Personal loans Singapore can be a great way to get a loan, but it’s important to know what you’re getting into before applying.
Here are some cons of personal loans in Singapore that you should consider before applying.
Interest rates are usually higher than the banks.
If you’re looking for a personal loan to help with your short-term financial needs, there can be several advantages to getting it from the right lender.
However, it’s also essential to know about some of the potential drawbacks as well. In this article, we’ll look at one such disadvantage: higher interest rates than those offered by banks.
Personal loans generally cost more than other types of credit because they involve smaller amounts and shorter repayment periods and, therefore, lower risk for lenders.
This makes sense from both sides; you want as low an interest rate as possible, but lenders also want to make sure that their investment is worthwhile and profitable for them in case something goes wrong with your loan or payment plan (for example, if you default on payments).
Your collateral is at risk.
Personal loan in Singapore has their pros and cons. One significant con is that you put up your assets as collateral against the loan.
If you default on your payments, the bank will be able to take away all or part of those assets from you.
Therefore, if you have no assets, getting a personal loan in Singapore may be difficult.
It can be a time-consuming process.
The application for a personal loan can be time-consuming and tedious. If you’re not careful, you might take on more debt than initially intended.
While the application process itself is relatively straightforward, it can take time to complete it and submit all necessary documents.
After that, your application will go through an approval process in which the lender decides if they want to lend money to you based on your credit score and other factors.
In addition to this lengthy application process, there are also specific requirements for documentation that could make the entire process even longer if any of these documents are missing from your file
Credit scores can get affected
The biggest downside of personal loans is that your credit score can get affected, and the credit score is a crucial factor in personal loan approval.
If you have any late payments, missed payments, or defaults on your credit card/loans, it will affect the overall health of your credit score and may make it difficult for you to qualify for an affordable personal loan.
As mentioned earlier, high loan amounts also affect your ability to apply for a reasonable interest rate or an attractive monthly repayment plan.
So while getting a more significant amount may seem like the best option when you are in urgent need of cash (like if there’s been an emergency expense), it might not be worth it as far as costs go down the road due to higher interest rates and repayment plans with shorter periods (such as 3-year fixed).
May not approve loans for specific sectors.
If you want to acquire a personal loan, you may not be able to get approved for it if the bank does not approve loans to people in your sector.
For example, if you are a nurse and apply for a personal loan from DBS Bank, likely, they will not approve your request because nurses are considered low-risk borrowers by banks in Singapore.
However, suppose you were working as an entrepreneur and applied for the same amount of money from DBS Bank (or any other bank). In that case, there is a good chance that they will approve your application since entrepreneurs have higher default rates compared to nurses or other professionals in Singapore.
Be aware of these cons before applying for personal loans in Singapore.
Considering applying for personal loans in Singapore, consider the cons before deciding to use them.
Do your research and ask family and friends for recommendations. Check out, other lenders. Compare interest rates, repayment periods, fees, and more. Is the loan secured or unsecured?
We hope this article helped you and learned something new about personal loans in Singapore. We also want you to know that even if a loan isn’t the best solution for your needs, other options are available.
If you require money, consider your options. If you have a high credit score, you can likely get approved for a personal loan. If not, there are other options to explore.