000 to $60,000.
What Are The Things That You Should Prepare?
You should be able to prepare the following:
- Proof of residential address and income;
- NRIC / Passport / Employment Pass, Latest Computerized Payslip; and
- Latest Income Tax Notice of Assessment.
One last tip to keep in mind is the fact that some banks partner with online comparison sites to give better offers as opposed to applying on their website. This one is the current trend maximized by individuals for them to have a good point of view on what he must have.
You may get surprised at how much you could save with some of these offers. Research as much as you can. Ask around about the experiences that others have had with a certain loan. Do not be afraid to do what you can with your requirements and with everything else in between. There is no way that you could get lost in financial translation if you do your homework and make sure that you have all the information necessary to keep your head high and your personal loan at the maximum amount if that is what you need.