When you carefully analyse, you will realise that to choose personal loan may be the most sensible option when you want to borrow a fixed amount over a short period of time.
By: Hitesh Khan/
While a credit card is a common way to borrow a small amount of money for a short time, and a mortgage a common way to borrow a large amount, unsecured personal loans can be the best way to borrow a fixed amount of between $500 and $50,000.
People in need choose personal loan as it may be a cheaper option
For borrowing a certain fixed amount personal loans often work out the cheapest option when compared to borrowing on a credit card or working into your overdraft. However, to get the most out of your unsecured personal loan you need to know what to look out for.
How much can you borrow on a personal loan?
Unsecured personal loans are typically for borrowing anywhere from $500 to $50,000. Generally speaking loans are cheaper the higher the amount you borrow (as the lender is guaranteed more in interest repayments), although the upper limit for personal unsecured loans tends to be up to $50,000. Above that will usually be secured loans.
How do I know if a loan is good value?
Before you choose personal loan, you should know that the main criteria to look out for when comparing loans is the APR, or ‘annual percentage rate’. The APR is what loan companies will advertise to you, and is an interest rate that includes fees and charges you will pay to give you an idea of the actual interest rate you will pay over the course of a year. Loan providers are required by law to show you an APR so you can compare between different loans. The higher the APR, the more you will pay in interest over the lifetime of your loan.
What is a ‘representative’ APR?
Unfortunately, whilst APR is certainly the best way to compare different loans, finding out which APR you will be offered is trickier. A representative ‘APR’ shows you the interest rate that at least 51% of people who applied for the loan were offered.
That means that when you apply you may be offered a higher rate based on your credit history. Unfortunately you have no way of knowing this until you apply for the loan, which will leave a footprint on your credit file. Too many footprints and you may be turned down for loans in future.
What else should I know before you choose personal loan?
The majority of loans make their money – and hence justify the lower APRs – by fixing the rate and term of the loan. So, for instance, if you borrow $1,000, you will know from the outset exactly how much per month you will be repaying and what your total interest payments are.
To counteract you paying back the loan early, loan providers may charge you early repayment penalties if you try and pay back too much of your loan too quickly. Some loan providers won’t charge this, so read the fine print.
Before you choose personal loan, you should also know the difference between secured and unsecured loans. Secured loans are linked to your property, so if you can’t pay back the loan your home may be repossessed, making them a very risky proposition.
Investing in the future is expensive. Be it an education, a home or a car, sometimes a loan is the only option to get a hold of a big-ticket item. Before you choose personal loan, it is important to look at the situation from the bank’s perspective.
To the bank, loans are a major source of revenue. The bank cuts you a check for a certain amount of money (principal), and you give the bank that same amount of money back as well as the interest. Interest payments are the lifeblood of most banks. Loans aren’t handouts, and financial institutions which give out loans are not in the business of being charitable. A bank’s primary concern is determining whether or not you will be able to pay back your debt.
If you don’t seem like a picture-perfect loan candidate, getting stuck with higher interest rates and fewer loan alternatives is likely. And if you have few assets, bad credit and/or are barely scraping by, chances are that lenders won’t be calling you back.
How to Secure Personal Loans Quickly
If you are in the debt overload zone and are searching for personal loans to ease your crunch, the loan consultants at iCompareLoan can set you up on a path that can get you a it in a quick and seamless manner. Our loan consultants have close links with the best lenders in town and can help you compare various loans and settle for a package that best suits your needs. Find out money saving tips here.
If you are looking for a new home loan or to refinance, our Mortgage brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us for your business expansion needs.
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