Personal Loan Interest Rates and Other Factors

 

 

When borrowers consider applying for personal loans, it's important to do things right. Every time one applies for a loan, the loan application will appear on their credit report; therefore, multiple applications may result in a higher probability of default. Each loan type serves a different purpose and has different documentation and eligibility requirements. Borrowers would need to select the suitable loan type based on their needs and right personal loan interest rates that fits their needs.

 

Personal Loan Types

Borrowers in Singapore request personal loans for various reasons, and there are various loans for almost every need. Below are some personal loan types and their purposes:


  • Secured personal loans are typically used to finance large assets such as cars and houses. Here, a borrower puts up an asset as collateral. Because collateral(s) are present, it is of less risk to lenders resulting in loan with one of the lowest loan interest rates in Singapore.
  • Unsecured personal loans are where banks and lenders loan money with no collaterals. These loans may be used to finance purchases, pay for vacations, and consolidate debts.
  • Car loans, as the name implies, are used to finance automotive purchases. Usually, the car itself is used to guarantee the loan.
  • Payday loans are often for smaller amounts (between SG$100 and SG$2000); they're designed to cover a borrower until payday. Installment payments are usually deducted automatically, and because they're meant to be repaid quickly therefore payday loans often command the highest personal loan interest rates in Singapore.

 

Documents Required for a Loan Application

Different loan types have different documentation requirements. In most cases, lenders would require the following documents:


  • Personal details such as NRIC, passport or driver's license
  • Proof of employment including where the borrower works, income, and the employer's contact information
  • Proof of assets including vehicles, real estate, and savings accounts (for secured loans mainly)
  • Details of liabilities including credit accounts and outstanding debts (for secured loans mainly)

 

 

Eligibility for Personal Loans

Each lender sets its own eligibility requirements, which vary by loan types. Some standards are much stricter than others are, but for most personal loans, a borrower must be over 21 year of age and receiving steady income. Below are a few more requirements:


  • For a secured loan, a borrower must be over 21 years of age, have good credit with steady income and collaterals as the assets
  • For unsecured personal loans, the borrower must be over 21 years of age, have good credit, and command steady income

 

Finding the Right Personal Loan

When making personal loan choices, a borrower must consider their needs and financial situation. Each loan application will be indicated in the Credit Bureau Singapore Report (CBS Report) and too many loan applications will result in a lower credit score. Choosing the right loan type will save a borrower from multiple loan applications. Borrowers should ask themselves the following questions:


  • What the loan is meant for? Defining the purpose of loan will help narrow the loan options. Some loans are designed for specific purposes, while others are open-ended.
  • How much money can the borrower be approved for? Depending on the borrower needs as well as their income, maximum and minimum loan amounts, they would be able to narrow down to the respective loan types.
  • What about repayment? When evaluating loan options, it's important to ensure the affordability of repayment. Interest rates have a significant effect. For instance, the difference between nominal interest versus effective interest rate (EIR) is an important factor to consider. While nominal interest is the amount charged by the lender furnishing the loan, EIR encompass all fees and charges and the original sum of the loan.

 

 

In Closing

When applying for a personal loan, borrowers read carefully and understand the loan application process to ensure that it's done correctly. Loans monthly repayment amount should be comfortable for borrower to pay off and this is an important factor to be taken into consideration. Credit Culture offers one of the lowest interest loans rates in Singapore, and we welcome potential borrowers to contact us for more details.