Financial adversities do not come knocking on our doors. More often than not, they just appear on our doorsteps leaving us baffled and in dire need of money. During such instances, when we need emergency funding within the shortest time possible, a personal loan is the best option. This is because they offer one of the lowest interest rate structures, they are processed within the shortest time in comparison to other forms of loans and they are unsecured.
Here are some tips on how to go about a Personal Loan:
Reason to apply for a personal loan:
Before you choose to apply for a personal loan, you need to decide if a personal loan is the best option for you or should you consider another loan or line of credit. For example, if you are looking to get rid of high credit card debt by making full payments on your outstanding balances and minimise your interest payments, then a personal loan is an ideal choice. This is because they have one of the lowest interest rates. You could also use a personal loan for reasons ranging from planning your perfect wedding, a getaway vacation and so on. However, it is not the best option to buy a car or a home because you need to put down a collateral that is worth just as much. Also, you will be unable to get the loan quantum you desire as personal loans do not offer large amounts for their loans. If you are looking for quick cash immediately and willing to pay it back within a year or lesser, a credit card is a better option than a personal loan under such a circumstance.
Consider more than one bank when applying for your personal loan:
Do your homework when applying for a personal loan and look at multiple options for your personal loan application. Do not look at only interest rates, consider hidden fees and charges, loan quantum they are willing to offer you, loan tenures and so on. Look at all facets as a whole with all banks and financial institutions in Singapore that are offering personal loans to make a better informed decision. However, do not send out multiple personal loan applications to different banks on the island as it will adversely impact your credit score. Instead, do your research, pick your top options and then apply.
Take into account your debt to income ratio:
TDSR or Total Debt to Income Ratio has become a serious matter of concern to Singaporeans. Ideally, your debt to income ratio should not exceed 60%. Therefore, if you already have other open lines of credit such as credit card debt, student loans, home loans, car loans etc. try to clear as much of your outstanding debt on these loans before you take a personal loan. You need to considerably bring down your TDSR before you apply for a personal loan. Otherwise there is a greater chance for banks to reject your personal loan application. Furthermore, piling of TDSR will only weaken your credit score and the approval on any line of credit in the future that you apply for will be in jeopardy.
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