Olivia is a working woman bringing a handsome salary every month to run her family. Unfortunately, one of her family members got a cardiac attack and needed immediate surgery. While she had savings, it was not enough to cover all the hospitalization charges. She was reluctant to borrow money from her friends and relatives, knowing their financial situation might not allow them to help her.
What should Olivia do in such a situation?
One answer — personal loans in Singapore.
Life is full of unpredictability, and you can find yourself stuck in a financial rut anytime. All you need is a helping hand to get through the situation in such times. We gave you an example of a medical emergency above, but your deal can be anything — purchasing a personal asset, going for a vacation, money for education, or marriage. A low-interest personal loan in Singapore can help you achieve your financial needs faster.
Here is our complete guide about personal loans. Learn everything about them — from what they are to how you can get them.
What are Personal Loans?
Personal loans are a kind of financing extended by financial institutions, allowing the borrower to use the funds for different personal purposes. Being an unsecured loan, it does not require you to put up any sort of security or collateral. There are various criteria for personal loans, such as income level, credit and employment history, and repayment capacity.
How to Get Low-Interest Personal Loans in Singapore?
Licensed moneylenders consider several factors before sanctioning a personal loan in Singapore. These factors impact your loan interest rate.
Interest rates on personal loans are usually higher than those on others. Therefore, you should try to get a loan at the most feasible interest rate. Here are a few aspects that will help you get a low-interest personal loan in Singapore –
1. Satisfactory Credit Score
A credit score is a number between 300–850 that analyses a borrower’s creditworthiness. To put it simply, it defines their ability to repay the debt. The higher the score, the more likely a borrower is to get a loan at competitive interest rates. A score of 750+ gives you a higher chance of bagging a better personal loan deal.
Therefore, ensure that your credit score is above average, if not the highest. Here are a few ways to do so –
- Clear your existing debt and dues on time.
- Maintain your credit utilization ratio within the 30 percent limit
- Have a healthy credit mix of both secured and unsecured loans.
- Monitor your guaranteed or co-signed loan account. Delay in payments by the primary borrower can hurt your credit score.
2. Good Repayment History
Timely payments are crucial to judging your creditworthiness. If you miss or delay payments on your existing credits, it highly impacts your interest rate.
Pay your credit card bill in full and clear off your debts every month. If you have other existing loans, pay their EMIs on time. A good repayment history gives you a chance to negotiate your interest rates with the lender.
3. Look for Seasonal Offers
If you need an immediate personal loan in Singapore, talk to your friends, family, and colleagues. Their recommendation can help you find a suitably licensed moneylender.
If there is no emergency and you are in the planning stage to borrow a loan, we suggest not taking any decision in hurry. Shop around to understand the loan marketplace. Do online research to learn about the moneylenders who have a good standing in the market for low-interest personal loans. Once you shortlist, consider visiting them to compare and choose the best among several moneylenders.
Also, if you have a pre-existing relationship with your existing lenders, they may provide you with some concessions in the interest rate.
Another way to bag a low-interest personal loan in Singapore is to shop for loans around or during the festive season. Many moneylenders launch attractive schemes offering personal loans at lower interest rates than usual.
4. Pay Attention to Interest Calculation Method
After assessing all the factors, you got a low-interest personal loan. Before you go out celebrating your win, think again — did you actually get a low-interest loan?
There are chances that despite you getting a low-interest personal loan, you end up paying a higher interest amount at the end of the loan tenure. How does that happen? Well, it’s because your interest rate is low on paper, but not in practicality.
The interest calculation method impacts your total interest amount more than you imagine. Lenders may give you a loan either at a flat or a reduced interest rate. The lenders calculate the payment of interest on the full loan amount throughout its tenure in the flat interest rate method. However, in the reducing interest rate method, lenders calculate the payment of interest on the outstanding principal, where EMIs gradually reduce with the principal amount.
Naturally, a reducing interest rate is much more cost-effective than a flat interest rate. So, talk to your moneylender about the interest calculation method before signing the loan agreement.
5. Stable Employability Record
Your employment history also impacts your credit rating and, by extension, your loan interest rate. Your job and residential stability define your FOIR — Fixed Obligation to Income Ratio — which can help build a good credit score.
Also, many licensed moneylenders require you to have an employment history of, at least, two years, including one year with your current employer. While this is not the norm with every moneylender, you should have an open discussion with your lender if this changes any factor.
If you are employed with the state or central government, PSUs, or quasi-government organizations, you may gain a favorable standing as a loan seeker. The same applies to people who have a good reputation and financial stability.
Before you finalize anything, note that the interest rate is only one factor of personal loans. Do not base your decision entirely on the interest rate offered. Instead, consider other factors as well, such as loan tenure, processing fee, prepayment charges, and loan amount.
You may begin your research with OT Credit — a leading licensed moneylender for personal loans in Singapore. Let us make your life easier with fast, affordable, and reliable loans.
