There are plenty of situations wherein borrowing money makes sense and is the most feasible option to achieve one’s goals, such as when buying a personal home, financing an education, starting a business, making home repairs, consolidating debts, and more. Thus, it is crucial to know what to look for in personal loans and any other kind of loan offer, be it instant cash loans, business loans, housing loans, and other easy loans in Singapore.
Below, we discuss a few factors to consider when deciding if a loan’s terms are best for you.
Key factors to take into account when evaluating your offer
1. Loan amount
The loan amount is the first and most important factor any borrower needs to determine. Ideally, these are the questions that you should be asking yourself:
- How much money do I need?
- Can I afford a loan with my desired amount?
Coming up with an answer to these questions would first require you to clearly describe the purpose of the loan and devise a plan on how to use the money.
Next, it is best to understand that every loan comes with its limits. These limits generally depend on individual factors such as a borrower’s salary, credit profile, and collateral. When looking for personal loans, it would be good to seek out the ones with the best compromise between being something you can easily afford to repay, fitting within your budget, and having a loan amount that fits your needs. Should you find that the loan amount offered is insufficient for your purposes, it would be best to avoid turning it down, as starting at a lower amount is always a good first step.
2. Loan type
When it comes to the type of loan, borrowers should ideally choose the one that makes the most sense for their circumstances. Although personal loans are all-purpose loans that can be used for virtually anything, it may be best to look at other specific loan types that may be better aligned with your purposes, such as home renovation loans for home renovations and business loans for business-related needs, and the like.
3. Interest rate and annual percentage rate (APR)
Interest fees are calculated as a percentage based on the principal loan amount and incorporated into your finalised monthly payment amount. On the other hand, the APR represents your loan’s total and actual cost, including the interest rate and any extra fees charged by the lender for the privilege of using their services. The interest rate on your loan offer will largely depend on various factors like the size of your loan, your creditworthiness, and the lender. Thus, it would be good to compare interest rates between your options of moneylenders and the loan amount they are offering versus the loan’s APR.
4. Prepayment/Early termination penalty
While there is no prepayment penalty for personal loans, some moneylenders impose early termination fees that penalise borrowers for paying off loans early, such as business loans. It serves as a way for them to secure the profit they would otherwise gain through the lost interest fees. As such, it is best to ensure that you fully understand what you are agreeing to before taking a loan offer since the terms generally can no longer be changed after you accept them.
It is imperative that you fully comprehend and are capable of dealing with all the terms listed on your loan offer. The most important details to be aware of are typically the loan tenure or the length of time you need to repay your loan, the fixed or variable interest rates, and the collateral involved – if any.
Tips to determine if a loan is right for you
1. You can afford the monthly payment
One of the top indicators that a personal loan is good for you is if its monthly payment fees are well within your capabilities. Taking on a loan that you are not all too confident in paying month to month on time and without issue could potentially lead to penalties and late fees or, at worst, put yourself at risk of defaulting on the loan.
2. It benefits you financially
One good way to evaluate if personal loan benefits you financially is by estimating the return on investment (ROI) compared to what you will be paying in interest. For instance, if you are paying 10% APR on student loans but your degree will provide you with opportunities to increase your annual income by 25% or better, the loan can be viewed as a positive investment.
3. It saves money in the long term
Another vital consideration to take note of is whether the loan can help you get ahead financially, such as helping you save on cash from interest and other fees in the future. Consolidating multiple high-interest debts with a debt consolidation loan or refinancing just a few with a personal loan are a couple of methods that make this possible due to their lower interest rates.
With the numerous licensed money lenders offering personal loans today, it can be challenging to know which one of them has the best loan offer for your needs. Thus, it is essential to do due research and evaluate if your loan offer is right for you before accepting the terms.
If you are in need of a personal loan for an emergency situation, look no further than Orange Credit. As a certified Geylang money lender, we offer a wide range of loans across all needs – be it personal or business. For fast loan approval in Singapore, you can count on us to assist you in your financial predicament.