To improve one’s quality of life, one must pay for the required fees to make it so. In most cases, however, these tangible and intangible things that elevate our daily lives don’t come cheap. For instance, our homes, education, and personal vehicles all come at a high price tag. However, thanks to the loans dedicated to each of them, attaining them becomes a much more feasible and realistic goal.
If such loans help an individual achieve a particular benefit, why are personal loans perceived negatively when they ultimately achieve the same thing, but on a smaller scale? Often perceived to have a bad reputation, such as being the last option due to poor financial management, personal loans are surrounded with baseless myths that four of which shall be debunked in the following sections.
Read on below for a better understanding what personal loans are, and how they can benefit individuals in their daily lives.
Taking personal loans will affect your credit score
Taking a personal loan has no negative consequences on your credit score if you’re getting them from licensed moneylenders. Credit bureaus in the country generally place more focus on your income and payment history when keeping your credit score up to date.
Despite this, the fact remains that you must ensure that you’re capable of paying back what you’ll owe well before you commit to a personal loan. The reason is that late payments or even defaulting on the loan can negatively impact your credit score, making it much more difficult to apply for new and instant cash loans down the line.
Collateral is always required to qualify for a personal loan
Loans are divided into two categories: secured and unsecured. The former generally provides high amounts to borrowers and are thus considered to be higher risk. To mitigate this higher risk, lending agencies will require collateral to serve as a safety net in the event that the borrower fails to pay their loan in full or default on it.
The latter loan’s amount is smaller in comparison and doesn’t have a high risk associated with it; thus, collateral isn’t necessary to get approval.
Moneylenders are untrustworthy
Moneylenders wanting to do business in Singapore now have to be registered with the Registry of Moneylenders, a separate department under the Ministry of Law. Before they can officially start their business, they must first acquire the required licence to operate by passing certain tests and requirements and complying with the regulations set by the Registry.
As such, any moneylender that is included in the official registry is sure to be licensed and thus trustworthy to do business with.
A low credit score can heavily reduce your chances of approval
A low credit score doesn’t heavily diminish your chances of getting approved for a personal loan, but it will affect the amount and interest rate that you’ll get with your loan.
A high credit score gives moneylenders more confidence that a borrower will pay their dues promptly and completely repay their loan on or before the end of their term. They can also enjoy a few extra benefits such as slightly lower interest rates and higher loan amounts.
On the other hand, a low credit score is less assuring. Still, the chances of approval remain relatively the same, albeit the terms are reversed, wherein you’ll be subject to higher interest rates and lower or even fixed loan amounts.
Conclusion
With a good strategy and proper financial discipline, personal loans can help improve one’s life in significant ways. Besides getting the loan amount to serve your needs, being diligent with your payments can help improve your credit score and allow you to take on bigger loans in the future.
If you need financial assistance, approved debt consolidation companies who are also reliable moneylenders can always lend you a helping hand with their personal loans, fast cash loans, debt consolidation loans, and more.
