5 Great Tips for Taking Loans in Singapore
Singapore is a country where cost of living is always high. Here everyone has to become a borrower some day or the other. You might not like the idea of taking loans much; but even then, you may have to do it someday. Therefore it is advisable to be prepared with thorough knowledge, so that if time comes, there are fewer chances that you would take a wrong decision.
1. Never Take a Loan before Another Major Loan
Keep this rule well in mind. If you are planning to buy a house or car, and would be taking a big loan for it, never take a personal loan.
While taking a bank loan for a house or car, your DSR (Debt Servicing Ratio) is a key factor. This decides what share of your income will be spent in repaying the loan, including repayment of other personal loans.
For example, 50% DSR means repayment of your all loans can’t go beyond 50% of your income.
Therefore, if you go on piling more and more personal loans, you will be qualified only for a smaller loan for house or car. And even there may be a stage when you will qualify for nothing!
In general, most Singaporean banks agree to 30% DSR for a car and 40% DSR for a house.
Exception of HDB Loan: The above rule may not be applicable to HDB loans. They have got a 35% Mortgage Servicing Ratio (MSR) cap.
This means that the repayment of your HDB loan cannot go beyond 35% of your income, without considering repayments of other loans. Therefore HDB loan won’t be affected by your personal loans as much as bank loans will be.
2. Be Specific about Your Loan
Being very specific about which loan you want is beneficial. Firstly banks want to know what they are lending for. But the second thing is more important. You may get lower interest rate. For example, for a personal loan, interest rate is 6% to 8%, but for specific loans, like education loan, home remodeling loan, etc interest rates are as low as 2%. So, if you take a personal loan for your home remodeling, you will unnecessarily be paying higher interests.
3. Shop Around and Compare Well
Mood of Singaporean banks about interest rates on personal loans keep changing haphazardly. Therefore it is highly recommended to shop around just at the time of taking loan and compare the interest rates.
So, if you decide to take a loan from a bank from where your aunt took a loan two months ago and the interest rate was very low, you might go wrong, because the bank might have increased the rate of interest by now.
Mostly no one checks penalties charged for late payments, since no one thinks that s/he will pay late. But it is good to know about them, just as you want to know about interest rates.
Unlike credit cards, it is not possible to get an “interest adjustment” if you pay late just once. Only one late payment may cost you an increased interest rate to 9%-10% from 8%. Besides, you will have to pay late fees which are quite substantial.
So, if you come across two banks that are offering same interest rates, late penalties may be your deciding criteria.
5. Look At Personal Loan as Cash Flow and Not as Leverage
Almost all personal loans are not secured. As borrowers have no security against them, they compensate by increasing the interest rates.
So, you should never borrow a personal loan if you don’t know exactly how and when you can repay. Otherwise you will have to pay enormous interest rates. Therefore, never use a personal loan as leverage.
An excellent moneylender in Singapore is RCSSVC who understand their borrowers’ concern and offer highly flexible loans. They offer a dedicated consultant to you who customizes the loan to make it suitable to all your needs. So, if you need a loan in Singapore, don’t forget to contact RCSSVC.