Taking out a loan for a business, pursuing higher education, buying a house and vehicle, or meeting personal needs isn’t as simple as it seems. That’s why it’s not uncommon for borrowers to make simple mistakes during the process. And unfortunately, simple mistakes in this regard have far-reaching consequences.
If you are thinking of getting a loan from one of the reliable money lenders in Singapore and want to avoid these mistakes, you are on the right page. We are going to discuss these mistakes so you can understand and avoid them. That way, you can have peace of mind and good financial health.
A great way to protect yourself and your finances is to research the money lenders you’re thinking of getting a loan from. Ironically, one of the most common mistakes borrowers make is not looking up the money lender they plan to borrow from. Not doing so could put you at a disadvantage. At worst, you can end up with lenders using predatory and illegal practices to make a profit.
While technological advances can make decision-making faster and more efficient, it’s still important to do some research on the money lender you plan to borrow from. Or better yet, look up many money lenders so you can compare and contrast their terms and conditions on their loan products.
When signing a loan agreement, you must not get too excited and accidentally overlook the details. Right before signing, understand the loan’s terms and conditions, fees, charges, prepayment penalties, repayment schedules, and other details that money lenders can provide.
Do not be afraid to ask your lender about all of these charges in order to clear up any confusion before signing; remember, disregarding the fine print can result in unforeseen fees damaging your budget.
Also, keep in mind that a licensed and trusted money lender will clearly explain the entire lending procedure to you. They will also not be afraid to explain all components of the loan sanction charges and give viable repayment options upfront. So if you have any questions, don’t hesitate to ask them.
As some of you may already know, if you apply for a loan, the lender or bank will first check whether you have a sufficient credit score to qualify for a loan. The higher your credit score, the lower the interest rate you will pay later.
Generally, if your credit score is between 1,000 and 2,000 points, which, according to Singapore’s credit scoring system, may assess a person’s likelihood of failing to pay their debts, your loan application may not be approved.
Also, legal money lenders are less concerned about your credit score than banks are. Nevertheless, it’s still a good idea to check it and keep it within a good range, even if your loan gets approved.
Having an excellent credit score means you have an excellent loan repayment history, and your profile is less risky for lenders. Therefore, generally lower interest rates are offered to applicants with excellent credit scores compared to those with average credit scores.
It’s also recommended to check your credit score periodically to see if there are any errors in it. Because if you find errors in your credit score, you can correct them with the credit bureau. You can also check your credit score through the credit bureaus or various websites that offer free credit score checks.
We recommend that at least once or twice a year you check your credit score before applying for a loan to make sure there are no errors.
Another mistake is borrowing beyond your ability to repay the loan. You’ve probably heard the old adage, ‘Don’t borrow more than you can’t pay back.’ Oftentimes, borrowers overestimate their borrowing capacity, which can actually cause financial stress, late payments, or even credit damage.
Your income also reflects your ability to get a loan. Because when you apply for a loan, you can be rejected if your income does not match the loan amount you are applying for, i.e., if you borrow more than your repayment capacity. And even if you don’t, you still shouldn’t get a loan that is beyond what you can comfortably repay with your income.
Therefore, assessing your financial situation is essential to ensuring you can meet your loan obligations comfortably.
Another effective way to ensure you are able to repay your loan on time is to check your credit score with a bank or lender so they can evaluate your income and repayment capacity.
Late or missed payments can lead to the worst loan-related scenarios, as they have significant and long-lasting consequences.
Based on what we have discussed above, getting loans is like a cycle. If you have good habits as a borrower, money lenders are more willing to lend you money. Once you stop being one, it will be more difficult to gain trust and restore your good name with them. As you consistently miss payments, your credit score will get lower, making it more difficult to get loans in the future.
Aside from losing lenders’ trust, the outstanding balance continues to accrue interest and penalty fees, resulting in a significant increase in the total amount you’ll be paying over the loan term.
Lack of research, inattention to details, not paying on time, and a bad credit history will affect your financial well-being in the future. By avoiding these common mistakes, you can turn your loan into a financial asset, not a burden that gives you a headache. And if you need further help, many reliable money lenders in Singapore can provide valuable guidance and support in making your lending decisions.