Moneylender Reviews
Consideration factors for a Borrower in Singapore
A loan is one of the great sources for financing money. We know that there are various types of loans are available for various purposes. However, the consideration of a borrower may differ for different loans. However, I will try to merge some common factors such that a borrower can consider as prerequisites before taking a loan.
If a borrower considers the below opportunities, I think he or she may be benefitted in the time of taking a loan.
Alternative sources
Before submitting a loan application to a licensed moneylender, consider alternative sources additionally, such as the various financial aid schemes offered are by Government agencies. You may contact the agencies or browse their websites to find out more about the offered schemes. In general, the Government agencies offered scheme’s interest rate be lower comparatively.
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Contractual Terms and Conditions
Before taking a loan you have to check the terms and condition mentioned in the contractual form. Because if you not able to repay the payment after taking the loan, the huge late payment may hamper not only your life but also your family’s daily activities. Besides the terms and condition must be unique understanding for both money lender and borrower. Otherwise, the borrower may suffer later if the borrower lodged a caveat against money lender. Moreover, the money lender will lodge a caveat against the borrower if he or she is unable to meet the repayment as per condition and the lender may sell your property which was taken as security.
Interest Rate and Repayment Schedule
Interest rate calculation for a loan is very vital for a borrower. Money lenders are normally offering nominal interest rate but charge the interest half yearly, monthly, weekly or daily basis. In that case, the borrower has to pay more interest without his or her concern. Let me clear it at first. When amoney lender offers yearly rate is called nominal rate. Sometimes it is called advertised or stated interest rate on a loan. However, the rate which is charged against the loan is called effective interest rate. If the interest charged is taken yearly then the nominal interest and the effective interest rate will be same. If the interest charge is taken monthly in that case the effective charge and the nominal interest will differ and the effective rate will be higher than nominal interest.
Suppose the nominal interest rate is 10% and the interest charge is taken monthly basis then the effective interest rate will be 10.47%
The formula of Effective Interest Rate is
Here,
r = nominal interest rate
n = number of year
m = interest charged period per year
Just think if the interest charge period is higher than 1 then the effective interest rate will be higher!
I have another post regarding effective interest calculation in MS Excel sheet. Just keep eyes on my post to get this.
However, you can follow the below link to check the effective interest rate:
http://bank-bima.com/wp/2017/06/24/effective-interest-rate/
Credit Score
Credit Score is one of the important things which determine your loan rates. Suppose you want to buy a car using loan and when you go to money lender for taking a loan they will first ask you “what is your credit score?” If your credit score is poor, you will incur higher interest rate and in some cases, it will be difficult to obtain a loan due to poor credit score.
A credit score is a four-digit number in Singapore that uses information from your credit report to determine your creditworthiness.
The credit score in Singapore are as follows:
Score Range | Risk Grade | Probability of Default | |
Min | Max | ||
1911-2000 | AA | 0.00% | 0.27% |
1844-1910 | Be | 0.27% | 0.67% |
1825-1843 | CC | 0.67% | 0.88% |
1813-1824 | DD | 0.88% | 1.% |
1782-1812 | EE | 1.% | 2.% |
1755-1781 | FF | 2.% | 2.% |
1724-1754 | GG | 2.% | 3.% |
1000-1723 | HH | 3.% | 100.% |
You can assess your credit score in Singapore by following the web link.
http://www.creditbureau.com.sg/credit-score
Loan Duration
The loan duration is another factor when you calculate the cost of your loan. Remind that the longer duration to repay will be your loan the interest rates will be higher accordingly.
Inflation Rate
The inflation rate is the rate at which the purchasing power decreases and the goods price increases in the economy. This has a major impact on your interest rates. I may discuss inflation rate deeply in another post later.
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If a loan taker considers the above factors I think he or she will be in better position in loan process in Singapore. So make a good plan before applying loan to the licensed money lender. It will be very pleasant for me if the post helps you a little bit and you are always welcome to take my suggestions. Just email us or comment here.