Personal loans in Singapore are an excellent way to obtain the cash you need. Personal loans can fund your business or pay off debt. However, if you’re not careful, they can also cause you some serious problems down the road. To help you avoid these pitfalls and make intelligent decisions when taking out a personal loan, we’ve put together this list of common mistakes that Singaporeans tend to make when applying for them:
Not Knowing the Loan Process
A personal loan is a credit offered by banks, financial institutions, and other lenders to help you fund your expenses. A personal loan differs from a consumer credit card because the money you borrow will be paid back over time (usually with monthly payments) and not as one lump sum. You can visit any bank or financial institution near you to apply for a personal loan. You’ll need to fill out an application form where they will ask for basic information such as your name, address, and contact details. You may also be asked about your income level so they can determine how much they can lend to you based on the type of repayment plan that makes sense for both parties involved. Whether it’s monthly payments at fixed rates or more flexible ones, which allow some flexibility based on what works best for both parties involved and any other factors like age limits that might impact eligibility criteria.
Misuse of Personal Loans
Personal loans are designed to meet short-term financial needs and should not be used to pay off other debts or for lifestyle expenses. Do not use personal loans to fund non-essentials such as vacations, home renovations, or new appliances. If you need money for any purpose other than repaying debt, borrowing from your credit card at a lower interest rate may be better than taking out a personal loan with higher interest rates.
Applying for Multiple Personal Loans
Do not apply for more than one loan at the same time. It’s better to use for one at a time because this will make it easier for you to manage your repayments. Tracking which payments are due, when, and to whom you owe money can be challenging if you have many loans. This could lead to late charges and extra fees for missed payments.
Lacking the Discipline to Repay a Personal Loan
There are certain things you should never do in life. For example, you should never speak to a bear or touch a scorpion. This is common sense, and you’ll get stung if you do either of those things!
Likewise, there are also certain things that you should always do in life—no matter what anyone else says—and one of them is this: Always repay your loans on time.
Not Having a Plan for Emergencies or Unexpected Expenses
Having a financial buffer is essential to help you handle unexpected expenses. While you may be able to save up a certain amount every month, there are times when emergencies arise that require you to use up all of your savings.
This could happen if the car breaks down and needs repairs or if one of your family members gets hurt and requires medical attention (and thus healthcare costs). In addition, sudden changes such as losing your job or being laid off can also affect how much money is available in your account.
A financial buffer is an extra amount of savings used for such situations where unexpected expenses come up and must be paid immediately.
Having this extra layer of protection can allow those affected by these events to avoid borrowing from creditors and spend less time worrying about how they will cover their bills each month without having them spiral out of control due to unforeseen circumstances occurring during that same period.
Avoid making these mistakes with personal loans.
Not Knowing the Loan Process
One of the biggest mistakes Singaporeans make with personal loans is not knowing how loans work. This can lead to misunderstandings between you and your bank and may even result in you paying more than necessary for a loan.
Misuse of Personal Loans
You should also avoid misusing personal loans by buying items that are not essential (for example, luxury items).
If you do this, paying off your loan on time would be challenging because unnecessary expenses tend to have high-interest rates, increasing your overall debt burden over time and causing problems later on.
Conclusion
So, Singaporeans make five common mistakes when applying for personal loans.
Keep in mind that one of the best ways to avoid making these mistakes is by taking the time to do your research and planning.
