If you reside in Singapore and you find yourself in a financial crisis, you may end up taking a personal loan from either a bank or a private moneylender. Even though the application process for both avenues is convenient, you need to evaluate which option is suitable in your situation. It is difficult and confusing to decide on the most viable credit option. If you make the wrong choice, it could land you in further debt in the long run. Deciding which way to go can be tough. Read on to find out how to obtain the best personal loan in Singapore, and then make an informed decision.
The loan amount is the main difference between banks and private moneylenders in Singapore. Most of the banks offer high loan amounts whereas private moneylenders can provide smaller loan amounts which is the best option when you need fast cash. It's best to visit a private money lender if you need a small loan amount in a short period. Banks are big organisations that are accredited by the Monetary Authority of Singapore and you need to have a stable source of income and a good credit history to secure a loan. It is a good option to approach a bank if you need a huge loan, for instance, to start a new business venture.
Private moneylenders' interest rates are fixed as compared to banks as they have to factor in the risk element if the borrower is unable to pay on time. Since private moneylenders' requirement standards are quite relaxed, they tend to accommodate people with poor credit history. Rest assured that authorised money lenders are not loan sharks who will harass you as they are regulated by the Singapore government. Banks, on the other hand, charge variable rates which fluctuate every 2 to 3 years, and there is a certain element of uncertainty.
Loan Application Process
A private money lender can provide you with the best and cheapest personal loan within an hour or sooner if all necessary paperwork and proof of income are in order, unlike banks where the process is more stringent, complicated, and slow. Banks may take 3 or more days to process your loan application as they have strict regulations. They will scrutinise your income, credit rating, and citizenship status as well. In addition, there is a lot of paperwork to produce such as Income Tax Assessments, CPF statements, and bank statements. Thus, if you need instant access to cash, visit an authorised money lender instead.
Late Payment Penalties
Banks charge high-interest rates on late or missed payments. Some banks may charge a flat rate whereas others charge a percentage on the outstanding loan amount. So, if you miss a single payment, you end up paying much more than the amount that you initially owed. Private moneylenders, on the other hand, are open to negotiation if you are unable to repay your personal loan on time. Licensed moneylenders also offer credit counselling services where both parties can negotiate a revised payment plan (which incurs an additional fee). Authorised money lenders will never harass their customers for loan repayment as they are required to adhere to the code of ethics issued by the Credit Collection Association of Singapore.
If you borrow from a bank and default on your monthly instalment, it would hurt your credit score. Your record goes to the Credit Bureau if you default payments for more than 60 days. To make it worse, you will be slapped with heavy penalties which will affect your creditworthiness. However, if you borrow from a private moneylender, they are more forgiving and tend to help you clear your outstanding debts by mutually agreed instalment plans. You can also get assistance by consolidating all your debts, thereby improving your creditworthiness.
Early Termination Fees
Authorised money lenders do not charge an early termination fee if you choose to pay off your loan in full before the specific time frame. On the other hand, banks will charge you early termination fees, which is unfair.
Applying for a personal loan in Singapore is easy. Before making a hasty decision, evaluate your options carefully based on the above pointers. If you are in the Chinatown vicinity, do visit Soon Seng Credit as they provide the best and cheapest personal loans in Singapore.