The demand for personal loans in Singapore is at a rise. This is because attaining one can elevate an individual’s financial status. However, a lot of borrows fail to understand the nature of legal personal loans in Singapore.
Personal loans are also termed as unsecured loans since they are not backed by a collateral, like a vehicle. The bank turns a blind eye to whatever activity is carried out by the borrower after getting a loan because it is unsecured.
However, there is a downside associated with this type of loan. There are always higher interest rates charged than normal secured loans. Moreover, these loans are defined by their payment timeline.
Since there is no collateral required, how do banks evaluate the ability of a borrower to repay the unsecured loan? In Singapore, banks and lenders usually assess the monthly income. After analyzing the monthly income, banks and lenders decide whether to approve the loan or not.
Type of personal loan
There are the three basic types of personal loans in Singapore:
- Personal installment loans are to be paid back every month in installments to the lender. This is the most common option in Singapore since it is easier to pay in installments rather than a lump sum amount.
- Borrowing from a line of credit is called a credit line. The borrower is then only obliged to pay interest on the amount.
- All outstanding loans can be transferred into one pool with a balance transfer loan. The borrower is sometimes even granted a grace period in which they might not be charged any interest.
Increase in its demand
Personal loans are an ideal way for Singaporeans to maintain a lifestyle that everyone desires. It is pretty tempting for them to look into attaining a legal personal loan in order to furnish their house or take up a nice vacation somewhere.
However, this is not the only reason. All over the world, including Singapore, credit cards have high interest rates. Many people obtain personal loans with relatively low interest rates to pay out one with high interest rates. It is surely a nice bargain.
Personal loans are easier to access as well. Its easy availability has made it more appealing among potential borrowers. Just a few formalities are needed to be completed in order to obtain a personal loan.
The bottom line
It is recommended for a borrower to take the time and assess their financial situation with an adviser before applying for a personal loan. You should get a loan that will create extra income in future. Getting loans for personal luxuries is not recommended at any time.
Moreover, it is also wise to compare different banks and lenders before getting a personal loan. Each lender may have a different set of terms, conditions and interest rates. Factors like these will help you to determine the best option available. Do some research before finalizing the deal with your lender.
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