At one point or the other you may need to take up a loan to sort some financial issues. These loans may range from those used to finance a study program (study loan), a loan to purchase a new car, loan to build or purchase a house or personal loan to sort out some personal financial issues. People attach more importance and urgency to loans taken for purposes of education or purchasing a home as compared to personal loans. Instead of taking personal loans, people opt to use their credit cards. This unwillingness to take personal is as a result of the belief that the loan is a sign of hopeless or desperate personal financial situation. Other people also have a feeling that their quest to obtain personal loans may be denied as a result of a range of reasons.
To be well versed as far as various issues concerning loans and money lender Singapore are concerned, we need to clarify on some mistaken beliefs (misconceptions) that people hold. Some of these bad ideas that most Singaporeans have about loans are explicitly explained below:
Misconception Point No 1: A good credit score is a requirement to obtain a loan
Credit score is a very important consideration when in need a loan from a financial institution in Singapore. This is especially so if you are dealing with a bank in this regard. However, there are several alternatives that borrowers have as they can also get these loans from money lenders who are licensed to give loans. They are legally authorised by Ministry of Law (MLAW) and you may wish to check the list and verify before you approach them. These money lenders are usually more lenient and understanding compared to banks when it comes to issues to do with credit scores. What makes them even better is the fact that they have their own credit score rating bodies separate from those of banks. You are assured to get a personal loan from them provided you have a history of paying back loans once borrowed.
Misconception Point No 2: Borrowers get similar interest rates from all the moneylenders
Given the fact that Singapore is a small Island country, it is easy to believe that the various financial institution that give loans to borrowers would prefer to charge the same interest rate on loans so as to maintain a healthy and more competitive business model within that economy.This belief if far from the truth. There are other underlying factors that will determine the interest rate that you will be charged depending on the type of loan that you have requested for.
The financial institution will assess different factors before settling on a particular percentage as the lending interest rate. These factors include assessment of your credit risk status, analysis of your capability to pay back the loan as required and within the timelines, the extent of your financial requirements as well as the ability to give collateral or security for the loan advanced. The interest rate will be based on all these factors. These factors will of course vary from one person to another as well as from one type of loan to another and will therefore attract different lending interest rates.
Misconception Point No 3: Always opt for a loan charging the least interest rate
The interest charged on the amount of loan issued is an important consideration as far as borrowing a loan is concerned. This is because it determines the overall amount that will be paid back for the loan eventually . However, it is not the only factor you should look at when obtaining a loan from any financial institution.
The loan you finally settle on must only be after you do an analysis and assessment of the other factors in addition to the interest rate. These factors include the period given for repayment of the loan, the costs associated with processing and administering the loan said loan, prepayment penalties of the loan if any as well as the ease and convenience of the loan application process.
Given that you will be charged a lower interest rate if you take a longer repayment period, for instance,you need to weigh if you need a longer repayment period to pay back an amount like $5,000 while paying it a bit lower interest rate or take a shorter period and end up paying a higher interest on the same amount of loan given.
Misconception Point No 4: You must be employed to get a loan
Having an employment gives you an added advantage as far as obtaining a given loan is concerned. However, it is important to know that even those who are not employed also need to get loans. Their financial requirements and situations may actually be more desperate as compared to those who are employed in formal and stable jobs. Take for instance, start up entrepreneurs who are in need of finances to open new businesses may not have adequate savings to do so or those who are a few days in business and are going through a period of financial challenges and would want to have some money in order to overcome these economic challenges. Such would definitely be in need of loans more than their employed mates.
Programs such as those provided by Business First Loan, a loan that does not require any form of security or collateral from the borrower that is anchored under Spring Singapore Micro Loan Program make life very easy for people starting new businesses. This scheme ensures that new businesses are able to obtain loans within a very short period of time without having to pass through difficult and prohibitive processes of loan application. In addition, these loans also have very favorable repayment periods that may extend for as long as 4 years. The only requirement for this loan is the need to have a guarantor. Moreover, the bank has to do a an analysis and assessment of the financial status of your business.
For those who are in self- employment, there has to be a detailed evidence of income and payment of income tax. These must be backed up by legal documents. This goes to clarify on the misconception that you need to be in formal employment in order to obtain a loan in Singapore.