Comprehensive Guide: What Can I Use A Personal Loan For & How To Apply?
You might have heard of home loans, renovation loans and study loans. But, have you heard of personal loans? What are personal loans and what can you use a personal loan for?
There are always many financial emergencies in life. Sometimes, we need to make an urgent big ticket purchase. For example, a necessity would be when your refrigerator spoils. All of your food is going bad and you need to buy a new fridge immediately. Where can you find that $1,500 to $3,000? Or, what if you’re stuck with a $4,000 credit card debt and but your pay is coming in later than usual?
A personal loan can help with all of these problems. The reason why they are called personal loans is that your lender will not question what you’re actually using the loan for.
Read on to find out more about personal loans, where to apply for a personal loan and what you need to consider before signing that loan contract.
What Is A Personal Loan?
A personal loan is a short-term unsecured loan that you can take out from a bank or a licensed moneylender at a more affordable interest rate. It’s also known as a cash advance because you receive the money immediately, and it doesn’t have to be paid back for a set period.
These loans are usually given on a monthly basis and are paid back in equal installments over a fixed period. Personal loans differ from other types in that they do not require collateral or credit checks.
To find out how much you can borrow, try our free loan calculator here.
Personal loans are available through banks and licensed moneylenders. Anyone can face trouble paying for things they need if their finances are tight. Personal loans can help you get back on track financially when you need it most.
They do not require collateral and can usually be approved within an hour. This speed is what people need to solve their financial challenges. To find the best personal loan, you need to consider what you will be using the loan for and what type of repayment plan suits you.
What Can I Use A Personal Loan For?
Personal loans are typically used by individuals who need short-term financial assistance for unexpected expenses.
1. Debt Consolidation
A debt consolidation loan can help relieve the burden of multiple debts by combining them into one payment with one lender. A personal loan is ideal for individuals who have credit problems or want to reduce the amount of interest paid on their existing debt. The best part about this type of loan is that it does not require any additional paperwork other than an application.
2. Home Improvement/Home Renovation
If you’re planning on purchasing a new piece of property or building an addition to your home, this might be an ideal time to take out a personal loan to help with the costs of these projects. You can use these funds to make the improvements yourself or hire contractors.
There are also special home renovation loans that are designed for homeowners. These renovation loans have fixed monthly repayment with greater flexibility. You can borrow a larger amount of more than $30,000 and use it for furniture purchases as well. You can find one of the best renovation loans here.
3. Major Purchase
You might want to take advantage of a personal loan if you need to make a big purchase, such as a vehicle or furniture. The loan will help you pay for these items and avoid taking out additional debt that could hinder your ability to repay later.
You can use a personal loan to pay for your travel expenses. The loan will cover the cost of airfare, hotels, rental cars and other items you may have to purchase when travelling. You can also use the money to repay your credit card bills or other debts that require you to stay in one place for an extended period.
5. Business Expansion
A personal loan will help you finance the necessary equipment or hire employees if you are starting a business or expanding an existing one. You will be able to add business stock or buy items needed in your business venture.
6. Medical Expenses
You may use a personal loan to pay medical expenses not covered by insurance or government funding programs. You may also use a personal loan to pay off debt due to medical emergencies such as car accidents or injuries sustained during times of unemployment.
Where Can I Apply For A Personal Loan?
The most common ways to apply for a personal loan in Singapore are via a bank or a licensed moneylender. You can also apply directly with an online lender by filling out an application form and submitting it post or in person at their branch. The most convenient way to get fast personal loan approval is to make an appointment online first.
Their sites come with a personal loan calculator where you feed in the amount you would like to borrow and set your repayment period to get the whole sum of what you should repay. These sites have incorporated big banks to provide you with the best personal loan for your financial need. The following are some of the banks and financial institutions online lenders have incorporated for you to apply and get fast approval personal loan:
- OCBC Bank
- UOB Bank
- DBS Bank
- HSBC Bank
- Standard Chartered Bank
Do I Need Collateral For A Personal Loan?
Luckily, you do not need collateral for a personal loan.
Personal loans are unsecured, meaning that you can receive your cash the moment you sign your loan contract. You don’t have to use your property as a guarantee. You can borrow this money to consolidate your existing debts, pay for a holiday, buy a car or apply for a diploma/degree.
5 Common Personal Loan Requirements To Know Before Applying
1. Credit Score
The main thing you need to be aware of is your credit score.
|Score||Risk Grade||Min. Probability of Default||Max. Probability of Default|
|1911 - 2000||AA||0.00%||0.27%|
|1844 - 1910||BB||0.27%||0.67%|
|1825 - 1843||CC||0.67%||0.88%|
|1813 - 1824||DD||0.88%||1.03%|
|1782 - 1812||EE||1.03%||1.58%|
|1755 - 1781||FF||1.58%||2.28%|
|1724 - 1754||GG||2.28%||3.46%|
|1000 - 1723||HH||3.46%||100.00%|
Source: Credit Bureau
You cannot get a personal loan without a great score. Borrowers with an AA, BB, CC or DD risk grade tend to have a higher chance of getting their loan approved. The better your credit score is, the less risky it is for the lender to loan to you. For borrowers with a healthy credit score, they may also be able to get a larger loan.
However, do not despair if you already have a bad credit score.
There are still licensed moneylenders who are keen to lend you a personal loan despite bad credit. They are able to lower monthly repayments to make things easier for you. BST Credit is one of such licensed moneylenders. Over the years, we have seen and helped so many individuals overcome their financial difficulties. Just as our name suggests, BST stands for begin with service and trust. We make the first move.
2. Employment Status and Income
Employment status and income levels can also affect your ability to get approved for a personal loan. Most lenders will want to see if you are employed full-time or part-time and how much money you make each month. It helps determine whether or not someone has the financial ability to pay back their debt after taking out a loan on their own.
3. Total Debt Servicing Ratio (TDSR)
The TDSR refers to the percentage of the borrower’s gross monthly salary that goes towards repaying a debt. A borrower’s TDSR has to be lower or equal to 55%.
For example, if Borrower A earns a gross monthly income of $3,000, not more than $1,650.
4. Processing Fee
As mandated by the Ministry of Law, all licensed moneylenders are only able to charge a maximum of 10% for the loan processing fee. It should not exceed 10% of the principal loan amount. Of course, there will be some lenders who charge a lower processing fee.
5. Late Fees
Lenders want to see that you can repay your loan fully and on time. If they get into an agreement with you and find out later that you couldn’t fulfill your obligations, they can charge you late interest rate. However, they are not allowed to charge you a late fee of more than $60. This maximum amount is decided by the Ministry of Law. If any licensed moneylender has gone against this rule, you can report them to the police.
Summing It Up
The benefits of securing a personal loan are numerous, but the best thing about them is that these loans can help you to achieve the financial freedom you desire.
A good loan provider will offer loans to help customers solve short-term financial problems. However, you must always consider your entire financial situation and make sure you’ve planned for all possible emergencies before taking out a loan like this.
If you are ready to apply for a personal loan, click here! BST Credit lets you apply online or via Singpass in 3 simple steps!