A personal loan is the ideal financial solution for many. That’s because it is easy to apply, has lower interest rates, has a flexible repayment period, and has no limitations on spending money. Also, personal loans require less time to be approved and disbursed, making them ideal for emergencies.
However, there are several things you need to know before applying for a personal loan. Doing so will increase your chances of landing a loan offer with better terms and interest rates. Also, you’ll be able to avoid mistakes that can make lenders decline your loan application.
Here are the things you need to know before applying for a personal loan
1. Lender credibility
Knowing the lender’s credibility is essential when applying for a personal loan in singapore. You can do that by checking online reviews, testimonials or seeking recommendations from friends or family members. If you choose a credible lender, you’ll enjoy the best deals with reasonable rates and terms.
You can choose the best lender by considering the following factors:
- Interest rate: Choose a lender that offers a low-interest rate to save money over the life of the loan.
- Fees: some lenders will charge you origination fees, prepayment penalties, or other expenses that increase the loan cost. Be sure to consider the expenses when choosing a lender.
- Eligibility requirements: ensure you can meet the lender’s eligibility requirements before applying to avoid wasting time.
2. How personal loans work
When applying for a personal loan in singapore, you’ll need to fill out an application providing information about your income, credit history, and employment. Your lender will review the data to determine your eligibility and the interest rate. If approved for a loan, you’ll receive the money and use it for your intended purpose.
3. Amount you need to borrow
Knowing the exact amount you need to borrow before applying for a personal loan is essential. Have an idea of the amount that will solve your financial commitment. For instance, if you’re borrowing to consolidate debt, add up all your debts to estimate an ideal loan amount. And if you’re taking out a loan for a specific project, get estimates by listing all potential costs.
4. Affordability of your monthly payment
The best practice when taking out personal loans is to borrow what you can afford to repay. Your monthly payment is the right way to know the loan’s affordability. Therefore, explore it to ensure you’ll be comfortable paying without breaking your bank accounts or credit cards. You can choose a favorable interest rate and loan length to ascertain that the repayment plan suits you.
5. Know the interest rate
You must know the interest rate before applying for a personal loan. The rates will depend on various factors, including credit score, lender, income, and your requested loan amount. A higher interest rate means you’ll pay more interest for your amount. So if you’re keen on saving money over the life of the loan, choose lower interest rates.
6. The documents you’ll need
When you apply for a personal loan, your lender will ask for various documents to verify and approve it. The standard documents include,
- Identity proof includes Voter ID, driving license, passport, or social security card.
- Income proof includes tax returns, bank statements, or utility bills.
- Address proof such as utility bill, property tax receipt, mortgage, or credit card statement.
7. Repayment period
You’ll need to check the repayment term before taking a loan. The repayment term refers to the period over which you’ll make your EMI payments. A longer repayment term means a shorter EIM amount. However, the longer tenure will come with higher overall interest. Therefore, know about the repayment period to ensure you’re in a position to pay without fail.
8. Prepayment option
Sometimes you can suddenly come into a lot when you have running loans. You’ll want to clear off the debts using the money. However, not all lenders allow you to prepare or foreclose the loan. Or if they provide the option, it will be after a certain number of EIMs have been paid, including penalty charges. So know about your lenders’ prepayment option before applying for the loan.
9. The time taken before loan disbursal
You’ll likely be taking out a personal loan to cater for emergencies. As such, waiting days to get your loan approved and disbursed will not serve any purpose. Therefore, knowing the time taken for a loan disbursal before applying for a personal loan is essential. Working with a lender takes several days or hours to approve and disburse.
10. Know your credit report
Checking your credit report before applying for a personal loan lets you identify mistakes. Such mistakes can lower your credit score or ruin your chances of getting a personal loan. So if you find an error, submit a dispute to the credit bureau to rectify or delete it.
How to apply for a personal loan
You’ll be eligible to apply for a personal loan, but you must apply appropriately. You can apply online; the application process will vary depending on your lender. But generally, you’ll
- Get qualified: you’ll answer a few questions about yourself, why you need the loan, and the amount you want. The lender will review your credit report softly to avoid affecting your credit score.
- Compare loan offers: If you pre-qualify for a loan, you will receive various offers with varying terms. Compare the options to ensure you pick the best deal with a comfortable repayment plan.
- Submit an application: After comparing, choose a loan offer suitable for you and submit an official application. The lender will do a credit check to ascertain your eligibility.
- Verify your information:You’ll need to submit various documents to support your loan application. Verify the documents to ensure they are correct because errors can lead to disapproval.
- Sign the loan agreement: After approving and conforming everything, the lender will send you a loan agreement to make everything official. Please review the terms, sign them, and ensure nothing has changed since you pre-qualified.
There are various things to know before applying for a personal loan. And now that you know what to check, let it be the guideline to help you choose the best loan offer. You’ll get a plan that works for you and your financial situation without further money crises.