Personal loans exist for a reason and just like credit cards, it is known for its less-than-shiny reputation due to frequent misuse of the facility. It is a basic understanding that borrowers have to pay off their loans based on the agreed terms and condition in the agreement but this agreement is often ignored.
Despite that universal understanding, some of the most common reasons people take up person loans are for vacations, home renovation, weddings, and even for purchase of big-ticket items like a new surround sound system for pleasure.
So when does it make sense to take up a personal loan? Easy! When you need cash immediately.
Personal loans are useful if you’re in a tight spot that requires help; not for low priority spending that will just eventually get you into trouble.
However, there are situations where you should definitely consider getting a personal loan to save yourself trouble and money in the long run:
1) To further your studies
We all know that professional education fees are hefty. Yet it is proven that qualifications are assets that can bring us further in terms of career advancement and of course the pay cheque.
In this case, taking a personal loan for professional education makes perfect sense, as the return in terms of pay raise is almost immediate once you have completed it.
Split the fees into instalments of up to 7 years, but earning the return (pay raise) upfront. Sounds like a deal?
It is good to look for personal loans with longer tenure hence you can get to service the loan with a lower monthly instalment.
2) To manage your debts
There would be days where you mailbox seems to be cluttered with your financial bills like credit cards, utility bills, and other instalments. Yet all you can do is just keep hitting the archive button because you simple can’t manage your debts? Eventually the outstanding amount will accumulate with time, making it harder to get settled.
If this happens then you should start considering on a personal loan to consolidate your debts, but why? Because managing a single personal loan account will definitely be less hassle than maintaining several accounts.
A personal loan to focus on debt consolidation is quite common all around the whole because of the fixed instalment payments and the lower interest rates, which would be easier for you to work around based on your budget. Interest rates for a personal loan are usually fixed, and of course it will be cheaper than the standard 25% p.a. interest rate that comes with each of your credit cards.
Remember that it would only be effective if you make your monthly repayments punctually.
3) To improve your credit score
If you are looking forward to purchase a house, then you should pay close attention to this. Banks take applicant’s credit score as risk indicator in order to decide whether to borrow or not. A huge part that makes up your credit scoring is your payment history. Payment history affects 35% of your credit scoring and credit utilisation affects 30% of it.
With constant credit card usage and lack of prompt payments, this would probably reduce your credit score and result you in approvals when you apply for a loan. A personal loan comes with a good monthly repayment plan because of it fixed interest rate, which would allow you to plan your budget well, do prompt payment and keep track of your monthly repayments.
So have you justified your reasons to take up a personal loan? If you are ready, we suggest you to research further on the current promotions out there. For instance, Standard Chartered CashOne is offering an interest rate as low as 6.88% per annum with cashback up to 1.2% or up to S$888 with S$199 credit with your loan amount for any successful application.
Visit iMoney to compare for more personal loan packages before you apply!
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