When you are facing urgent financial difficulties such as medical emergencies, short-term personal loans can be a lifesaver to help you with your cash flow during tough times.
Personal loans are flexible loans you can use for many purposes. If you take a personal loan with a licensed money lender, you can often discuss and negotiate a repayment plan that works for you, as well as repayment options.
Wondering if a personal loan with a licensed money lender could be suitable for your financial needs? Here are seven reasons why it might just be the solution you need:
If you need a loan to cover multiple expenses, consider a personal loan. There are very few restrictions – a personal loan can be used to cover any expenses, from emergencies and medical bills to travelling expenses and renovations.
You may also apply for a small or large loan, depending on your needs, income eligibility, and borrowing limit.
2. Reducing interest rates
Although licensed money lenders charge an interest rate of 1-4% a month, interest is calculated using the reducing interest rate method. This means you pay less in interest over time as you repay your loan, as compared to a flat interest rate loan.
For example, if you had taken out a loan of $3,000 to be repaid over 6 months with 3% monthly interest (36% per annum), this is how much you would need to repay every month:
|Month||Amount to be repaid ($)||Interest ($)||Principal ($)||Balance ($)|
Although licensed money lenders have higher interest rates than banks, it may not make sense to go through the hassle of taking out a bank loan if you are only looking to borrow a small amount or you don’t have the best credit score — banks are known for their stringent credit checks.
Find out more about getting the lowest interest personal loans in Singapore.
3. Pledging collateral is optional
Pledging collateral for a loan means offering an asset of value, usually property or vehicles, to the lender as security for the loan. This is done as a form of protection given by the borrower. If the borrower defaults on the loan payment, the lender can liquidate the asset to recover the loan amount owed.
A loan that involves pledged collateral is a secured loan, while one that does not require collateral is unsecured. Personal loans can be both secured and unsecured.
As unsecured personal loans are the more common option, they are ideal for borrowers who want to borrow funds without pledging any assets as collateral. Without the need for collateral, unsecured personal loans are a less risky financial solution for borrowers.
However, for borrowers who might be at risk of not getting their loan application approved even with a licensed money lender (i.e. having inconsistent income or multiple existing loans), taking out a secured loan instead of an unsecured one can increase their chances of loan approval.
4. Fast approval
Your loan can be approved in less than 30 minutes with most licensed money lenders, provided you meet all the eligibility criteria and provide all the necessary documents for verification.
After your loan is approved and once you sign the loan contract, the funds can be credited to your account immediately. You can also choose to receive the amount in cash on the spot at the money lender’s office.
5. High borrowing limit
With licensed money lenders, you can borrow up to six times your monthly income for unsecured personal loans, depending on your income and nationality.
Here’s a breakdown of your borrowing limit set by the Ministry of Law:
|Borrower’s annual income||Singaporeans and Permanent Residents||Foreigners residing in Singapore|
|Less than $10,000||$3,000||$500|
|At least $10,000 and less than $20,000||$3,000||$3,000|
|At least $20,000||Six times the monthly income||Six times the monthly income|
Do note that your borrowing limit is cumulative across all existing loans across all money lenders, which means that if you are a Singaporean with an annual income of $12,000,
and you have already taken out a loan of $1,000 with one money lender, you can only borrow up to a maximum of $2,000 with another money lender at the same time if you have not repaid your $1,000 loan.
6. Loan tenure of up to 12 months
You can get a loan from licensed money lenders with a repayment period of up to 12 months, which is a comfortable length of time if you have a small loan amount. Some licensed money lenders might also extend the loan tenure up to two years.
Do note that taking up a longer repayment period means you need to pay more in total interest, so if you can afford to repay your loan within a shorter period (which means more amount repaid every instalment), it is recommended to do so.
Here are some tips on how you can save up and pay off your loans at the same time.
7. Wide availability
Personal loans are one of the most popular financing options for a borrower. Hence, you will find many financial institutions, like banks, credit unions, and licensed debt consolidation companies in Singapore offering personal loans.
However, before taking up any loan, you should compare the loan terms across different money lenders and institutions so you can choose an option that is most suitable for you.
If you are seriously considering taking out a personal loan, here are 5 important things you need to know before you proceed.
What are the benefits of choosing licensed money lenders for personal loans?
1. Flexible and diverse loans
Banks impose a minimum annual income to be eligible for their personal loans, typically S$20,000 per annum. On the contrary, licensed money lenders cater to clients of all income ranges.
When it comes to loans, the latter offers a greater variety for you to choose from. Aside from general personal loans, money lenders also offer loans targeted at specific needs, such as wedding loans, business loans, study loans, medical loans, and more.
2. Fewer requirements and faster approval rates
It’s conventional for banks in Singapore to employ other numerous criteria and regulations to decide if you’re eligible for a loan. This results in higher rejection rates due to possibly failing in a few factors they deem important, such as annual income. And if you do get approved, it usually takes banks several business days to disburse the loan, or even longer if you’re not an existing customer.
In contrast to that, licensed money lenders are much less constraining in their eligibility requirements. This unrestrictive nature naturally means higher approval rates, even for those with poorer credit scores. On top of that, fewer documents are required from applicants, and one can expect to get loan approval as well as receive their loan amount all on the same day.
3. Shorter payment terms
Since the loan amount is smaller, the payment term for personal loans offered by licensed money lenders is shorter as well. Banks usually offer a repayment schedule that stretches for a few years. In contrast, money lenders’ repayment schedules may only last for a few months.
In general, the shorter the loan tenure is, the lower the interest accrued. As such, you will be saving more money if you opt for a shorter loan tenure over a longer one.
Searching for an affordable personal loan?
Looking for an affordable loan to help you navigate a tough financial situation? Goldstar Credit has got you covered. Visit our branches in Toa Payoh or Hougang to learn more about our loan solutions.
Do you want to bring more financial stability into your life?