Taking Out An Unsecured Loan: Necessary Things To Know Of

Unsecured loans are a type of loan that can be obtained without the need for collateral or someone to vouch for the borrower. It isn’t an uncommon loan type in Singapore because most of the time, financial institutions tend to prefer for a loan to be secured with a physical asset of equivalent value to the sum being borrowed. In other cases, they may demand a guarantor, someone who is capable of settling the loan in the borrower’s stead in the event that one does not meet the repayment terms.

In the case of unsecured loans, any reliable money lender in Singapore would arrange for an assessment of the borrower’s credit score. Though the evaluation is often less stringent than with banks, they still need to determine if the person taking out the loan is trustworthy enough to qualify for it. Thus, for most financial institutions or any other such licensed moneylender, for instance, the possibility of obtaining an unsecured loan with an extremely poor credit score rating is very low. Most moneylenders operate with a credit score of 650 and above, and this is the minimum score needed for a loan application to even be considered.

Examples of unsecured loans

The type of unsecured loan depends on the moneylender one is borrowing from, and more often than not, they will state and explain the terms and conditions of the loan contract before one signs it. The financial consultants there may also suggest a number of unsecured loan options to choose from for a borrower’s financial situation.

One way of obtaining unsecured loans without a financial institution or moneylender in Singapore is through a credit card. With a credit card, there is no need for collateral or a guarantor. Although a lot of people do not think of this as a loan, it can be referred to as one.

A lot of moneylenders in Singapore offer students unsecured loan options. For this kind of loan, the lender would not need to assess a credit score, and one will most likely be granted the loan.

Furthermore, with this loan option, the borrower won’t need collateral or have to pledge any asset. A very vivid example of this kind of loan is the school bursary loan in Singapore. There are a lot of such loan options which parents can choose from with Singaporean moneylenders to help fund their child’s education.

Types of unsecured loans

Most unsecured loans are under the personal loans category. Examples of these include the following:

Auto loans: The moneylender determines if an auto loan is secured or unsecured.

Business loans: There are various options available for business loans in Singapore, so some do fall under the unsecured loan category.

One thing that should be noted is that unsecured loans generally come with a higher interest rate as compared to loans that demand guarantors or collaterals. In situations where one is urgently in need of a quick loan in Singapore, the interest rate may even be higher.

Ways to get unsecured loans

In Singapore, there are a lot of moneylending businesses that provide the option of unsecured loans. Furthermore, unlike other financial institutions, there aren’t a lot of requirements to fulfill in order to qualify for the loan.

For unsecured loans, make sure to borrow moderately, and to only do so with the certainty of one’s ability to make the repayment within the stipulated time. Finally, one should keep in mind that an unsecured loan is unable to act as a substitute for a debt consolidation loan in Singapore.