Should I Get a Personal Loan?

January 16, 2024

In an ideal world, our income and savings should be able to cover any cost we need. But we know reality isn’t so simple right? Sometimes we underestimate the renovation cost of our home our wedding, or face a sudden emergency which requires funds. There are days when we need more cash than we have on hand. That’s when you can consider getting a personal loan from a legal moneylender in Singapore:

What is a personal loan?

A personal loan is a small, unsecured debt –the money is given to you, just on your word that you’ll pay it back later.

A good way to think of personal loans is to think of oranges at a supermarket: during Chinese New Year, you’ll need more oranges than usual right? The supermarket tries to accommodate that need, even when you require an abnormally large amount of oranges that month.

Legal moneylenders, like banks, do the same thing with money: they try to make sure that the cash is available to you, in times when you need more of it than usual.

In return for this service, they’re repaid through the interest rate on the loan.

Another interesting aspect of a personal loan is that no one controls how you use the money

With many types of loans, such as home loans or education loans, you don’t actually get the money in your pocket or bank account. The lender will pass the money directly to the seller (e.g. if you take a home loan, the money goes directly to the person selling the house, not you).

Personal loans are much more versatile. The moneylender doesn’t control what you use the cash for. You can use it to buy a laptop, repaint your house, pay for scratching someone’s car, etc. It’s entirely up to you.

What are the circumstances when you should get a personal loan?

You can consider a personal loan under the following circumstances:

●       You are faced with an urgent necessity

●       There’s no specific loan type that caters to your need

●       You are confident that you can repay the loan in short order

●       The loan amount is not beyond your capacity to repay

1. You are faced with an urgent necessity

Don’t use personal loans for frivolous purchases. If your phone line is about to be cut, or you need to pay for medical bills, then these are valid reasons to take a personal loan.

Wanting to go on holiday, buy a new tablet, or blow it all on a KTV night are not viable reasons to take a loan. You should simply save up until you can afford those things, and not borrow money at all for them.

2. There’s no specific loan type that caters to your need

If there is a specific loan type for your need, use that first. This is because specific loans are always cheaper. For example, use a car loan to pay for your car, because it will be cheaper (lower interest rate) than using a credit card or personal loan.

You can use a personal loan if there’s no specific loan type catered to what you need.

3. You are confident that you can repay the loan in short order

In general, licensed moneylenders give out short term loans. You are expected to repay the loan within a few months, or a year. If you need much longer than that (e.g. you want a seven-year loan to pay off a car), then a personal loan from a moneylender is not appropriate.

It will be cheaper for you to take long term loans from other types of lenders.

4. The loan amount is not beyond your capacity to repay

As a rule of thumb, avoid taking any loan that you cannot fully repay within six months. There are many ways to borrow much more than that (e.g. a credit card already lends you up to four times your monthly income), but it’s not financially prudent to take on so much debt.

Personal loans are supposed to ease your financial burdens, not become financial burdens.

Always shop around for low interest rates when getting your personal loan

One of the lowest rates in Singapore comes from Friday Finance, which is just around one per cent per annum. You’ll also save even more with prompt repayment, as we’ll shave 50 per cent off your administrative fees.

It just takes five minutes to apply, so let us help you out.