So, you are bound to take a personal loan because of the tight cashflow? There is nothing wrong with taking a loan if you are willing to manage your expenses. But there are some important things you must understand before making that major decision. So, let’s dive into the details of things you should know before getting a loan from Smart Loan licensed money lenders in Singapore.
The Difference Between a term loan and a revolving loan
The term loans come with a specific loan tenure such as 1,3,5, or 7 years. The borrower needs to pay off the loan during this time in the form of fixed monthly installments. These installments also include interest payments. The term loans are considered to be the ideal option for big-ticket expenses. The good thing about the term loans is that they come with low-interest rates as compared to the revolving loans.
A revolving loan comes in the form of a line of credit. It enables you to a limited amount according to your present needs. These loans make you feel free from paying major interest payments as you’d only have to pay interest on the amount you’ve drawn. And you can easily draw the funds again once you’ve made full payment. We only recommend using the revolving loan when it’s an utmost necessity because these loans come with higher interest rates.
Both the term loan and revolving loan have their advantages and disadvantages. You need to analyze your financial needs if you want to make an informed decision.
Consider the Whole Package
The mistake that many borrowers make is that they go for the loans that come with the lowest promotional interest rates. This practice can get you into trouble. You need to look for other important elements as well. For instance, the processing fee and prepayment fee are the important factors that can be a headache for you after taking the personal loan.
Sometimes, the lender will ask you to take the insurance plan before approving the loan application. And many lenders increase the interest rates once the promotional period is over. So, when you’re looking to take out the personal loan, you shouldn’t just rely on the interest rates, but you should keep an eye on other elements as well.
Higher Interest Rates
Without any doubt, personal loans can be used for anything. But you must keep in mind that personal loans come with the higher interest rates as compared to other types of loans, including car loans, home loans, renovation loans, and education loans. Make sure that you go for a reliable lender if you are looking to take out the personal loan.
Taking out a personal loan can be a challenging task as it has many important elements associated with it. Therefore, you need to consider all the important elements so you may make an informed and wise decision.