Do You Really Need To Take Out A Personal Loan?

At SingSaver, we are all about taking care of your financial health. So unless it’s an emergency, taking out a personal loan should be your last resort.

By emergency, we mean a major hospital bill that your insurance can’t cover, a sudden loss of income or some such unfortunate unforeseeable circumstance. Not a quick fix for your Monday blues on Net-A-Porter.

Loans come with its share of problems that can only stress you out even more – high interest rates. So, do yourself a favour. Before you open up that personal loans application form, go through the following checklist, ask yourself a few essential questions and be very honest about it.

If the answer is still a “yes” at the end of it, then, you got to do what you got to do. Just do it with caution, prudence, and a very good repayment plan you will adhere to.

Like we said, we are all about building and maintaining good financial health. The first question to ask yourself is: What do you need the extra money for? Is it an emergency? Is it an impulse? Is it a need or a want? Can it wait? Are there other avenues of acquiring the money without turning to loans?

See also: Your Go-To Personal Loans Guide in Singapore

Apart from deciding on whether the money is a necessary expenditure, another important factor to consider is the urgency of spending this money. For instance, if it’s a wedding, can you afford to wait another year? Can you reduce the cost of your wedding to something more realistic and financially sensible? If the money is for pursuing further education, would it be better to save up first while gaining work experience and some savings?

In the event that you do need an urgent loan, Standard Chartered is offering instant approval and disbursement for its CashOne Personal Loan, and an attractively low interest rate of only 3.88% p.a.

Sure, money can sow discord between family and friends. But if you’re in serious need, these should be the first people you approach before you turn to the banks. Can they help you out? It might help if you take the initiative to draft a repayment plan — perhaps with interest.

Before you think about getting a personal loan, check your eligibility. A few basic requirements:

• You are between 21 and 65 years old
• You have an annual income of at least S$20,000
• You have a Singapore Identification Card (IC) or Employment Pass (EP) + Passport

Do note that there may be slightly stricter personal loan requirements if you're a foreigner. For example, a higher minimum annual income or some form of credit history.

As personal loans are usually unsecured, this results in much higher interest rates than other types of loans. Make sure that you are aware of your “means” — the monthly payments (mind hidden fees), for example, is one thing to consider. Is your monthly expenditure way less than your monthly income? If so, you will experience less difficulty in paying off the loan. If that is not the case, then a loan could add to your burden and put you at financial risk, possibly affecting your credit rating.

Once you have decided that you need a personal loan, it’s imperative to work out the payment cycle of the loan. How long will it take you to pay it off? How much interest is it going to cost you? Calculate your fixed expenses for the upcoming months, or years, if possible, to get a bigger picture of whether you are in a good or bad financial position. Remember, the longer your loan lasts, the more interest charges you incur. Do not drag it out.

Use our personal loan comparison tool and spend some time researching on the loan that is most suitable for your need.

This will give you a good idea of the interest charge (which changes every month) you will end up paying. For example, if the amount you require is not too high, then you can go straight for an interest-free or low-interest loan — easy credit or balance transfer — to tide you over.

Always, always, compare between loans before committing to them. As this analysis shows, choosing the right loan can save you hundreds, if not thousands, in interest alone.