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How Personal Loan works for you

licensed moneylender

When Are Personal Loans a Good Idea?

Although personal loans can be a costly affair but they may sometimes be your only option.

The great thing is that a personal loan can be used for anything that you need it for. While moneylenders will require to ask you what you intend to do with the money as part of their due diligence, in general moneylenders just want to ensure that you will have the ability to make your repayment on time. Although personal loans are not cheap in general, they can be a viable option in a variety of circumstances. Here are some options in deciding which one is suitable for you.

Important points

  • Your personal loan can be used for everything that you need it for.
  • Personal loans are usually unsecured and rarely secure with collateral.
  • Personal loans can be less expensive than credit cards if you are not consistent with your repayments and you will not be suffer greatly on the late penalties in comparison.


Some kinds of loans are designed for a specific use. You can get your next home with a mortgage loan, get your new ride with an auto loan or pay for college fee with a student loan.

Your home serves as the collateral for the mortgage loan; much like an auto loan where the car is the collateral.

But unlike those 2 loans, a personal loan often does not need to be secured with a collateral.

Since the is collateral for the moneylender to repossess should you default on your loan, the moneylender is exposed to a higher risk lending to you and they will most certainly charge you with a higher interest rate to justify taking that risk in lending to you.

There are several contributing factors such as your credit rating and your debt-to-income ratio that will determine how high your rate will be.

Secured personal loans are also available occasionally if the collateral such as your vehicle, bank account, art work or other property can be secured. Getting a secured personal loan will be easier for you to qualify for a loan and you might get a lower interest rate as compared to an unsecured one. Just as with any other secured loan, you may lose your collateral if you are unable to keep up with your repayments.

Just as with an unsecured personal loan, the risk in failing to make timely payments can be harmful to your credit score and severely limit your ability to obtain credit in the future.

Your repayment history is your single most important factor in determining your credit rating, failing that, you will lose your credit standing even if your other ratings are good.


Before you apply for a personal loan, take some time to consider whether there are cheaper alternatives that you could loan. Here are some reasons for choosing a personal loan are:

  • You unable to qualify for a low-interest credit card.
  • The credit limits on your credit cards falls short of your current borrowing needs.
  • A personal loan is the cheapest lending option.
  • You don’t have any securities to use as collateral.

You should consider a personal loan only if you are certain that you are able to repay back in a short duration of time. Generally, personal loans tenures range from 12 to 60 months. If you are in the knowledge that you will have a sizeable amount of funds coming in within the next two years but unfortunately do not have the cash flow currently, a two-year personal loan could be a financial respite during these 2 years.

Here, for example, are five scenarios where a personal loan will be applicable.

1. Consolidating your Credit Card Debts

If you owe a sizeable debt on one or more of your credit cards and stacked on it with high interest rates, then taking out a personal loan will alleviate your financial pressure in closing them off. Take for example, if the average interest rate on a credit card is 24%, while the average rate on a personal loan is 10%. That difference should allow you to pay the outstanding balance quickly and with less interest to boot. As a bonus, it will be easier to monitor and pay off a single debt obligation than to juggle multiple loans.

Another way is that you might to transfer your balances to a new credit card with a lower interest rate, on provision that you can qualify. In fact, some balance transfer will even offer to waive the interest for a promotional period up to several months.

2. Offsetting Other High-Interest Debts

Although a personal loan can be more expensive than some other types of loans, it isn’t necessarily the most expensive. For example, if you have a payday loan, it is likely to carry a much higher interest rate than taking a personal loan from a bank or a similar financial institution. Similarly, if you happen to have an older personal loan with a higher interest rate than what you would apply now, replacing it with a fresh loan could give you some savings. But before you do apply, it be good that you check and find out whether there’s an early repayment penalty on the old loan or application or origination fees on the new one. Those fees can sometimes be substantial enough that paying up early will be counterintuitive.

3. Renovation loan or Planning to Make a Big Purchase

If you are in the midst of buying new household appliances, such as changing all the windows, or making another major purchase for your business expansion, applying for a personal loan could be significantly cheaper than financing through a credit card. On a side note, if you have any equity built into your home, a home-equity loan could be a cheaper alternative. However, both of these loans are secured with collaterals, so you’ll be putting your home st risk if you default on your loan repayments.

4. Paying for a Major Life Event such as a Wedding

Just like any major purchase, financing an expensive event, such as celebrating a major personal milestone such as your wedding anniversary party, or your child’s coming of age party, the cost could be less expensive if you pay for it with a personal loan rather than a credit card. As important as these events are, you might want to reconsider scaling back if it means not going into debt for a longer duration that you are comfortable with, especially when the cost of everything going up. For that same argument, borrowing to fund that dram holiday may not be a great idea, unless you are certain the rewards outweigh the repayment that you have to foot for months to come.

5. Improving Your Credit Rating

If you need to take a bigger loan from the bank in future,  getting a personal loan and paying your credit card debts in a timely manner could help improve your credit rating, this become especially important if you have a poor history of making missed repayments on other debts.

That said, borrowing money you don’t really need in the hope of improving your credit score is a wantonly bad financial decision unless the interest saved is high enough to justify the risk of defaulting. It is better for you to maintain a stricter financial discipline and keep paying all your other bills on time while maintaining a low usage in contrast to what you owe to the bank.

Licensed Moneylender in Singapore – Singa Credit Pte Ltd

Established in 1992 and previously known as Yong Seng Credit,
Singa Credit Pte Ltd is Licensed Moneylender in Singapore regularly updated with the latest regulations to be in line with the requirements set out by Registry of Moneylenders.

Please feel free to call 66946166 for more info on our lowest interest rate in Singapore or walk in our office 470 North Bridge Road #02-01 Bugis Cube Singapore 188735.

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