If you have a personal or business endeavour that needs financing right away but you’re uncertain of what kind of loan to go for, a monthly installment loan is a good option. It’s typically used to fund things like college tuition, a brand new car or even repaying other debts.
Installment loans come in really handy in different kinds of situations, but most people don’t really understand the ins and outs of such loans or even how to go about getting monthly installment loans Singapore.
Read on to find out everything you need to know about an installment and how you can get your hands on such loans in Singapore.
What is a Monthly Installment Loan?
In a nutshell, a monthly installment loan refers to when a borrower is given a fixed amount of money to repay over a certain period of time in equal monthly repayments. The amount of money that the borrower will have to repay every month depends on the principal amount borrowed, the duration of the repayment period, and the interest charged.
Installments are basically the fixed amount of money that you pay back each month. Although they are supposed to be fixed, they tend to fluctuate if for instance you miss a payment and then the remaining portion of the money you still owe will be charged with late repayment interest.
The terms and conditions of installment loans are very similar to any other type of loan, with only a few differences here and there.
Types of Installment Loans
There are different types of installment loans; they all work the same principles. Additionally, your loan can either be secured or unsecured.
When a loan is secured, it requires some type of collateral before it’s approved. Unsecured loans on the other hand, don’t require any type of collateral. Typically, personal loans are usually unsecured, whereas mortgage loans are unsecured.
The following are the common types of installment loans:
- Auto: Auto loans are more commonly known as car loans are used to finance car purchases. A car is a necessity, but buying it in one go will put unnecessary strain on your budget, which is why you can get an auto installment loan and then agree to repay a set amount of money every month.
- Mortgage: a mortgage is a loan taken out to buy land or a house. Since most properties and lands are quite pricey, mortgages typically have longer settlement periods and also they are always secured loans, which means you’ll need to provide some type of valuable collateral.
- Personal: a personal loan is often unsecured and it’s referred to as personal, because you have the freedom and flexibility to use it for anything legal. Most people get this type of credit to make ends meet before their next payday or simply to finance a personal endeavour such as a trip overseas.
- Student Loan: As the name suggests, a student loan is used to finance your studies. Ideally, you’d want to go for one with low interest rates and a flexible repayment period.
- Business: this is a type of personal loan more commonly used for business-related expenses such as capital, buying equipment and sometimes even paying wages.
What are the Pros and Cons of Monthly Installment Loan?
Installment loans can be really beneficial, especially because you have the flexibility to repay everything you owe in smaller monthly payments. In spite of that, it’s worth noting that there are a few disadvantages that you may incur.
The following are pros of installment loans:
- Fixed monthly payments: monthly payments are predetermined and they will remain consistent for the entire duration of the loan term. This makes it easier for you to plan ahead.
- Improves your credit score: with regular payments, you’re able to demonstrate your ability to keep up with payments without falling behind and this in turn will greatly improve your credit score.
- Loan can be refinanced: refinancing means that the terms of the loan are changed throughout the course of the loan term. This usually happens when either your credit score or the interest rate change. This may result in lower installments.
It’s important that you take the time to consider all the cons before you opt for a monthly installment loan. The following are the most common cons:
- Possible fees: if for instance, the interest rates are lowered and you decide to apply for a new loan, you will most likely have to pay some type of fee in order to process the new loan.
- The payment schedule may be long: if you’re taking out a loan for something really expensive like mortgage or even a car, you can expect to pay installments for a lengthy period of time. This may put a strain on your monthly budget.
- Only one payment: once the loan has been approved and you’re in the process of repaying, there’s no way to increase the amount borrowed in order to finance emergencies or other needs.
- It may be costly if you have poor credit: when you take out a loan, you’re typically given an interest rate based on your credit score. The lower your score, the higher the interest rate you’ll receive.
Where to Apply for an Installment Loan?
Depending on your needs and preferences, you can apply for an installment loan through a bank or a moneylender. Each option has benefits, disadvantages and different eligibility requirements. You should compare the two options before you decide on which to opt for.
Here’s a table reflecting the key differences between borrowing a personal loan from a bank vs a licensed moneylender:
|Terms of Loan||Bank||Licensed Moneylender|
|Loan Amount;||Up to 10x your monthly salary||Up to 6x your monthly salary|
|Interest rate||From nearly 4% per annum (Around 8% for the effective interest rate)||1-4% per month|
|Repayment period||1-5 years||6-12 months|
|Processing fee||1%||10% of the principal loan amount|
Things to Consider Prior to Taking a Loan
There are major things to consider before you take a loan. For instance, you need to:
- Know whether you’d be able to afford the loan. To know this, you have to figure out how much money you’ll be paying off each month.
- Determine the monthly installment based on a principal amount, interest rate and loan term. All those terms are usually only available to you, once you’ve applied for the loan. For this reason, you can make use of sample computation.
Example: if you take a loan of $10 000 with a loan tenure of 3 years and interest rate of 3.4% you simply have to punch in this information on an online loan calculator and it will give you the total interest you’re going to pay in 3 years. In this case it’s $1020.
Next it’s going to calculate the total amount payable, which is $11 020.Lastly, it will tell you how much you’ll be paying off each month, which is $306 in this case.
Alternatives to Installment Loans
It’s always a good idea to shop around to find the best possible solution when it comes to credit and borrowing. If you feel that an installment loan isn’t for you, the following are good alternatives:
- Personal Line of credit
A personal line of credit works like credit cards; it allows you to use funds that exceed your bank balance instead of applying for a lump sum of money. It’s ideal for people that are administering ongoing projects or those who don’t have a consistent stream of income but they need to keep up with utility bills.A personal line of credit is generally short term with flexible repayment terms. After submitting an application form, your bank will consider a few factors like your credit score, before approval.
- Payday Loan
A payday loan is an unsecured type of credit and it’s available to permanent residents and foreigners from a licensed money lender in Singapore. It’s the perfect choice if you need to pay for groceries, utility bills and home improvements.To apply for one, you simply have to fill in the application form and wait for the application process to be done. The amount that you will be granted will greatly depend on your borrowing history, your monthly income and proof of employment.Payday loans are quick, efficient and have the lowest interest as opposed to other borrowing methods. Also, their rate of interest is more favourable.
The Bottom Line
Whether you’re getting a repayment loan from a bank or a licensed money lender in Singapore, one thing is for certain, you have to keep up with your monthly repayment. If you happen to miss a few payments, not only will that increase the overall amount of money you would have to pay back, but it will also mess up your credit score.
Finding a source of personal loans and cash loans in Singapore can be daunting, especially if you’re looking for an institution with a great reputation and excellent customer service.
Fortunately, 365 Credit Solutions Pte Ltd, among the best licensed money lenders in Singapore, offers customized loan plans for Singaporeans as well as foreigners to suit their financial needs.