There are various reasons why Singaporeans apply for a loan. Even those with regular good paying jobs experience getting payday loans, it may not be for an emergency reason, but rather for a leisure that is hard to pass up. From a grand house renovation to buying a brand new car, it is convenient to know how much you will have to pay monthly before actually starting the loan process.
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Secured vs Unsecured
The secured loans are certain loans that are protected by assets as collaterals. This stands as less risky for the lenders and puts the borrower’s assets on the line. Secured loans usually offer larger amount of loans as there is more assurance that you will do everything you can to pay the loan. These loans are not just for purchasing new cars and houses, they can also be home equity loans. However, if you borrow more than you can actually pay, you lose your valuable asset.
Unsecured loans on the other hand are more risky for the licensed money lenders as they have no assets to recover should the borrower fails to pay the loan so they your certain criteria to evaluate the borrower’s creditworthiness. These may include but not limited to character, capacity, capital, collateral, and conditions based on the personal interview and passed requirements.
An interest rate is a fee usually called base rate, calculated as a percentage of the total loan amount, which you are charged for borrowing money. It is a proportion of loan charged on top of the principal loan. It is typical for the moneylender to earn money from the interest it charges as the borrower has to pay interest for the privilege of getting a loan.
There are several factors that can affect the interest rates. Since the lenders are putting their money in the hands of a borrower, they are risking losing that value, the riskier it is, and the higher the rate can go. Also the value of the money can decrease in the future, what the $1000 can buy now may not be the same after a year. Another factor is the government’s limit on the interest rates to prevent advantageous lenders from charging skyrocketing rates. In Singapore, licensed moneylenders can only charge up to 4% of interest loan.
In theory if you borrow $1,000 at 4% and your total repayment sum comes to $1,040.However, if you add up the APR in the equation, this goes a little complicated.
Annual Percentage Rate
APR is an annual rate charged for borrowing a loan making it an important factor in determining the overall cost of a loan. Use APR to compare different personal loan offers. Some lenders include additional costs in APR such as the prepaid interest, closing fees and any other costs that may be associated with the transaction. Since moneylenders differ on add on fees such as transaction fee, it is easier to see which lender has lower interest.
If you borrow $1,000 with an APR of 3% over 2 years
Year 1 interest: 1,000 x 0.03 = 30 and 30 + 1,000 = 1,030
Year 2 interest: 1,030 x 0.03 = 30.9 and 30.9 + 1,030 = 1061
The formula for the loan payment calculator:
Monthly payment = [r + r / ((1+r) ^ months -1)] x principal loan amount
Where: r = decimal rate / 12
For easy calculation you can use the online Personal Loan Calculator at calculator.sg
Type in the Loan Amount (SGD), months to pay and Annual Interest Rate %.
If you want to experience a high class service with transparent terms and fees, choose Cash Mart. Cash Mart takes pride on not only their quick loan application, but also for its lowest sensible interest rates a lender can give. Drop a call or stop by Cash Mart’s office and the friendly staff will be willing to walk you through the personal loan process, requirements and terms.
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