A personal loan is a short-term loan that you can take out to help you get through a difficult time. Personal loans are typically used to help pay for necessities such as bills, home repairs, renovations, weddings, and funerals.
Personal loans are available from banks and other lenders. They’re also known as unsecured personal loans because the lender doesn’t require collateral. If you don’t repay your loan in full, the lender can sell your property or other assets to compensate for your unpaid debt.
Below are the benefits of personal loans;
Flexible repayment options
You have different ways to repay your loan, including regular payments, interest-only payments, or negative amortization. Each option has advantages and disadvantages, but you should choose the payment option that works best for you. For example, if you have trouble making payments on time, an interest-only payment may be a good choice because it allows you to make smaller monthly payments until the loan is paid off completely.
Low-interest rates
Personal loans often have lower interest rates than other types of loans. In fact, the average APR on personal credit cards is over 20 percent, which is high compared to other types of credit cards. This means that if you make your minimum payment every month on time, you can save thousands of dollars in interest charges over time.
Save time and money
With a personal loan in Singapore from online lenders, you can choose from several terms and repayment options, including no paperwork required! It’s quick and easy to apply for a personal loan online, so there’s no need to go into the bank or wait in line at your local credit union branch office. Just fill out an application and submit it securely online, then sit back and relax while your application is reviewed within minutes.
It can be used for anything
Consumers commonly use personal loans to buy cars, vacations, appliances, and home improvements. They’re also popular among small business owners because they provide capital they can use to expand their businesses or purchase new equipment.
No collateral needed
A personal loan is a form of unsecured debt, which means you don’t need to put up any collateral to get the loan. This can be good news if your bank or other lenders have turned you down because they’re worried about your credit score.
Consolidate debt
Personal loans are a great way to consolidate debt. If you have several credit cards you’re managing on your own, using too many of them at once can be confusing and overwhelming. Consolidating your debt into one loan will make it easier for you to pay back the money later, and it may also help you save on interest payments.
Borrow against other forms of credit
If you have a high balance in one credit card account, another option is to borrow against another type of account, such as a home equity line of credit (HELOC) or bank savings account using personal loans as collateral. Borrowers who use HELOCs or savings accounts as collateral often get better terms than those who use just cash.
Credit building
If you make timely payments on your personal loan, it can help improve your credit score. Demonstrating responsible borrowing behavior and a history of on-time payments can positively impact your creditworthiness, making it easier to secure future loans or obtain better terms on other financial products.
Basically, building and improving your credit score is one of the significant benefits of personal loans. Here’s how personal loans can contribute to credit building:
Payment history: Making timely payments on your personal loan demonstrates responsible borrowing behavior to credit bureaus. Consistently paying your loan instalments on time reflects positively on your credit report and helps build a solid payment history, which is crucial in determining your creditworthiness.
Diversification of credit mix: Personal loans add to your credit mix, which refers to your different types of credit accounts. A diverse credit mix, including revolving credit (e.g., credit cards) and instalment credit (e.g., personal loans), can positively impact your credit score. It shows lenders that you can handle different types of credit responsibly.
Length of credit history: Personal loans, especially when repaid over a longer duration, contribute to the length of your credit history. A longer credit history is generally seen as a positive factor by lenders. By establishing a positive track record with a personal loan, you can build a longer credit history, positively impacting your credit score.
Credit utilization ratio: Personal loans are instalments loans with a fixed loan amount, which means they don’t affect your credit utilization ratio like credit cards. The credit utilization ratio is the amount of credit you’re using compared to your total available credit. Using a personal loan to pay off high-interest credit card debt or consolidating debts can lower your credit utilization ratio, positively impacting your credit score.
Improved creditworthiness: Your creditworthiness improves as you make timely payments and build a positive credit history with a personal loan. Lenders are more likely to view you as a responsible borrower, making securing future loans or credit products easier. You may also be eligible for better interest rates and terms on other financial products, such as mortgages or auto loans.
Quick access to funds
Personal loans often have a streamlined application and approval process, especially compared to other types of loans. In most cases, you can receive the funds within a few business days, allowing you to address your financial needs promptly.
It’s important to note that while personal loans offer many benefits, they are still a financial obligation, and you should consider your personal financial situation and repayment ability before taking on any loan. It’s advisable to compare loan offers from different lenders, understand the terms and conditions, and evaluate the overall cost of borrowing before making a decision.
Key Takeaway
A personal loan in Singapore is a flexible way of borrowing money. It’s not tied to your credit score, and there’s no need to put up collateral. If you don’t want to use the money for an emergency expense or if you want to pay down debt, a personal loan can be a good option. Personal loans come in different sizes and with different repayment terms. You can borrow as much as you need; the interest rate will depend on your credit history.
