8 questions to ask yourself before getting a personal loan

a man stressed over bills

Are you in need of quick cash for an emergency? One of the most important factors when considering applying for a personal loan is the interest rate.

Whether you’re planning to go for the Standard Chartered CashOne Personal Loan (as low as 3.48% p.a.) or CIMB CashLite (3.5% p.a.), pause for a moment to think it through.

Ask yourself these questions before getting a personal loan.

#1: Why do you need the money?

There are many reasons you may wish to borrow money. Maybe you’re faced with medical bills or unexpected home renovations.

For those looking to pay off high-interest debt, applying for a personal loan would make sense too. For example, if you have a credit card debt at a 25% interest rate per year, it would be wise to take up a personal loan with a 7% interest rate to consolidate your debts and pay it off first.

Go ahead and get that personal loan if you know it’s for a good cause, such as reducing the interest.

#2: What is the interest rate?
Interest rates

Image Credits: Investopedia

Speaking of interest, here’s our next point.

Before you borrow money, understand that the lender will make a profit by charging you interest. According to Investopedia, interest is a charge applied to you, expressed as a principal percentage. And, of course, a lower interest rate is better for you as the borrower. 

However, it’s not as simple as it seems. There are two rates to consider: Applied Rate (AR) and Effective Interest Rate (EIR). In short, AR keeps the loan principal as a constant over the life of the loan. In contrast, EIR calculates the reduction in principal as you pay down the sum.

Do more research if you are unsure of the terms.

#3: Are there other charges?

In addition to interest, there may be additional fees.

Possible charges include a fixed annual fee tagged to borrowing, a late payment fee if you miss a payment, or a change fee if you need to renegotiate your loan terms.

Some banks even charge an early repayment fee as early repayments affect a portion of their predicted profits. Be aware of these possible charges before you move forward with the application.

#4: Can you manage the loan repayments?
loan repayment plan

Image Credits: The Economic Times

When considering whether to take up a personal loan, you must decide if you can handle the repayments.

Once you know the interest rate, extra fees, and anticipated monthly repayment amount, make necessary calculations from your income to see if you can afford to pay it back.

To do so, you want to write out a detailed budget including your spending needs on groceries, household bills, and miscellaneous expenses. From the breakdown, see if you have enough leftovers to weather an unforeseen financial storm.

Yes, that’s for your rainy days.

#5: How will it affect your credit score?

Lenders use credit scores to decide whether to issue you a loan. Credit scores affect loan terms such as interest rates, tenure, and principal limits.

Your payment history, the ratio of debt to credit, the age and quantity of your accounts you own, and any derogatory reports such as loan defaults can affect your credit score.

If you think you can do without a personal loan this time around, then skip it. Ensuring that your credit is in good shape will help you get a better loan in the future when you seriously need it. 

#6: What is your borrowing limit?
Singapore 50-dollar notes

Image Credits: Yahoo Finance

Are you aware that The Monetary Authority of Singapore (MAS) has established a Credit Limit Management Measure (CLMM)?

It prevents financial institutions from lending new credit facilities to borrowers with debts greater than six times their monthly income. This credit limit helps to protect borrowers from getting into high debts too much to bear.

And of course, other than CLMM implemented by the authorities, other factors will also affect your borrowing limit. This includes your credit score, monthly salary, and the relationship you have with the bank.

#7: How reliable is the lender?

Be mindful that some people and institutions may not be worth your time and transaction in any situation involving money.

If a lender fails to run a credit check, seems disorganised, or cannot answer basic questions, be wary. You want to deal with a reputable banking institution and not one that agrees to a loan without reviewing your credit history.

#8: When will you get the funds?
two men shaking hands

Image Credits: Jmc Accounts

Most people seeking personal loans are racing against time. If that is a factor, you want to find out how long is the approval process. From approval to disbursement of the loan, speeds will vary from bank to bank.

Here are three personal loans promising instant processing times:

Final thoughts

The decision to borrow money should be considered carefully. Evaluating and understanding your loan’s reasons, the interest rates, loan repayments, and more mentioned in this article can help you make the best decision possible when seeking a personal loan.

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Top tips on how to pay off credit card debt quickly

credit cards in Singapore

Getting your first credit card is often a liberating experience for many. The idea of having that financial freedom in your wallet and being able to buy almost anything on credit is exciting but sometimes dangerous.

Without financial discipline and careful planning, debt can rack up fast. One missed payment can turn into two, and suddenly interest pools up until you’re staring at a balance you can’t imagine paying back.

Here are some top tips on how to pay off your credit card debt quickly, if that is you.

#1: Settle smaller debts first

Having several debts to pay is a stressful encounter. We could all do with a little motivation, no? 

Organising your debt priorities from the smallest to the largest can help nudge you to continue paying off your credit card debts and reap the rewards of a debt-free life in the future.

#2: Go past minimum payments
credit card minimum payment

Image Credits: The New Savvy

Maybe you’ve read somewhere or heard from someone that minimum payments are sufficient to help you “get by”. But merely making minimum payments every month is a dangerous practice.

What you want to do is to go beyond minimum payments to prevent your credit card from accumulating a tremendous amount of debt over time. It will also keep your credit card debt from growing out of control.

Over time, these payments will help break down your “debt snowball” and keep things at a manageable level.

#3: Take advantage of a balance transfer

Interest rates are among the quickest ways we see credit card debt expand without our knowledge or awareness. If you have a large credit card debt you can’t anticipate paying off any time soon, but it’s gathering a lot of interest, you can apply for a balance transfer credit card.

So what’s a balance transfer? A balance transfer is similar to a short-term (up to 24 months) 0% interest loan, often via a credit card or credit line account. It will allow you to transfer your debts to an interest-free account and stop collecting high interest on your existing debts.

The main idea here is that you’re kind of taking a short-term loan with an interest-free grace period so you can avoid paying rolling interest payments on your credit card debts.

Speaking of which, you can also consider taking out a personal loan.

#4: Apply for a personal loan
a personal loan application form

Image Credits: Friday Finance

You can apply for a personal loan if you are seriously in a pinch and need to get rid of your credit card debt fast.

Upon approval, you will receive a cheque that you can use to pay off all of your outstanding credit card debts. However, you will be responsible for paying back that loan, which usually relies on its own set of repayment requirements.

The advantages of getting a personal loan include a possible lower interest rate on your debt and a fixed repayment period (up to 84 months) to clear it off. With that said, usually, individuals with excellent credit scores, high salaries, or loan amounts can enjoy the lowest rates.

You can refer to more pros and cons of using a personal loan to pay off your credit card debts here before deciding if it’s suitable for you.

#5: Opt for debt settlements

If you’re sure that you won’t be able to pay back the entire balance of your credit card but want to try and eliminate them, it might be time to write an appeal letter to your creditor. 

Also known as debt settlement appeal, it’s the most fuss-free form of debt settlement, and you won’t need a lawyer for it. But do prepare supporting documents like your income and CPF statements to accompany your written appeal.

Apart from debt settlement appeal, these are other debt settlement options in Singapore:

  • Discounted lump sum settlement

Instead of an instalment payment plan, you will negotiate with the creditor for a lower total amount that your owed sum. As the name suggests, you must pay the agreed amount in one bulk quantity.

  • Debt consolidation plan

By choosing this method, a single bank or financial institution will settle your outstanding debts on your behalf. In return, you will pay back the bank in fixed monthly instalments. This plan is only applicable for Singapore citizens and permanent residents with a specific income cap and assets value.

  • Debt management program

Credit Counselling Singapore (CCS) provides this program for borrowers in severe financial hardship and cannot pay for unsecured loans due to banks and authorised moneylenders.

  • Debt repayment scheme / Bankruptcy

Bankruptcy is often the last resort after you’ve exhausted all your options. One may also be placed on a debt repayment scheme, a pre-bankruptcy scheme, to avoid bankruptcy.

For more details, please click here.

Final thoughts
until debt tear us apart graffiti on a brick wall

Image Credits: unsplash.com

Though a credit card can be a significant source of financial relief, the debt can build up quickly and cause enormous problems for people who don’t know how to manage it.

Tackle your credit card debt head-on and pay them off quickly using the abovementioned trustworthy techniques to minimise the odds of you reaching bankruptcy.

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Expenses You Must Never Swipe On Your Credit Card

I have to admit! Credit cards are convenient, especially at this time. However, swiping your plastic card often costs you more money than other payment options. Regular charges from interest rates and annual fees are coupled by hidden surcharges. The latter are transaction-based fees that can add up!

You must maximize your savings and use your debit card as much as possible. On that note, here are the expenses that you must avoid charging into your credit cards.

#1: EDUCATION EXPENSES

Most schools and universities accept credit cards as a form of payment nowadays. Some even offer attractive interest rates. Just because it is available does not mean you have to use it. During my time, a diploma course in a private institution costs S$10,000 a year. Imagine paying a 3.5% interest per month? This will accumulate to about 51.11% interest in an annum. This is too much, if you ask me.

#2: GAMBLING EXPENSES

Gambling addiction is inside the Psychological manual of Psychologists and therapists. Gambling is there for a reason! It poses an uncontrollable damage on one’s finances and relationships. If you are thinking of using your credit card to cover your gambling-related costs, you are in deep trouble. Go home!

Contemplate on the monthly interest rates you will have to pay on the top of hidden fees. The interest rate will shoot up continuously until you pay your balance in full amount.

#3: MEDICAL EXPENSES

Many experts agree that you must use your Government medical allowance, non-retirement savings, and available cash to pay for medical expenses. If the COVID-19 situation is tough for you, you may get a low-cost loan option too. Medical expenses can immediately put you in a mountain of debt. You cannot simply turn to your credit card to pay for your entire hospital bill!

Image Credits: unsplash.com

As you take in all the above information, it is important to know how to avoid surcharges. Follow these tips.

a. Use a debit card to pay for your retail expense as it directly deducts from your bank account. Another electronic service that rarely incurs fees is NETS.
b. Book your flights using travel points. Use your travel points or air miles when you book for a flight overseas.
c. Use vouchers when institutions do not accept credit card points or rewards.
d. Link your credit card to PayPal. PayPal allows you to link your bank accounts in one place. This way, you will be able to pay the merchant free of extra fees.
e. Search for other businesses that offer zero interest rates on credit card transactions.

May these tips help you shop around!

Sources: 1 & 2

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Beginner’s Guide To Credit Cards

DEFINITION

Swiping a credit card is the polar opposite of using a debit card. The latter allows you to spend the money that you already have in your checking account. While, the former lets you borrow money from a financial provider. You have to pay an interest at the end of every billing statement.

Be forewarned that having a credit card does not equate to having “free” cash around. It only means that you are expected to pay back whatever you borrowed at a given period of time. Furthermore, you are held responsible to check whether you are spending within the maximum limit.

MECHANISM

How do credit cards work? As a responsible owner of a credit card, you must know the mechanism behind owning one.

Firstly, you must apply for a credit card. Research on which type of card suits your needs the best. Choose a card based on your eligibility, your credit score, your annual income, and your lifestyle. One credit card may have an annual fee, while the other may have a discounted fee for the first year.

Secondly, you must wait for the financial provider’s approval. Major credit card companies often use online services for their card applications. Thus, you will he able to review your application results immediately. Once approved, your financial provider will send you a physical card.

Thirdly, you must make purchases with your card. To spend online, simply enter your credit card number and other additional information (e.g., CVC at the back of the card). Your balance will add up as you spend. Remember to keep an eye on your credit card limit.

The last step is for you to review your billing statement and pay promptly as you have agreed.

SUGGESTION

For beginners, some of the best credit cards this year are as follows. You can count on the American Express Platinum Credit Card for rewards, OCBC 365 Card for dining benefits, and Citi VISA PremierMiles Credit Card for travel miles.

A. American Express Platinum Credit Card lets you reap these benefits:

* Receive 1 Night Stay at Swissôtel The Stamford Singapore worth S$529 upon Annual Fee payment.
* Receive an additional Samsonite Sigma 76cm Expandable Spinner worth S$600 when you spend S$4,500 within the first 3 months of Card Approval.
* Receive S$20 CapitaVouchers each, for the first two approved Supplementary Cards.
* Enjoy Love Dining @ Restaurants privileges which offers up to 50% savings on food orders at a handpicked selection of popular restaurants.
* Love Dining @ Hotels offers you exceptional year-round privileges and savings of up to 50% on food bills for unlimited visits at selected 5 star hotels around Singapore.
* Enjoy a complimentary drink with purchase of at least one item from the merchant’s menu at over a dozen fashionable bars in Singapore.

To qualify, you must have a minimum income requirement of S$50,000 per annum for Singapore Citizens and Residents and S$60,000 per annum for Expatriates. Terms and conditions apply.

B. Citi VISA PremierMiles Credit Card lets you collect travel miles, which you can use in renowned airlines’ frequent flyer and hotel loyalty programs. These include Krisflyer, Asia Miles, and Qantas. You will be rewarded fast as you spend with your card. Terms and conditions apply.

C. OCBC 365 Card is best used for dining. It has a cashback promo that allows you to reap rewards whether you dine internationally or locally. Here is a layout of the rewards:

* 0.3% cashback on ALL spending
* 3% cashback on TELCO bills, local supermarkets, and online purchases
* 3% to 6% cashback when you dine in restaurants island-wide
* 5% cashback on petrol purchases
* Up to 18.3% discounts at petrol stations
* 3% cashback on medical spending – under Child Development Account
* Complimentary travel insurance (up to SGD $800 coverage)
Terms and conditions apply.

Image Credits: pixabay.com

Be wise when choosing your first plastic card! 🙂

Sources: 1 & 2

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Best Personal Loans in Singapore with the Lowest Interest Rates (for 2019)

OCBC, HSBC and Standard Chartered offer the lowest interest personal loans in Singapore, available exclusively on SingSaver.

Editor’s note: Personal loan and bank rates are subject to change. Last updated 7 October 2019.

Whether it’s due to an emergency or simple cash flow management, most of us will need a personal loan at some point. Personal loans do get a bad reputation sometimes, but if you understand how to manage cash flow and know how to take advantage of promotional interest rates, they can be used to your advantage.

The most important factor when deciding on a personal loan is the interest rate for the personal loan. The lower the interest rate, the better. This is especially true if you need to borrow a large amount. Interest rates being offered via SingSaver are often lower than the ones being offered by the bank but also take note that ultimately, the final loan interest rate will also take into account your credit score, salary and repayment history.

Also pay attention to any admin or processing fees involved (sometimes, they are waivable), annual fees, how quickly you can get your cash as well as the monthly instalments to be repaid. Here’s a quick guide on the dos and don’ts when applying for a personal loan. We’ve compared the lowest interest rate personal loans available on the market right now and shared them below.

S$20,000 LOAN WITH 3-YEAR TENOR

Bank Loan Flat Annual Interest Rate Effective Interest Rate (p.a) Processing Fees Monthly Payment
OCBC Personal Loan 3.5%* 7.27% $200 $614
HSBC Personal Loan 3.7%* 7.00% $200 (min of $88) $617
SCB CashOne Personal Loan 3.88%* 7.97% $199 (waived as cashback) $620
*NEW* SCB CashOne Fee Free Personal Loan 4.38%* 8.2% None $630

*Exclusive rate only available on SingSaver

1. OCBC Personal Loan

Enjoy the low interest rate of 3.5% p.a. (EIR 7.27% p.a.) — the lowest in the market currently — when you apply for an OCBC Personal Loan. This rate is exclusive for new to OCBC loan customers who apply via SingSaver. In addition, receive up to $320 in Capitaland vouchers with a minimum loan amount of $8,000. (Note: existing OCBC loan customers will be offered an interest rate from 4.7% p.a)

The downside for this loan is there’s a one-time processing fee of 1% of the loan amount. So if you’re looking at a $20,000 loan amount, that will be a processing fee of $200.

Do note that you will need to open an OCBC Credit Card or OCBC EasiCredit account to service your loan. Your maximum credit limit will be 6x your monthly salary if you’re earning $120,000 a year and above (if not, it will be 4x your monthly salary). Click the “Apply Now” button below, which helps you apply for both the credit account and cash loan all at once.

SingSaver Exclusive Rate

This low rate of 3.5% p.a. (EIR 7.27% p.a.) for your OCBC Personal Loan is exclusive to customers who apply through SingSaver and is not available on the bank’s own website.

Eligibility

Nationality Age Minimum Annual Income
Singaporean or Permanent Resident (PR) 21 – 65 years old S$30,000 and above
Foreigners (residing in Singapore) 21 – 65 years old S$42,000 and above

2. HSBC Personal Loan

If you’re looking at a loan tenor of 2 to 4 years, the HSBC Personal Loan offers the best annual interest rate of 3.7% p.a. (EIR 7% p.a.) for all income levels above S$30,000 per annum. This interest rate is only available on SingSaver and cannot be found on HSBC’s own website. 

The HSBC Personal Loan also offers the longest loan tenor on the market — you can spread out your payments over up to 7 years. Enjoy a waiver of the S$88 processing fee as part of your welcome offer.

Loan amounts range from a minimum of S$5,000 to a maximum of 4x your monthly salary. If your annual income exceeds S$120,000, you can borrow up to 8x your monthly salary, or a maximum of S$200,000.

Foreigners residing in Singapore will need a minimum annual income of S$40,000, and may borrow up to 2x their monthly income, or a maximum of S$100,000.

Nationality Age Minimum Annual Income Other requirements
Singaporean or Permanent Resident (PR) 21 – 65 years old S$30,000 and above N.A.
Foreigners (residing in Singapore) 21 – 65 years old S$40,000 and above Employment Pass with at least 12 months’ validity

3. Standard Chartered CashOne Personal Loan

With a guaranteed flat interest rate of 3.88% p.a. (EIR from 7.63% p.a.), regardless of loan amount or tenure, the Standard Chartered CashOne Personal Loan is one of the best options in the market.

There are no processing fees for this loan but Standard Chartered charges an annual fee of S$199 (waivable for the first year). Subsequently, a S$50 fee waiver will also be awarded (in the form of a cashback) from the second year onwards if all payment is received by the due date for the past 12 months.

What’s more, you can now get instant approval and loan disbursement – no more waiting 3-5 working days to receive your cash! From now till 29 February 2020, you can also receive an Apple AirPods worth $239 when you apply for a minimum loan of $10,000!

Nationality Age Minimum Annual Income Other requirements
Singaporean or Permanent Resident (PR) 21 – 65 years old S$30,000 and above N.A.
Foreigners (residing in Singapore) 21 – 65 years old S$60,000 and above • Foreigners must be holders of P1, P2 or Q type Singapore Employment Passes
• Q Pass holders must have minimum 1-year validity remaining on their passes

4. *NEW* Standard Chartered ‘Fee Free’ CashOne Personal Loan

For a limited time between now until October 31, Standard Chartered are offering a fee-free personal loan with a flat interest rate of 4.49% (EIR from 8.4% p.a.). It comes with:

  • annual fee permanently waived
  • no early redemption fee (after 9 months)
  • instant approval and cash if you apply via MyInfo
  • $160 cashback for successful applicants with minimum $20,000 loan

As there is no “lock-in” period, this limited offer is ideal for people looking for a fuss-free (and fee-free!) product as a means for investment or quick emergency cash.

Nationality Age Minimum Annual Income Other requirements
Singaporean or Permanent Resident (PR) 21 – 65 years old S$30,000 and above N.A.
Foreigners (residing in Singapore) 21 – 65 years old S$60,000 and above • Foreigners must be holders of P1, P2 or Q type Singapore Employment Passes
• Q Pass holders must have minimum 1-year validity remaining on their passes

If you’re still undecided, we’ve compared all the personal loans being offered by banks so you can easily compare the various terms and conditions. Compare and apply through SingSaver now and save more with exclusive welcome gifts and better interest rates.

Alternatively, check out our summary of the Best Personal Loans in Singapore 2019 for our recommendations of the best loans based on different needs.

This article first appeared on Singsaver.com.sg.

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