While accessing a private personal loan in Singapore is insanely easy, getting the lowest personal loan rate isn’t as straightforward. This is mainly caused by the huge information gap between borrowers and lending services. So, if you’re focused on saving some coins on your loans, you’re in luck today! In this article, we delve into five killer tips for evading predatory loan rates and landing sweet loan deals.
- Work on your credit score
Do you want to enjoy ridiculously low personal loan rates in Singapore? Start improving your credit score. Easily, this is the simplest route you can take to loosen the grip of exorbitant interest fees. The thing is, a low credit score paints you as a problematic borrower. And when this happens, many lenders will ward off lending you money. The few that agree to exert financial mercy on your soul will charge you the highest possible interest rates. Why? Because they want to mitigate the risk of lending you money. So by charging you high rates, they can recover as much money as they can before you default.
This means that you need to polish your credit score for lenders to have confidence in you. Start by paying off your credit card bills early, and clearing any pending private loan that’s overdue. This way, you’ll easily land a cheap personal loan in Singapore
2. Don’t ignore the Effective Interest Rates (EIR)
Are you familiar with the term APR? Also known as Effective Interest rate, this percentage is the real reflection of the cost of borrowing. However, when applying for a personal loan in Singapore, it’s easy to bury your head in the advertised interest rates. Yet, these rates hardly reflect the comprehensive cost of taking the loan. For instance, the advertised rates may exclude fees such as administration charges. And this begs the question, what should you really focus on if you want a good personal loan rate in Singapore?
- Simply put, the Effective Interest rate (EIR) is the chief determinant of how much you owe your lender. Compounded monthly, this percentage rate is the real return on any saving account or loan. This rate is important because it reflects the actual cost of borrowing in Singapore. It covers all the extra costs of borrowing, loan tenure, and the intervals at which you’ll pay back the loan. For this reason, the EIR will be higher than the advertised loan rate, but this shouldn’t discourage you. Just ensure you opt for the lowest EIR since it will help you secure a cheap loan with zero hidden costs and a low personal loan rate.
In a nutshell, you can follow these steps to calculate your loan’s Effective Interest Rate:
- Add total interest paid over the loan’s tenure
- Divide it by the loan’s principal amount
- Divide the quotient by the number of days in the loan’s life
- Multiply by 365
- Multiply by 100 to get the APR percentage
3. Don’t go for very low monthly installments
Did you know that the cost of your monthly installments determines your repayment period? Consequently, this shapes the amount of interest you end up paying.
It’s noticeable that almost every private personal loan in Singapore offers unbelievably low monthly installments for the loans. While this may look appealing, the low installments attract unseen higher rates. Low installments culminate into a longer repayment period, and consequently a higher interest charge on the principal amount.
So to circumvent the high interest on borrowed money, stretch your financial muscle and opt for the highest installment that you can afford. This way, you’ll downsize the loan faster and pay less interest fees.
4. Stick to the loan amount that you need
Given the ease of accessing a personal loan in Singapore, it can be tempting to apply for more than you need. Yet, this only attracts higher interest rates.
To avoid high amounts of interest charges on the personal loan, apply only for the amount you need. Besides being cheaper, it will also instill a sense of responsibility on how you handle the borrowed cash.
5. Maintain a short loan tenure
In simple terms, a short loan tenure will mean that you will pay off the loan faster, and therefore, pay less in terms of interest charged. The interest will often accumulate to higher amounts when your loan tenure is long. Having short loan tenure will hence be advantageous when it comes to reducing the loan interests.
There you have it! Those are the five secrets for clinching the lowest personal loan rate in Singapore when applying for a personal loan. As a rule of thumb, check your credit score, avoid high amounts unless it’s necessary, and opt for the high installments and short loan repayment periods.