Amid the hustle and bustle of life, there might come a point in time where you may need some extra cash to tide through a month or two. Sometimes a personal loan can come in handy when emergencies occur. For first-timers applying for a personal loan, just the thought of applying or searching for the right loan may be daunting. Fret not, we have here some dos and don’ts to guide you through your first personal loan application.
Do’s
1) Get your facts right
Before applying for a loan, it is important to do thorough research on the type of loans that best suit your needs. There are many types of personal loans out there for various purposes such as a debt consolidation loan for consolidating debts, a renovation loan for revamping your home interiors, a medical loan for paying hospital bills and so on. Personal loans can either fall under “secured” or “unsecured” categories depending on your needs and repayment ability.
While every moneylender has their packages and interest rates for secured and unsecured loans, you should familiarize yourself with the types of loans available in the market and your ability to meet specific credit criteria. This would help you make more informed decisions when applying for a personal loan to meet your needs.
2) Survey the market
The difference between a licensed and unlicensed moneylender makes a world of a difference, so does a low interest rate and a high interest rate. Finding the cheapest personal loan in town may not always be the best deal, you might be dealing with an illegitimate lender. You should always do proper research and background checks to make sure that you are dealing with a licensed private money lender in Singapore. Surveying the market for competitive interest rates would help you save on forking out extra in interest rates over time as well. It pays to do your homework.
3) Read, read, read
Understanding the different types of loans and interest rates is just as important as reading the fine print on your loan application. Always go through the fine print in detail to check for hidden or additional administrative fees and so on.
Don’ts
1) Not checking your finances
For many first-time loan applicants, it is easy to fall into the trap of taking out a loan amount beyond your means. We do not recommend taking out a huge loan just because you think you can afford it. A loan payment may seem manageable at first but you may run into unexpected circumstances such as losing a job or incurring emergency medical expenses. Overborrowing can be dangerous as it might lead you to an even greater debt.
For first-timers especially, before applying for a loan, make sure to check your financial health and account for any existing debts and rainy days to avoid taking out a loan that is not within your budget. When in doubt, you can always consult potential moneylenders to put together a plan for your loans.
2) Making late payments
This is by far one of the biggest mistakes a first-time loan applicant can make. When you take out a loan, you will have to pay both the principal and interest back to the lender. First-time loan applicants may overlook the fact that interest rates can accumulate over time, especially when payments are late. To avoid this mistake, schedule automatic withdrawals or reminders to pay your loans on time. Your pocket will thank you later.
Taking out a personal loan for the first time doesn’t have to be scary. With these tips in mind, go forth and search for the best loan suited for your financial needs. When in doubt, our team of experts is always ready to help at Loan Here.
About the Author
Armed with years of experience crafting content for brands and companies across industries, Clio is ever-passionate about putting out top-notch, well-researched personal finance pieces that seek to educate.
