What are your credit options and what do they mean? Before you borrow, learn about your credit options and how each one can affect your financial health.
By: Hitesh Khan/
Traditional bank and credit cooperative loans. If you already have a bank or credit cooperative account, begin with your own lender. Shop around for the best interest-rate options and bring any competitive rate quotes back to your bank. Rates are always changing, and they can vary significantly. What rate you get depends on your financial situation and your credit rating. If you have good credit, you may be able to negotiate a better interest rate.
Home equity loans. If you own a private residential property, taking out a loan against it — a home equity loan — can be an inexpensive option. Check with banks, your current mortgage company and other financial institutions to find a good interest rate and terms. Before you sign the paperwork, be sure you understand the financial commitment. Simply put, if you can’t make the payments, you risk losing your house because it’s the value of your house that’s securing the loan.
Medium Expense Credit Options
Credit cards. Credit cards can be a convenient way to loan yourself money. If you plan to use a credit card look for the lowest interest rate you can find, no annual fee, and a grace period where interest isn’t charged as long as you pay by the due date. If you know you can’t trust yourself not to spend money you don’t have or don’t have a plan for paying off the purchase, it’s best to avoid using this credit option.
Loans from family and friends. When it comes to personal loans, every situation is unique. Some friends or family members may be able and willing to offer you a lower interest rate than you can get anywhere else. Be careful when receiving money from friends and family. Be aware there may be unspoken expectations when you receive money; for example, they may think they have the right to tell you how to spend it.
They may say you can have the money for as long as you need, but then they run into financial trouble and need you to repay them right away. It’s best for both parties to treat the loan the same way as if it was a loan from a bank. Agree to terms up front — interest rate, payment amounts, due dates, payoff date — as well as consequences if you fail to repay the loan. Sign and date your mutual agreement.
Licensed moneylenders. Licensed money lenders may charge no more than 4% interest per month on the amount you have borrowed. But before you approach a licensed money lender, consider other alternatives, such as the various financial assistance schemes offered by various Government agencies.
As you are legally obliged to fulfill any loan contract you enter into with a licensed moneylender, consider whether you are able to abide by the contractual terms, bearing in mind your income and financial obligations. Borrow only what you need and are able to repay.
Be mindful that if you are unable to meet the contractual terms, the late payment fees and interest payment will be a financial strain not just on yourself but also on your family. The law requires moneylenders to explain the terms of a loan to you in a language you understand and to provide you with a copy of the loan contract.
Make sure you fully understand the terms of the contract, in particular, the repayment schedule, the interest rate charged and the fees applicable. Regardless of how much of a financial crunch you are in, you should always shop around different moneylenders for the most favourable terms. You should not rush into and commit yourself to a loan until you are satisfied with the terms and conditions.
Understanding credit options is useful so that you don’t take on more debt than you have to or are able to bear. Weighing credit options takes effort and may require creativity, but can save you a lot of money, worry, and stress. Most importantly, do not respond to those sms about giving you a loan, many of those may be illegal. Always make sure you borrow from a registered money lender. You can check the list of licensed moneylenders in Singapore here.
How to Secure Personal Loans Quickly
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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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