Taking a loan in Singapore is a normal occurrence, depending on your reason for taking that loan. There are any number of reasons you might want to take a loan, such as for a wedding, for tuition, for a house, or for a vacation, but this loan also depends on some other factors that you have to take note of. Should you take a loan from a bank? Should you take a loan from HDB? Should you go to the moneylenders? What are their interest rates?
These days it seems taking a loan in Singapore has more cons than it has pros, so it is necessary to think of the following before going to take a personal loan.
6 Things to Consider before Taking Any Loan
- Think of the alternatives. In Singapore, you can take a personal loan from moneylenders, from banks, or from other lending institutions. There is several financial assistance schemes set up by different government agencies that could also be of benefit to you. Make sure you consider all alternatives before settling on one source of loan.
- Any contract you enter with any lending company is binding and legal. So, if you decide to take a loan from a moneylender, read the fine print. Moneylenders are a legal lending institution in Singapore, and their contracts with you are binding on both parties involved.
- Be careful to borrow only what you can pay back. This means that you have to consider your monthly/annual income, are your budget, and decide how much you can pay back at the end of every month. In the contract you enter with the lender, there could be a stipulated amount to be paid at a specific time every month. Failure to meet these payments as when due will incur high interest, and add to your financial woes.
- Consider the flexibility of the contract. Will it allow you to make late payments due to some unforeseen circumstances? A good personal loan contract will have options in it that will allow you to renegotiate your contract with the lender. These terms could include increasing the amount of time needed for each payment, reducing the interest rate on your loan, or even increasing the amount of your loan.
- Read and understand the loan contract you are getting into before agreeing to it. By law, moneylenders in Singapore are required to explain the terms of the contract to you in very clear terms, and they are also to give you a copy of the contract. Take your time to go over this contract, noting the interest rates, the repayment plans, and other terms like the applicable fees.
- Do not agree to any contractual terms that may give the lender the opportunity to lodge a caveat on the proceeds the sale of your property when you have been unable to repay your loan. Think carefully about this before agreeing to it, because it is either you have to pay back your loan before you can sell the property, or the lender will take their repayment from the proceeds of the sale, leaving you with very little money to have.
Knowing what you are getting yourself into is the first step in finance responsibility. Only borrow from a legit financial institute and never from illegal loan sharks to save yourself the hassle and the pain!