5 Questions to Ask Yourself Before Getting a Loan in Singapore 2018 – How to Get One and Loan Repayment Tips
This might be your first time getting a loan. For some, you might have already gone through the process. However, it still pays to carefully consider if getting a loan is the right option for you.
Think loan tenures and interest rates.
Before you pick up the pen to sign on that dotted line, here are a few things to consider before you take out that loan:
1. Could There Be Other Options Aside From Getting The Loan?
If family and friends are able and willing to advance the money, it is definitely a much better option. There will most likely be no interest, plus a better room to negotiate the friendliest repayment terms. Not to mention that the conditions are much easier- some friends don’t bother with securities.
However, with that being said, before you ask for a loan, ensure that you have already taken the necessary steps towards improving your finances. This shows your friends and family that you have taken up responsibility to veer your finances onto the right track and are prepared to handle the funds properly.
2. What Are The Consequences Of Not Paying It Off?
There’s no telling what will happen tomorrow. As morbid as it might sound, accidents do happen, as do salary cuts. If this happens, there would be more pressure on your finances and a huge possibility of skipped payments which adversely affects the credit score.
In some cases, banks can recall the loan abruptly leaving the client facing a momentous financial crisis. The question of how to bear the repayments in such occurrences is fundamental.
3. Will The Loan Leave Me Better Or Worse Off?
Yes, people will always claim to have very convincing reasons to go for the loan but it doesn’t hurt to re-evaluate the motives.
It’s no secret that some of the borrow are fanned by the need to follow the trend or their peers and keep up with a certain lifestyle which does not necessarily add value.
For instance, while not a bad thing, obtaining a loan to finance a vacation only ends up squeezing the pay slip further without having much to show for it apart from memories. To some, that can wait until they’ve settled off current debt instead of worsening an already precarious debt situation.
Nonetheless, some credit could be fantastic. For example, borrowing to exploit a potentially lucrative business opportunity could potentially add more money to the jar if the venture thrives.
4. Will I Afford The Extra Repayment Burden?
Surely, it all boils down to knowing whether your salary or business revenues can survive the added stress from a new loan. It is vital to access whether getting a loan will affect one’s ability to meet their financial goals in the future, and if necessary, the lifestyle changes one has to make in order to sustain the additional load.
Also, having a debt-to-income ratio of more than 25%. The Country’s Monetary Authority of Singapore (MAS) doesn’t allow banks to lend to individuals whose debt exceeds 6 times their monthly income.
5. What’s The Most Economic Payment Term?
The shorter the term, the less the total repayments but the higher the monthly amortizations. Singaporean banks offer anything from 6 months to 60 months and one must get their numbers right. Of course, the income level matters, plus the existing level of commitment. Generally, the faster the repayment, the better the credit score so it’s advisable for people to see if they can maneuver and settle debts much more quickly.
Reasons To Get A Loan
Singaporeans borrow for a variety of reasons:
1. To Buy Homes
We all have to admit, buying a home in Singapore is not cheap and few of us are able to afford buying a home without getting a loan from the bank. Moreover, buying a home is only half the battle won and other factors such as renovation, furniture and monthly utility bills come into play.
2. To Expand Business
Investment savvy Singaporeans can always get funds to open or grow their businesses. Most of the banks offer very soft terms on business loans.
3. For Further Education
There are many education loans in Singapore. Some are only to domestic colleges while others can fund education overseas, which are generally very costly. They also have different repayment methods and one can even delay repayments until after graduating and getting a job, making it easier on your finances.
4. Car Loans
It is no breaking news that cars in Singapore are extremely expensive. But one’s work or business may force them to invest in a private car. Luckily, most lenders offer handsome vehicle loans making opening the doors for Singaporeans to own their dream cars.
Steps To Getting A Loan In Singapore:
1. Shopping For The Best Offer
It’s advisable to compare the various offers. Only by comparing does one become able to access the different loan packages the banks and licensed moneylenders have to offer. Prospective borrowers should visit any of the top ranked loan comparison sites to make the task easy.
They can pick 2-3 packages to start with.
2. Preliminary Application
In this stage, the client should contact the chosen bankers and apply in principle. He/she will now receive all the relevant information about the packages from each bank. It is also important to prepare the needed documentations for loan submission.
3. Bank Assessment
Banks will then apply their usual diligence checks and lending criteria on the application. One should have gathered everything needed to ensure they pass all the tests.
4. Approval In Principle
One will receive a response from the financier regarding the application approval (in-principle). He/she can check the final terms and conditions from the different proposals before making the final decision on their preferred lender.
Tips For Handling Loan Repayments
1. Don’t Delay Or Miss An Installment
This cannot be stressed enough when handling loans. Delays or missed payments will incur additional charges such as penalties. Not to mention that the credit score may go down.
2. Consolidate Loans If Possible
People with numerous loans may have difficulties keeping up with the numerous payments. In such a case, and if the lender allows, they can opt for a loan consolidation program. Not only does a credit consolidation reduce payments, it may also result into a lower interest rate and even discounts for setting automatic payments.
3. Increase The Regular Repayments And Make Lump Sum Installments Whenever Possible
Anytime one has hit some jackpot or gotten some extra cash, they can ask the financial institution to increase their repayment amounts to help settle the debt more quickly. Alternatively, they can deposit the lump sum amount into the loan account. However, some lenders need a notice while others impose a penalty charge so one should check the terms prior to increasing their regular payments.
Loans can have drastic consequences on one’s finances so it’s always wise to do some soul-searching before signing up. Individuals should ask themselves deep questions such as whether their income can support new debt repayments, or whether friend/family can advance the requisite monies instead of the bank. They should also be well prepared and take the necessary steps to improving their finances such as ensuring timely payments while taking out that loan.