7 tips when taking up a personal loan

Some things you need to know before taking up a personal loan.Personal loans aren’t as scary as they sound. If you know what you are doing, a personal loan can be a handy tool to manage your cash flow. Suss out these tips and arm yourself with some basic financial knowledge!

1) Know the difference between secured and unsecured loans

There are two kinds of loans: Secured loans require borrowers to pledge their assets, and when the borrower defaults on the secured loan, the lender can sell off the pledged assets to recover the money owed. Other loans such as education and renovation loans, or even a personal loan are known as unsecured loans. Lenders do not have the securities of a pledged asset in an unsecured loan, so they tend to charge higher interest rates, and borrowers are motivated to repay the debt on a regular basis.

2) Use personal loans to ease cash flow

As a rule of thumb, personal loans should always be used on something you need, not want. Preferably, the loan should ease your cash flow, help you gain possession of an appreciating asset, or help you generate positive cash flow. It is not wise to take up personal loans to pursue material objects (which may not be necessary) such as a new television or a new mobile phone. But no matter what the reason is for taking up a personal loan, just make sure to plan ahead for repayment.

3) Know your repayment plans before borrowing

It’s easy to get cash in hand, but it may not be as simple to think and deliberate upon the repayment process. Think anyway — it’s a must! Before you apply for your loan, designate and set aside the monthly payment amount you can reasonably afford. Once you have determined this repayment amount, try to secure a loan agreement that allows you to repay the loan as fast as you can without exceeding your budget.

4) Have your best interests at heart

Interest rates are constantly fluctuating, but this means that as a borrower, it’s up to you to decide when to borrow to get the best rates possible in the market. Here’s a heads-up: For a limited period until 31 August 2015, Dash Advance Personal Loan1 (offered by Standard Chartered Bank (Singapore) Limited) is offering one of the lowest interest rates in Singapore2 at 5% per annum (or Effective Interest Rate of 10.85% per annum3) on approved loan amounts below $10,000 at a loan tenor of 36 months. SMS ‘DashAdvance’ to 77222 for a callback from Standard Chartered on your Dash Advance Personal Loan enquiries now.Plus, an added convenience of Dash Advance is the fuss-free online application process. To apply, simply take a photo of your income documents and upload it to the Dash Advance online form, and you can get an approval-in-principle4 within 60 seconds!

5) Make sure lenders are reputable

Exercise due diligence to make sure that the lender comes from a reputable source. That way, you can be assured that you are protected legally and will not be subjected to irregular interest rates.

6) Myth busted: Rates are unreasonable!

Keep in mind that personal loans are often unsecured (for the lenders) and they are offered based on the person’s ability to pay. In the long run, personal loans—with their competitive fixed interest rates—might offer better rates than credit cards, where the interest can multiply exponentially. Nowadays, it’s also easy to find personal loans that offer very reasonable interest rates, and these may be made available by reputable banks.

7) Consolidate and reduce your debt

Here’s a tip! Personal loans are great for consolidating several minor debts. Instead of paying off different debts at varying interest rates, you can choose to repay all your debts with one loan, at one interest rate. Consequently, this could lower the total amount of interest you will need to pay.

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