Most people think that having a loan is not exactly healthy, in terms of their finances. There is the lingering thought that a loan only prevents you from saving money since you have debts to pay each month. Instead of saving a large chunk of your paycheck, you end up having to use a percentage of it for debt payments. So, it can get a little tricky to budget the money because of loan payments that you need to make. But the question is, are loans really all that bad? Do they serve a purpose at all, aside from helping you go through a difficult financial situation in life?
The Real Deal on Personal Loans
In Singapore, there are numerous types of loans that you can use for various purposes. There are car loan, housing loan, business loan, and personal loan. But for now, we will focus more on personal loans and the functions that they serve.
Unlike with other types of loans, a personal loan is typically a smaller amount of money that you can take out for an emergency expenses. It is not the type of loan that you get when you want to buy a car or a house. Generally, people take out a personal loan for other purposes such as to cover an unexpected expense when their emergency savings is not enough.
Also, a personal loan serve a purpose much like what a credit card is used for. But of course, there are varied interest rates and payment terms, depending on the loan provider. This is why having a clearer understanding of the details stipulated in the contract is important in making sure that you are adhering completely to the terms and conditions of the bank or the licensed moneylender Singapore.
Whenever you find yourself in a tight and crucial spot in life, a personal loan can save the day. But always remember that it is not at all for the purpose of low-priority and spontaneous spending. A personal loan is not something you should use when you just have the urge to buy a very expensive cellphone or a luxury brand of bag or shoes. This type of loan has a much bigger purpose, and we have the top reasons to use a personal loan lined up below.
1. Use a personal loan to pursue continuing education
People have different reasons for studying further after college. They may have the strong desire to continue learning more about various fields. Other individuals think that by having another degree, they can specialise in another field for greater career opportunities. As for some people, continuing education gives them an opportunity to be promoted in their job because of a mastery in their line of work.
These are all excellent reasons to further your studies. You can surely expect an incentive for having another degree in terms of a career promotion or an increase in salary. Shifting to another job because of your career is another possibility, which makes it very promising to study further even if you feel secure in your job at the moment. But there again, continuing education is not a cheap thing to do. This entails a certain budget, which may not be enough if you are not making a large amount of money from your job. Thus, there exists the issue on whether you should just settle with your present degree or study some more despite the cost that comes with post-graduate education.
Fortunately, there is an option to study again by simply taking out a personal loan. Perhaps all you need is not exactly a massive amount of money for this loan type since it is only to pay for your education. A professional education is indeed worth it if you know that there is something more lucrative waiting for you after completing it. If you decide to take a loan out, you may split the loan fees into terms. For instance, you may consider paying your loan off for a period of 7 years. This should make the monthly payments a little smaller and more affordable. A personal loan that comes with a longer tenure is usually appealing to people who want to pay a lower amount on a monthly basis. But there is also the option to shorten the duration of the loan in case you think you have more to pay each month. Doing so can also save you from a large amount of money that you may end up paying because of a longer tenure.
2. Take out a personal loan for managing your debts
Do you have a ton of debts on your different credit cards? Maybe you have multiple credit card debts, and you are having a tough time paying them off? With high interest rates and varied payment dates for your bills, the whole experience can get very stressful. But did you know that there is an option for you to take out a single loan and pay for all your debts? Add up the total amount of your credit card bills, then consider borrowing some money with the same amount. Once you have sufficient cash for your bills payment, you can simply pay off your massive debt, and not have to worry about interest rates that accumulate from your different credit cards.
The main concept about this technique is to get you debt-free the soonest possible. Sure, you still owe some money from your personal loan. But then again, you only have one debt to think about instead of multiple ones. You can simply focus on paying a personal loan based on the duration you choose whether it is 6 months or more. By consolidating your debts, you can slowly work your way towards being free from credit card bills.
Perhaps the only challenge here is to make your loan payments regularly. Being aware of exactly when you need to pay off your loans is important to prevent high interest rates from accumulating. At the same time, this can aid in giving you that opportunity to free yourself from debts sooner – from your credit cards and personal loan.
3. A personal loan can help with your credit score
No one wants to have a bad credit score. A credit rating that is less than perfect prevents you from being eligible to taking out a loan in case you need it one day. It may be a car or housing loan that you wish to take out in the future, once you are ready to purchase a property you can call your own. But this is never possible when your credit rating is poor. If you use your credit card too frequently, this does not make your credit score look good at all. This is why some people find it harder to take out a loan as compared with others.
If you are concerned about having a bad credit score and unable to obtain a loan, you may wish to read on: How to Get a Personal Loan in Singapore With a Bad Credit Score
So what can you do about this, then?
The idea is for you to take out a loan, yet making sure you pay it off on time. A smaller loan is ideal, so it will allow you to make regular payments according to the timeline set by the moneylender or the bank. A good, regular monthly payment also prevents you from massive fees due to penalties while helping you with keeping track of your expenses and budget.
Just be sure to take out a loan that you believe you can pay off without any problem at all. Limit your loaned amount to just a few hundreds at first, then make it a point to pay it off punctually. This should aid in building your credit score over time, which can make you more appealing to financial institutions. Soon, your credit rating will improve, along with your financial health. At the end of the day, a personal loan offers a win-win situation.