Low Interest Personal Loans Good Credit – A handy guide to the four types of personal loans comparing interest rates, one-time processing fees, loan tenures and the time it takes you to apply for each. 1) Personal Installment Loan The first common personal installment loan has different names from different banks but the principle is the same: you borrow a fixed amount, pay a one-time processing fee (banks usually discount this) and repay it in fixed monthly installments for up to 60 months. Agree to pay. How it works: Personal installment loans allow you to borrow a lump sum and repay it in equal monthly installments. Interest and charges are calculated for the entire loan period and added to the total loan amount. Payment: One time processing fee ranging from $0 to 3% Interest rates vary by bank and start at 3% (effective interest rate 6.96%) and above. Banks sometimes waive processing fees and offer special interest rates during promotions Loan Amount: Installment loans are based on the available credit limit in your personal loan account or credit account. Generally, the maximum amount is 4x your monthly salary if your annual income is more than $120,000 and you have a good credit history it can go up to 10x your monthly salary. Loan Tenure: The repayment period usually ranges from 12 to 60 months When you should use it: Personal installment loans are useful when you need a large sum of money to cover a big ticket expense that will take you a long time to pay off. Example: Your investment went bad and you’re looking at $40,000 in total outstanding debt. Take a personal installment loan, say for 24 months, and gradually repay the amount in equal monthly installments over the tenure. Compare the most attractive personal installment loan offers in Singapore now 2. Line of credit The second type of personal loan is a line of credit, which is an overdraft facility that only charges interest when you withdraw from the account. How it works: Once approved, withdrawals can be made via ATM, check, internet banking or visiting a physical bank branch. You are charged interest the moment you withdraw the funds No interest when you withdraw the funds Fees: Credit lines typically have an annual fee of $60 to $120 The interest rate before any promotional offer is usually between 18% to 22% p.a.
Loan amount: Banks usually offer 2x your monthly salary as a credit limit, but it can go up to 4x or 6x when you include other credit facilities. Loan Term: There is no fixed term Access as much as you want You pay interest when you use it and vice versa when you need to use it: A line of credit is useful as a standby cash fund for unexpected expenses. If you need funds for an emergency, you can withdraw cash instantly without any approval process. But the trick is to withdraw these funds when needed. Example: You are a small business owner and need a standby cash facility to purchase office equipment, supplies or additional manpower during busy sales periods. Once that busy period is over, pay back the cash you borrowed from the line of credit quickly. Compare the most attractive line of credit offers in Singapore now 3. Fund Transfer or Balance Transfer The third type of personal loan is Fund Transfer (FT) or Balance Transfer (BT). This loan facility uses available credit on your credit card, you pay a one-time processing fee and enjoy very low or 0% rates for 3 to 12 months. After that, you settle the total outstanding amount or you are charged an interest rate between 18% and 29% depending on the credit facility. How it works: A balance transfer helps you transfer balances from one or more credit cards to a low or 0% interest account or line of credit. It provides you quick cash in times of emergency or need It is subject to a one-time processing fee on the approved transfer amount Charges: For balance transfer offers, banks usually charge a one-time processing fee of between 1% and 5% of your approved loan amount. The best balance transfer offers will waive this processing fee Loan amount: Typical balance transfer loans are as low as S$500 but can go up to 10X your monthly salary if you earn a lot and have a good credit history. Loan tenure: Typical repayment tenure ranges from 6 to 12 months before interest rates kick in. When you should use it: A balance transfer is best if you need cash right away, or have a large, short-term expense on the balance and want to avoid the high interest rates on other types of loan facilities. Common use cases include consolidating debt owed on multiple credit cards or emergency car repairs or medical bills, investments or business opportunities. Also, remember to compare the best balance transfer offers in the market, which may waive or waive the processing fee entirely through incentives or cashback. Example: You have a total outstanding debt of $30,000 spread over several credit cards, and you are paying 20-25% interest rates on each credit card. Use a balance transfer to consolidate all outstanding credit card debt into one and gradually pay off the combined amount each month, giving you some breathing room while enjoying a zero or low interest rate each month for the duration of the loan. Plan to clear or reduce total outstanding debt by the end of the term Compare the most attractive balance transfer offers in Singapore now 4. Debt Consolidation Plan The fourth type of personal loan is the Debt Consolidation Plan, which is a government-approved plan available at all leading banks in Singapore. If you have a lot of open unsecured debt – like lines of credit and credit cards – and you’re having a hard time managing all the payments, go for a debt consolidation plan. It brings all your open unsecured credit under one umbrella, which means easier repayment and debt management. You only have to remember one payment date, and the interest rates are lower than regular personal loans How it works: DCP applies only to credit cards, lines of credit and personal loans. After approval, the new bank will accept all loans from other banks. All amounts including fees and charges will be paid Those accounts will be closed or temporarily suspended You will have to make monthly payments to the new bank that arranges the DCP until the total amount is paid You can refinance your DCP with the new bank after 3 months of previous agreement with the previous bank’s DCP.
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Fees: There will be a one time processing fee depending on the bank and the incentive rate, the effective interest rate is usually between 6.6.7% to 12% per annum. Debt Amount: Debt amount is the total amount owed on your credit cards, lines of credit, and personal loans. And you should have an outstanding loan of at least 12 times your monthly salary before applying for DCP. Loan Term: The term is between one and 10 years When you should use it: If you have problems repaying your loan and have a large amount of debt, 12 times your monthly salary. Paying off the loan enough not only lowers your interest rate, but also forces you into a disciplined repayment plan because your other benefits are withheld or suspended until you pay off the loan in full, making it less likely that you’ll accumulate more debt. Example: You have $100,000 in outstanding debt. Compare the most attractive debt consolidation offers in Singapore right now What you need to know before taking out a loan 1. Create a repayment plan It’s a common misconception that personal loans are bad. True, it’s not all negative. Debt has a functional and sometimes beneficial purpose. For example, imagine you own a stock fund. Selling it at the current price means losing money. So take the loan, pay the interest and pay it back when the stock rises. The real problem with personal loans is that most people don’t have a proper repayment plan. The usual game plan is borrowing.
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