When you are in a financial crisis, you can easily borrow a personal loan to bankroll your needs. While personal loans can be primarily categorized into two groups i.e secured loans and unsecured loans, these loans, which are intended for any other use except for business can be further subdivided into various sub-groups. We highlight those sub-groups below:
These are some of the most common types of personal loans in Singapore. Just as the name implies, fixed interest personal loans have fixed interest rates. Nevertheless, interest rates are mutually decided by both parties i.e the lender and the borrower, upon consideration of various factors, including the borrower’s credit score, whether it is a secured loan or an unsecured loan, etc.
The difference between fixed interest personal loans and variable interest personal loans is that FIPLs have fixed interest rates whereas VIPLs variable interest rates. Both have their interest rates mutually decided by the lender and the borrower upon consideration of many factors, including the above. One of the primary advantages of variable interest personal loans is that they have the lowest interest rates compared to fixed interest personal loans. For borrowers that are looking for the most affordable personal loans, VIPLs remain the best option.
Did you know that a bank overdraft is actually a personal loan? For starters, an overdraft is a fund that a financial institution offers you to cover an expense when there are insufficient funds in your account. The lender then recovers their money as soon as your bank account gets credited with funds enough to offset the overdraft. Lenders will set varying overdraft limits for borrowers, depending on various factors, including borrowers’ savings, incomes, etc. Usually, the number one clients for the lending institutions are salaried employees with job security.
A line of credit is a common type of personal loan that is easy to confuse with an overdraft. Just like an overdraft, this loan offers access to funds when required, allowing borrowers to withdraw some money as necessary. The main difference between a line of credit and an overdraft is that with the former, interest is not charged on the amount borrowed but on the amount spent, whereas with an overdraft, it is generally charged on the amount borrowed. For instance, when you borrow $500 and end up spending $400, you will only pay an interest on the $400 that you spent. So your total debt will be the total amount borrowed plus the interest rate on $400. As you can see, a line of credit can be a cheaper borrowing option compared to an overdraft.
Fixed, variable, overdraft and line of credit are some of the most common types of personal loans SG. So, in your view, which of these personal loans in Singapore would you borrow? Please leave your comment below so we can know your opinion.