Debunking personal loan myths (updated with GoBearTV episode 18)
Singaporeans have always been skeptical when it comes to loaning money, no thanks to numerous urban legends on personal loans.
But the truth is, personal loans is not about snowballing your debt. Nor is it meant to feed your insatiable appetite for holidays that you can't afford.
Yet, there's a stigma surrounding personal loans, fuelled by various doubts and hesitations. To put things into perspective, we will be debunking common personal loan myths.
Only rich people can get approved for loans
Although banks have salary requirements for loan applicants, you may still be approved for personal loans if you have other sources of income and you have documents to prove it.
You can submit remittance slips from your online job or from your spouse who works abroad. Ask the bank representative about other documents required for better chances of approval.
Lenders are bad
Most borrowers fear harassments and threats from debt collection officers who make constant calls and payment follow ups.
Lenders are not monsters. Your account is transferred to the debt collection after months of non-payment. Borrowers are given the chance to settle repayments and delinquencies.
If you are facing some money problems, inform your lender and seek for adjustments.
People with bad credit scores are not eligible for personal loans
Having a bad credit score does not mean you cannot apply for loan. It only means that you have a slim chance of getting bigger loanable amount, lower interest rates and easier payment schemes.
If you have plans of applying for a loan, fix your credit profile by paying off debts incurred in the past.
On a related note, not taking a personal loan doesn't equate to a perfect score. In fact, if you were to take a loan and make timely payments, this might improve your credit score due to your trustworthiness for paying on time.
Choose a lender with the lowest interest rate
Considering the rates is a smart move but a low interest charge is not always the basis for choosing a lending company or bank. You also must check for other fees.
For instance, Bank A charges 5% interest while Bank B sets 7%. However, the catch is that Bank A charges additional 5% on late or early repayments while Bank B only imposes 2%.
The best thing to debunk this myth is to do your math before signing anything.
You will lose your house
Banks and other lenders usually offer unsecured personal loans. Only when you apply for secured loans that you risk assets like your home and car. Check the difference between secured and unsecured loans and decide which one suits your need.
You can only get one loan
Everything depends on your capacity to pay. If you have a good credit score and you can pay your debts on time, then banks will open more opportunities for financial assistance. You can always seek for opportunities to build your credit line and improve your cash flow.
Personal loans are bank products designed for people to improve their lives. Sometimes, things just go wrong because we become too relaxed in repaying the debts. Good money management will help us budget our earnings right and repay the money we borrowed on time.
If things don’t get clearer by now, check GoBear’s comparison tool to find the best deals on personal loans that’s right for you.