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Yes, yes, yes, and yes. If you’ve been following our series on loans, we hope you got the majority of those answers right! And if you are new to Betterzine and loans, welcome! But also, click on the “Loans” subject tag at the bottom of the page to catch up on all we have to say on this important topic!
Now let’s level up and talk about why certain loans are better than others.
Swiping my credit card is so much easier than taking out a personal loan.
Credit cards are very common in Singapore. It’s unsurprising - they are easy to use and they dangle attractive incentives! So why and when might you want to take out a personal loan?
- Using your credit card to pay for retail therapy? As long as you are able to afford it and it fits your needs, do it! But if you are looking at stretching out the payment of a larger project like your home renovation or a wedding, a personal loan might make more sense.
- If you are looking for a lower rate of interest: As a general rule, credit cards carry a higher interest rate than personal loans after the interest free period. This is not an issue if you are able to pay off your card balance in full each month but you’ll find that this snowballs quickly if you miss a payment or two.
- The barrier to entry is lower for personal loans! You need to earn at least S$30,000 a year to use a credit card versus S$20,000 to get a personal loan.
- Predictability: The good thing about personal loans is they typically offer steady, equal monthly payments. This predictability makes it easier for you to plan your budget. As always, make sure to check the terms and conditions - are you able to customise the tenure and repayment date?
Ok, so why don’t I just take out a cash advance on a credit card?
Cash advances are a convenient option to get cash. When you get a cash advance you are essentially withdrawing cash against your credit card limit. They are a convenient option to get cash but do note they tend to have high-interest rates (on average this is about 28 per cent per annum!). In addition, many credit card companies charge additional fees for cash advances.
Why should I borrow from a bank vs an authorised money lender*?
Banks in Singapore generally have stricter eligibility criteria than licensed moneylenders which might make the latter seem like a good idea. However, it is worth sticking to banks for the following reasons:
- Banks generally offer lower interest rates and longer loan tenures.
- "For licensed money lenders, the borrowing limit ranges from S$3,000 up to six times your monthly income, subject to the borrower's income and across all moneylenders in Singapore. The total unsecured amount you can borrow from all banks combined is 12 times your monthly income. The latter gives you a greater amount of control."
- For licensed money lenders, the borrowing limit ranges from S$3,000 up to six times your monthly income. The borrowing limit from banks is 12 times your monthly income based on regulations from the Monetary Authority of Singapore which gives you a greater amount of control.
- For licensed money lenders, the borrowing limit ranges from S$3,000 up to six times your monthly income.
We’ve talked quite a bit about loans this past few weeks in the hope that it opens your mind to new possibilities. Deciding whether a loan is right for you is a personal decision and one you shouldn’t rush into. Always make sure you do your research and that the loan is right for your needs! Before taking out a loan always make sure that you have considered other alternatives. You should also only borrow what you need and are able to repay.
If you’re still on the lookout for a loan, consider the GXS FlexiLoan. We get that the loan process can be confusing and frustrating and that is why we designed our application process to be simple. The GXS FlexiLoan is also designed to empower our customers and you can choose your preferred tenure and repayment date. And yes, we hold a banking licence issued by the Monetary Authority of Singapore. Find out more here.
Now, go chase those dreams.
*Licensed moneylenders are regulated by the Registry of Moneylenders. You can find related laws and regulations as well as the list of licensed moneylenders here.
Psst! Here's something else you should know:
Link(s) in this article may bring you to a third party website(s), owned and operated by an independent party over which GXS Bank has no control ("3rd Party Website"). Any link you make to or from a 3rd Party Website will be at your own risk. Any use of a 3rd Party Website will be subject to and any information you provide will be governed by the terms of the 3rd Party Website, including those relating to confidentiality, data privacy and security.
