Sometimes when you’re in need of a little cash, your first instinct is to borrow from friends and family. However, getting help from your relatives may cause a bigger burden in the long run if a sense of trust is lost. Instead, help from authorised establishments is a better option for your situation. When applying for a loan, we always want to get the best bang for our buck. However, what does a low interest personal loan exactly entail? Are they too good to be true? What should you be wary of? Personal loans are usually the most common type of loan if you’re looking for a sum that you can get as quickly as you can. Common enterprises that offer personal loans are local banks and licensed moneylenders. However, the two offer different rates, schemes and repayment plans which you should look into before applying for a personal loan. While low interest loans may seem very attractive, here are four things you should consider before making your decision.
- Is It Legal & Safe?
You may have received text messages promising you the cheapest loans in Singapore. Most of the time, these are illegal loan sharks, which could land you in big trouble if things get out of hand. Instead, look for legal options such as authorised banks and moneylenders which are much safer. Some typical tell-tale signs that you may be dealing with an illegal moneylender are not having a license number or an address for their office, refusing to meet up in person and only requesting online transactions. Authorised establishments will always have a face-to-face meet-up with their clients to go over their needs as well as to fill up the required documents and forms. While their charges may look appealing, always keep yourself safe by checking the appropriate ministry websites to inquire if the moneylender is authorised with a license number.
- What Is Considered a Low Interest Rate?
Between a bank and a loan from a licensed moneylender, there are a few differences in interest rates and charges that one should be aware of before choosing your preferred choice. Bank loans typically range from 5% to 7% per year with credit card loans soaring as high as 25%. In comparison, licensed moneylenders’ personal loan rates are capped at 4% per month, under Singapore law. However, this is the maximum charge of interest rate and certain moneylenders have competitive prices that offer some of the lowest interest rates for personal loans in the market. A low interest rate for a personal loan could go down to 2.27% per month. While moneylenders have a slightly higher charge than banks, their selling point would be their quick transaction turnaround time of a couple of hours while a bank would take a few days to release your loan.
- How Much Do You Need?
Before deciding to get a personal loan from either a bank or a moneylender, figure out how much exactly you require. Banks usually offer bigger loans up to 8 to 10 times your monthly income but they also have a minimum loan amount that can go up to five figures. Bank loans are not for those who are looking for extra cash to get by just for a few months. Their repayment plans also range from 12 to 84 months so do manage and plan your finances for the long term if you choose a bank loan. Moneylenders, on the other hand, do not have a minimum loan amount and usually offer a flexible loan repayment scheme of up to 12 months. Choosing between the two would require you to consider your short and long term financial situation and the urgency of your circumstance.
- Do You Have the Required Documents?
Personal loans from licensed moneylenders are unsecured which means that your credit history will not be heavily scrutinised. Once you’ve found a low interest personal loan plan, all you will need for the application is your monthly income statement while the bank will require several documents to prove validity and declaration of your assets, and will also carry out a background check on your repayment and loan history, which can take a few days to be approved.