During the tough economic times, many people are turning to personal loans to help them pay for large ticket items, consolidate their debts, and even to help improve their credit. There are some things a person needs to think about when they are debating about getting a personal loan. Taking the time to look over these three things may help you better understand personal loans and how to apply for them.

For many years the idea of the residents searching for licensed money lender in Singapore to assist them when in financial need has been on the rise. This has been attributed by the fact that they do not have any limitations or any collateral security on how you can use the money you have borrowed. One of the main reason why so many people have developed an interest in personal loan compared to other financial means is that it can meet some emergency expenditures that you may face such as sudden travel expenses, medical bills and other home emergency bills.

Before applying for a personal loan it is good that you decide what exactly you plan to use your loan for. Don’t tell a company that you intend to use it as extra spending money; chances are you will be denied. When applying for a loan, explain to lenders how you plan to pay back the loan; an example would be you need a loan for certain moving expenses for a new job, and the new job has a higher pay for which you will use to pay back the loan. If you just tell lenders you need some more spending money or money for a frivolous purchase and never explain how you will pay it back, they see you as living beyond your means, and more of a risk.

Despite the fact that many people apply for personal loans in Singapore many people have decided to keep away from them due to some misleading misconceptions that have in the end costed them in so many ways. Some of the misconceptions are as shown below:

1. Personal loan can assist in paying off the credit cards

In the past personal loans in Singapore were used in settling debts in a credit card but nowadays they are no longer used. Recently the government introduced a new lending plan known as the debt consolidation plan which is the replica of the person loan but with additional features. Since the personal loans may be used for any purpose the debt consolidation plan charge a slightly lower interest rate meaning it can be useful in settling a credit card debt. For instance debt consolidation plan is about 0.8% cheaper than a person loan. It is therefore good that you do not place your hopes that personal loan is the best method that can settle such debts.

2. Personal loan is the cheapest loan

The rate of interest of personal loans can be higher compared to that secured loans such as car loan and home loans. Even if you may have heard any negative things about personal loans, it is not good that you avoid borrowing it from the licensed money lender in Singapore. When you are faced with an emergency and you need cash it can be the best way to finance your needs compared to other means. There are so many money lenders in Singapore who are available 24 hours and they can offer their services to you at any time that you may need them.

3. For you to qualify you need a high credit score

One thing you need to think about is your credit score. Lenders will rely heavily on your credit score to decide how much they can give
you for a loan, and what the interest rate may be. The higher your credit score, the higher your chances are of receiving a loan and at a lower interest rate. Your credit report will give lenders a small view into your financial history as far as do you make payments on time, and do you only make the minimum payment necessary? Credit scores and reports simply tell a llicensed money lender how much or how little of a financial risk you may be in the near future, which has a direct effect to how much, if any, they are willing to lend you.

Even if you do not have a good credit score you cannot be limited from receiving or applying a personal loan. In many instance many lending institutions usually use the average income that you earn per year as a way to qualify for a person loan. Many banks usually place some minimum annual income that you must have for you to qualify a loan. Although you can get a loan below such a minimum but that will depend the supporting documents that you will provide to the licensed money lender that will convince them. It is not good that shy away from applying a loan when you have a poor credit record.

4. All lenders charge the same

If you start searching for the lending institutions and compare their prices when it comes to issuarance of personal loans you may expect to find that many of the institutions in Singapore charge the same interest. This cannot be true as many money lenders differ on both the fees and the interest rate. It is good that you compare fees and other penalties attached to the personal loan lather than looking at the interest. This has been attributed by the fact that many institutions charge the similar interest rate but varying degree of penalty fees for those lenders who fail to pay the loan in the required period.

Everyone has had those small times in life where money is tight and has needed some help. Getting a personal loan may be an option for you and your financial troubles for the moment. Just remember to think things out before agreeing to any contract, maybe have a trusted lawyer look over then agreement before signing. It is good that you do not take this misconceptions about personal loans seriously as many of them may mislead you.