A cash loan is a short-term personal loan with a fixed interest rate and repayment period. It is usually unsecured, which means the borrower does not need to pledge any collateral to apply for one (but of course, there are also secured personal loan options).
When looking for a cash loan in Singapore, we all know the basics of finding low interest rates and a bank or reliable licensed money lender who can meet your financial needs. What else should you look out for?
In this article, we will share four things every borrower should know if they want to increase the odds of finding the best cash loan in Singapore.
One of the most important factors to consider when applying for a cash loan is finding a low and competitive interest rate. However, a lower interest rate does not always mean that you are getting a cheaper loan.
There can be high processing fees in place. Also, if you are taking a bank loan, it is important to look at the effective interest rate (EIR) instead of the advertised interest rate as the EIR would include other costs such as the administrative fees. The EIR would be a more accurate representation of your cost of borrowing.
Therefore, even if the advertised interest rate is low (or even 0%), the overall cost you have to pay might be high.
On the other hand, licensed moneylenders in Singapore use the reducing balance method to calculate interest. This means that they only charge interest on the outstanding amount of a loan. The interest rate licensed moneylenders can charge is also capped at 4% per month by the Ministry of Law.
Just so you have a gauge, good licensed money lenders in Singapore tend to charge an interest rate of 1-4% per month.
When you take out a loan from a bank, they would look at your credit score to determine whether they would approve your loan application or not. Your credit score – alongside other factors such as the loan amount and tenure – may also affect the interest rate they offer you.
However, if you’re taking a loan from a licensed money lender, the interest rate usually depends on how much you borrow, your loan tenure, and your loan history with other money lenders as documented in your Loan Information Report via the Moneylenders Credit Bureau (MLCB) platform.
Also, although your credit score with banks does not affect your loan approval with licensed money lenders, it may affect the interest rates offered to you. This is because if you have a bad credit score or bad credit history with other lenders, you will be considered to be at a higher risk of defaulting on your loan.
So make sure you build up good credit history over time with good loan repayment habits so that your interest rates for future loans can be kept more affordable for you.
You might be tempted to get a repayment plan with a shorter loan tenure so you pay less in total interest. However, this also means you will need to repay a larger sum with each instalment.
Is it financially realistic based on your income and other financial commitments?
On the other hand, some of you might be tempted to drag on your loan tenure for as long as possible, so that you’ll have a more comfortable cash flow every month. With licensed money lenders, your loan tenure for personal loans can be up to two years, though one year is more common.
The longer your loan tenure is, the more total interest you’ll have to pay. If you can afford to repay more for every instalment, it may be more prudent to choose a shorter loan tenure that lets you clear your debt earlier.
So before you choose a repayment plan, remember to manage your monthly income and set your financial goals first. It is also important to employ methods to keep your finances healthy so you do not let your debt accumulate.
Many credit cards and cash loans offer promotional deals that may seem attractive but are dangerous if you are not aware of the terms and conditions.
An example is deferred interest. It is a common promotional feature that lets the borrower or credit card user make charges and avoid paying interest if the payment is made in full before the promotional period ends.
The catch is that with deferred interest promotions, you will end up having to pay off the original interest amount if you miss the repayment period and fail to make the full payment within the promotional period.
As much as possible, when applying for a cash loan during a promotional period, it is advisable to pay off your loans in full so you do not incur additional interest.
It is important to compare the different interest rates and repayment plans offered by different banks or money lenders to find one that best suits your needs.
With the right financial partner, half the battle is won in finding the right cash loan, or best cash loan, for you.
We offer flexible loan repayment terms of up to 24 months and best of all, fast loan approval so you can get your cash loans almost instantly.