You might currently find yourself in a temporary financial knot and require a personal loan to get you through. However, before taking out a personal loan, there are a few things to take note of.
Once you have made up your mind to take out a loan, the next step is to find the right financial institution. Most people go with the closest financial institution they can find, but this often leads to mistakes that could have easily been avoided.
Here are 7 things that one should know and consider prior to taking out a loan that can prevent common mistakes made by borrowers:
1. Get A Loan That Suits You Best
Once you have taken out the loan, the decision will affect your life for the duration of the loan.
Therefore, it is imperative that you shop around and get a loan that is most suitable to your current situation. The idea is to look for competitive rates, and packages that are flexible enough to handle the ups and downs of life.
You should look across the lending landscape considering credit unions, traditional banks, and licensed moneylenders. Review their eligibility requirements, what types of loans they offer, interest rates, terms and conditions and the like. Considering their reputation is also very important because nobody wants to work with an institution that has a bad name.
At Lending Bee, you can be assured that you will be getting one of the best loans in the market. As a licensed money lender under the Ministry Of Law, Lending Bee not only offers our customers with friendly interest rates and flexible loan tenures, but we also pride ourselves for being active listeners to our customers. Based on the needs of our customers, we will pick out a loan that is best suited for them.
2. Take Stock Of Assets
This comes into play when you are considering taking out a loan that requires collateral. Personal loans can be offered with collateral or without. Secured loans tend to have lower interest rates and monthly payments, or they may be offered to someone who has bad credit and therefore, needs to back up his promise to pay the loan with collateral.
If you will be offering security for a loan, then you may need to review what they have that is of equal value to the loan amount they are looking to borrow. Some of the things to consider include property, a car, and in some cases, expensive jewellery.
The good news is that Lending Bee provides unsecured loans of up to S$100,000. This means that you won’t have to put up any collateral in exchange for the loan.
3. Loan Tenure
This is very important when deciding on taking a loan. It tends to dictate two main things:
- How much you will be paying every month: When the loan tenure is long, the monthly repayments tend to be smaller. On the other hand, if tenure is short, then you will find yourself make larger monthly payments.
- The total interest that you pay out: The longer the loan tenure, the more you pay in total interest on the loan.
It is important for you to gauge your financial status and decide whether you will go with a more aggressive payment approach which will reduce loan tenure and overall interest paid, or a laxer one which will call for longer tenure and more total interest paid.
The best thing though, is to make sure that you work out manageable monthly repayments and a loan tenure that is as short as possible. This balance is key.
Lending Bee offers our customers with a maximum loan tenure of up to 36 months. This ensures that you’ll be able to make comfortable repayment without struggling.
4. Put In A Few Applications
Even though you are encouraged to research widely, applications should be narrowed down to 2 or 3 at the most.
Submitting multiple applications at the same time has a negative effect on your credit score. It will appear as if you are too desperate for money. Each lender who receives a loan application will carry out a credit check and they will see that you have been visiting other lenders for a loan as well.
They thus begin to form an opinion about you, as a borrower, since it seems that you have been applying for loans and been rejected, which means that you are a high-risk borrower. It is best to shop widely and narrow down to just a few lenders who are a great fit.
This cannot be ignored. It is especially important when you are sourcing for loans that are not secured. This is because the credit score gives the best indicator of whether you are a high or low risk borrower.
The credit score can help you qualify for the loan that you have been desiring. It can also help you secure excellent interest rates if they have the excellent credit. One of the best things that you can do in preparation to taking a loan is to find out what your credit score is, review your credit report and make sure it is correct, and then source for the best interest rates within your credit score bracket.
If you are currently struggling with a poor credit score and have been rejected by banks and other financial institutions, fret not. Lending Bee will not immediately reject you upon seeing your poor credit score. We will require you to submit additional documents, meticulously review them and if we see that your financial situation has improved, we might be able to provide you with a loan.
6. Total Debt Servicing Ratio (TDSR)
You should assess this prior to taking a loan.
According to the law, total debt burden should not exceed 60% of your monthly income. Therefore, it is important for you to check how close you are to that figure, and find out how the new loan and monthly repayments will affect your TDSR. If need be, you should lower your current TDSR before taking on a new loan.
7. Catch Up On Payments
Prior to taking out a loan, it is imperative that you ensure that your other payments are made. Overdue bills and defaulted loans can easily cause your loan application to be canceled. If you are unable to pay your bills in a timely fashion, then it is best to hold off on taking on another loan.