Things to Consider Before Taking Out a Loan

things-to-consider-before-taking-out-a-loan

Not all of us have spare cash to buy what we want. With the cost of everything increasing gradually in Singapore, it is an ironic situation that despite having a good job with a handsome salary, you are still unable to afford your dream house or even your most desirable car. The increase in cost has also affected some to the extent that they are having second thoughts on furthering their studies to continue their pursuit of their ambitions so as to save money!

However, with the above said, if you are willing to take on some extra burden, these situations may still be manageable. What we are talking about is taking a loan to afford the purchase of a house or car. In fact, you can cover all your tuition fees to achieve your lifelong ambition of becoming an educated person. In doing so, however, you should always remember that if you borrow money, your future finances might be affected. Even your lifestyle might change. So, here are the things that you must consider before taking a loan.

  1. Types of Loan

Before applying for a loan, you should know the different types of loan that are available. You should compare the features of each loan and decide which one will suit your financial needs better. Some of the loan as follows:

  1. Interest Rates

Loan Interest rate is the most important consideration when borrowing money from banks or licensed moneylenders in Singapore. Regardless of the type of loan you are taking, you should always focus more on the interest rates. A higher interest rate loan means a bigger loan amount to repay as compared to a lower interest rate loan, assuming the same principal amount was borrowed.

  1. Additional Charges

Besides the interest rate consideration, you have to find out if there are any other additional charges that you might need to incur. Different moneylenders or banks name these charges differently but some common charges as follows:

  • Origination Fee
  • Appraisal Fee
  • Underwriting Fee
  • Administration Fee
  • Credit Report Fee
  • Processing Fee

These charges will add on to the total loan cost.

  1. Loan Repayment Tenure

The length of the loan or loan repayment tenure is also a vital consideration because it will determine the total loan cost. Depending on the type of loan that one is looking to borrow, the loan tenure offered differs. It would be better to consult with a financial institution (licensed moneylender or bank) to discuss the best loan repayment tenure. Do keep in mind that some loan packages do not allow you to repay early hence they may include an additional fee – prepayment penalty into the loan agreement.

  1. Down Payment Amount

The down payment is another consideration that needs utmost attention. Though not all loans require you to make down payment. In the event that you do, this will help in reducing the monthly repayment amount. As a result, you will be in a better position to manage your finances entirely.

  1. Present Financial Situation

Before you decide to borrow money, you must first evaluate your financial condition. Referring to your monthly or yearly budget can help you to recognize how financially stable you are! It will also help you in understanding the capacity to borrow money from the banks or moneylenders.

 

In summary, you can choose to take up any loan from the banks or moneylenders. However, you need to consider all aspects related to your finances because it will be a long-term commitment. In the long run, if you don’t know how to properly manage your finances, you might not even be able to afford taking up the loan. Therefore, please consider the above aspects and analyze before you take up a loan!

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