A personal loan can be the key to unlock your biggest dreams. People use it to address different type of needs, from consolidating debt, to major purchases. But, there are lots of things that go into making the decision to take a loan. You want to make sure that you understand personal loan interest rates , how everything works, and if it’s the best decision for you. This article clarifies all of these concerns!
What Exactly is a Personal Loan?
A personal loan is a sum of money that is given to the borrower, and it is repaid in a previously agreed period of time. It is usually repaid through monthly payments, and usually it does not require collateral. Because it is an unsecured loan, your credit score and income are way more important than with another type of loan. But, these are some of the important things you need to know, in a short and concise form:
• Loan amount – The amount of money you can borrow through this type of loan is anywhere between 1,000$ and 50,000$, depending on the lender. Some lenders offer even higher amounts (up to 200,000$).
• Repayment time – Again, the repayment time depends on the lender, but it is typically between 12 to 60 months (so, from one to five years).
• Interest rate – The personal loan interest rates are usually fixed. This means that the payment you have to make monthly won’t change throughout the period of the loan.
• No collateral – This type of loan does not require collateral. Therefore, the chance of losing a valuable property doesn’t exist.
Now that these elements were discussed, there is another question that remains. What can you really use it for? There seems to be a loan for any kind of problem, so what kind of problems can this loan help us with?
How Can You Use a Personal Loan?
This kind of loan can be used for a large variation of needs and situations. But, what are the most common ways in which people use this loan? A list, accompanied by specific examples is exactly what will clear the waters for all those curious or confused.
• Major purchases – This category refers to purchases like high-end appliances, or planning a wedding.
• Home improvements – You can use the loan to remodel your kitchen, add a new bathroom to your house, or other home renovations.
• Medical expenses – A loan could cover expenses not covered by insurance (maybe dental work, or cosmetic procedures).
• Debt consolidation – This is basically gathering your debts into one monthly payment.
• Emergencies – Anything from car repairs, to funeral, and unexpected travel.
Any expenses that fit into one of these categories can be covered by this loan. If you have a payment that you can’t handle, and it is either a medical expense, or home improvements, think about this kind of loan! If it’s hard to remember all of the categories, think of the word ‘personal’ and what are the things that this word encapsulates. The health and aesthetic of yourself, your home and your car are things that can be fixed and maintained with this loan.
How do These Loans Work?
What is the process through which you can get in possession of the amount of money you need? Well, after choosing your lender, the first step is applying for the loan. Most lenders allow you to apply online, so this step should not be very hard. You will have to provide your personal and income information. You will also, most probably, have to agree to a credit score check.
Then there is the actual approval; you will have to wait for the lender to approve your application, which typically takes a few weeks. The approval will depend on your credit score, employment history, and DTI (debt-to-income) ratio.
After you discuss with your lender and agree to all the terms, the funds will be transferred into your account in a few days. After this, the repayment process begins. The repayment will more than probably work through monthly payments. Some lenders allow automatic payments, so that you don’t forget to make your payment.
What are the Types of Personal Loans?
This loan can be divided into categories based on its requirement of collateral, which can be unsecured or secured. Unsecured loans are those that do not need collateral; while secured loans need collateral. Then, it can be categorized based on the rates, wither fixed or variable. Fixed rates are those that remain the same through the whole period of the loan. While variable rates will fluctuate; this can start with lower interest rates, but will probably rise later.
Last but not least, the debt consolidation loan can also be a subcategory here. A debt consolidation loan is the type of loan that gathers all your debts together, and you pay everything only with one monthly payment. This helps with organization, and simplifying the process.
Personal Loan Interest Rates
What is an interest rate? Personal loan interest rates are the price you pay for borrowing money. You have to pay back the amount you borrowed, plus a little bit more (the interest rate). Personal loan interest rates depend on:
• The amount you’re borrowing.
• The agreed upon repayment period.
• The currency of the borrowed money.
• The existence or inexistence of collateral.
• The lender.
As an example, there are lenders in Singapore that offer way lower interest rates compared to their competitors. If you’re thinking of a personal loan in Singapore, check the government list to see if they’re licensed, as the government in Singapore made such a useful list available to the general public.
Conclusion
Applying and getting a personal loan in Singapore is as easy as it is in any part of the world! You are now familiar with all the elementary information when it comes to borrowing money from a lender. Getting a loan should be as easy as it easy to ask money from a close friend; and knowing everything works does just that. Identify your expenses, choose a lender, and fix your problems!
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin