Ever heard the term “instalment loan” thrown around but wondered what it means? Don’t worry, you are not alone.
Borrowing can definitely be overwhelming at times, especially when you encounter unfamiliar terms and concepts. However, understanding the ins and outs of instalment loans is essential for anyone seeking financial assistance in Singapore. To better understand instalment loans in Singapore, keep on reading.
What Are Instalment Loans?
Known for their flexibility and structured repayment plans, instalment loans are a go-to for people who prioritise financial stability and convenience. These loans provide borrowers with a specific amount of money that is repaid in regular, fixed instalments over a predetermined period of time. This means that borrowers can easily plan their finances and budget accordingly since they know exactly how much they need to repay each month.
How Do Instalment Loans Work?
Instalment loans are given to approved applicants in a structured manner. First, individuals apply for the loan by submitting their personal and financial information to the loan provider. The bank, financial institution, or licensed moneylender then reviews the application and determines whether the borrower meets their criteria for approval.
Once approved, borrowers receive a lump sum of money that they can use for any purpose (for personal loans). The repayment period is then divided into equal instalments, usually on a monthly basis. In Singapore, the usual repayment period for instalment loans ranges from 6 months to 5 years, depending on the loan amount and the loan provider’s terms.
Terms to Understand
If it’s your first time dealing with instalment loans, expect to encounter the following terms:
Principal
This is the initial amount of money that you borrow from the loan provider. It is the total sum that you will need to repay over time, excluding any interest or fees.
Interest Rate
The effective interest rate refers to the cost of borrowing money. It is expressed as a percentage and is added to the principal amount. The interest rate determines how much extra you will need to pay back in addition to the borrowed amount.
Loan tenure/Repayment period
This is the duration in which you are obligated to repay your loan. The length of the loan tenure can vary depending on the loan provider and the amount you borrowed.
Fees
Fees are additional charges or costs associated with taking out instalment loans. These fees can include application fees, processing fees, late payment fees, and prepayment penalties. Knowing these is crucial so you can avoid any surprises or hidden costs down the line.
Collateral
If you don’t have a high credit score and are considered a high-risk borrower, some banks or financial institutions may require collateral to secure the loan. This is an asset that you own, such as a house, car, or valuable personal possession. If you fail to repay the loan, the lender has the right to seize the collateral as compensation for the unpaid debt.
Advantages of Instalment Loans
We’ve gathered the top advantages of instalment loans in Singapore
Predictable Repayment Schedule
As stated above, you know exactly how much you need to repay each month when you take out an instalment loan. Having a predictable repayment schedule can help you avoid any surprises or financial setbacks since you can easily plan your monthly expenses and ensure that you have enough funds to cover your loan instalment payment.
Flexible Loan Amounts
Whether you need a small loan for emergency expenses or a larger loan for a major purchase, you can find a loan provider that suits your financial needs. This allows you to borrow the exact amount you need, without taking on additional debt.
Low interest rates
Another key advantage of instalment loans is the relatively low interest rates compared to other forms of borrowing such as credit cards or payday loans. This perk allows you to save money in the long run by paying less interest on your loan. It also makes instalment loans a more affordable and cost-effective option for those in need of financial assistance urgently.
Improves your credit score
By making timely and consistent payments each month, you can prove to loan providers that you are responsible and capable of managing your debt. This positive payment history can boost your creditworthiness and make it easier for you to access future loan products with more favourable terms. For instance, you may be more likely to qualify for higher loan amounts in the future.
Discover more on how you can improve your credit score here.
Convenience and Accessibility
Instalment loans are widely available in Singapore, offered by various banks, financial institutions, and licensed money lenders.
You have multiple options to choose from so you can find a loan provider that offers great terms and conditions. The application process is also relatively straightforward and can often be done online, saving you time and effort.
For instance, Crawfort is a top choice among individuals seeking urgent instalment loans. The application process only takes 8 minutes to complete.
Moreover, instalment loans are accessible to Singapore citizens, PRs, and foreigners residing in the country, making them a viable option for a diverse range of individuals. Keep in mind that the requirements are less strict for Singaporeans and PRs compared to foreigners.
Are Monthly Instalment Loans and Payday Loans the Same?
These two types of loans differ in terms of repayment period and loan amount. Payday loans are smaller in amount and require repayment within a shorter period. On the other hand, monthly instalment loans have longer repayment periods due to their larger loan amounts.
Despite these differences, both types of loans can give much-needed financial assistance to everyone. That said, you must carefully consider your financial situation before deciding on which type of instalment loan to take. Payday loans are great for urgent and short-term needs, while monthly instalment loans may be more appropriate for larger expenses.
Can I Still Be Eligible for Instalment Loans Despite Having Bad Credit?
While you may not be eligible for bank loans, licensed moneylenders understand that having a bad credit score is not necessarily a barrier to obtaining an instalment loan.
As long as you are 21 to 65 years old, Money lenders can offer up to S$3,000, even for those who earn less than S$10,000 annually. Meanwhile, those who earn over S$20,000 can borrow up to 6 times their monthly income.
Final Thoughts
Instalment loans can help you bridge financial gaps and achieve your goals, whether they are short-term or long-term. But as with any financial decision, weigh its benefits and drawbacks first.
Should you opt for instalment loans but you are unable to meet the eligibility criteria of banks, licensed moneylenders can help. If you’re ready to apply for a personal loan, Crawfort is reliable and efficient and can provide you with the financial assistance you need. Reach out to Crawfort today.