Sometimes we find ourselves in a situation where we are in need of urgent cash but we don’t have the available resources for it. In times like these, taking up a loan is the only option. While many tend to borrow cash from friends and family, getting a personal loan in Singapore is a more secure and safe alternative. The personal loan interest rate in Singapore is usually more affordable and the loan is repaid through an instalment scheme on a monthly basis. Before rushing to search for personal loans online, it is important to plan for the long run and manage your finances to ensure financial security and reduce the risk of piling on debts. Here are some ways to manage your finances before applying for a personal loan.

Be Aware Of Your Existing Loans

Before applying for another loan, you have to list down any other existing loans that you currently have. Take note of the interest rates, duration of repayment and your monthly repayment amount for each of your existing loans. After knowing your repayment schemes for these loans, you can then better plan your finances and manage your money better when taking on a new personal loan. You do not want to take on more than you can handle as this will incur a hefty debt in the long run.

Plan Your Monthly Expenses According to Your Income

With your loan repayment coming out of your monthly salary, managing your income is key to applying for a successful personal loan. Plan your expenses in advance by categorising your monthly income into separate divisions. For example, you should set aside money for your monthly needs such as groceries, phone bills and insurance. A sum of your income should always be put into a savings account and the remaining will be used to pay off any debts. A tip that many swear by is the 50-20-30 rule where 50% of your income goes into your necessities including debt payments, 20% is put aside for savings or investments and 30% is used for things that you want to treat yourself with such as a shopping spree or watching a movie at the theatre. By budgeting your income, you can ensure that you will have cash every month to help pay off your loan debts.

Decide an Appropriate Loan Amount

Now that you know you can afford a loan that fits within your income capacity, you can then decide on how much of a loan you need. In some cases, you only need a small sum for an emergency but in other circumstances, you may need a much larger amount. With that being said, do not ever loan more than you need as it just incurs unnecessary expenses. This may affect where you plan on obtaining a loan as many banks usually have a five-figure minimum loan amount depending on the type of personal loan you are looking for. If you are looking for a smaller sum of money to loan out, licensed moneylenders can also be a good option as they do not have a minimum loan amount. Overall, be cautious and precise on the amount you need and choose a lender that can accommodate your needs best.

Find an Interest Rate Within Your Means

Shopping for an affordable personal loan interest rate in Singapore could take up a large chunk of your time. To narrow it down, the interest rate will vary depending on how urgent you need the loan. For example, bank loans usually have a longer transaction time as your credit history and background will have to be checked and evaluated. If you are able to wait a couple of days for a loan, bank loans usually have an interest rate of 5% to 7% per annum. However, if you need cash quickly, licensed moneylenders do not analyse your credit score, which means you can receive your loan within an hour to two. This speedy service comes at a slightly higher interest rate than the bank, with the maximum rate of 4% per month being charged. With competitive prices in the market, some licensed moneylenders have rates as low as 2.27% per month as well. By figuring out the urgency of your situation and your financial means, you can then make a decision on the type of lender that can offer you a personal loan in Singapore that suits your needs.

Be Mindful Of the Duration of Loan Repayment

Once you have decided on your loan provider, it is extremely important to be mindful of the duration of your loan repayment. With personal loans usually having a monthly repayment scheme, this amount should fit the sum that you have set aside when budgeting your expenses. The duration of personal loan repayment varies with banks and moneylenders where banks usually have a longer timeline of a few years while moneylenders’ repayment plans are usually up to 12 months. If you’re planning on loaning a small sum and paying off your debt as quickly as you can, licensed moneylenders are the better option.

Taking on a personal loan in Singapore is an important decision that should not be done in a hurry as it could result in debt accumulation if not properly planned. Instead, take your time to think through your financial capabilities and long-term plan before looking up personal loans online and applying for one.