Are you thinking of taking out a personal loan to cover basic expenses? You’re not alone. The rising inflation, higher interest rates, and increasing GST rates have a significant impact on many Singaporean’s budgets.
In fact, unsecured debt levels, such as credit card debts, education loans, and renovation loans, have increased from 24% in 2021, according to the survey done by OCBC. While taking out a loan will easily aid your financial troubles, it can still lead to an increased debt stress level.
Mismanaging debt can add emotional and financial stress. Here’s a step-by-step guide on what you should do after being granted a loan. Plus, we’ll provide a few tips to properly manage your debt.
Step 1: Verify the Principal Amount
As soon as you receive the loan proceeds, make sure that it is the right amount. The loan proceeds must be equal to the principal amount stated in the loan contract less than the processing fee. Even if you’re dealing with a licensed and credible money lender, the smart thing to do is count your money.
Note that licensed money lenders in Singapore are only allowed to deduct an upfront processing fee which is not more than 10% of the principal loan amount.
Step 2: Set Up a Repayment Plan
A personal loan or any type of loan is not “free” money. Your end goal should be to pay back the lender on time. This means keeping close track of your monthly repayments. Late payments can lead to hefty late fees and late interest. Worst, defaulting on a loan will significantly damage your credit rating which will make it harder for you to take out a new loan in the future.
Here are a few things to keep in mind:
- Make sure to take out a loan that you can comfortably afford
- Familiarize the scheduled monthly repayment amount, due dates, and terms of the loan
- Take note of the interest rate
- Set a reminder on your phone or physical calendar.
- Another option is to set up automatic payments so you’ll never have to miss a payment schedule.
Step 3: Obtain Receipts
Every time you make payments towards the loan, make sure to ask for a signed receipt. The receipt must be correct and must include these details:
- Your name
- Amount paid
- Payment date
- Outstanding balance
That said, be mindful and observant when repaying your loan. As a client, you have the right to ask for a signed receipt as a form of acknowledgment that the licensed moneylender received the repayment amount. Most importantly, keep all receipts as part of your documentation.
Step 4: Review Statement of Accounts
A loan statement of account is basically a summary that details all the repayments paid towards the loan as well as the remaining balance. The statement of account shows the opening and end date of the loan tenure, the interest rate, the outstanding balance, and more.
Licensed money lenders in Singapore are obligated to provide you with a statement of account for all your loans. Make sure that you get these statements at least once every January and July. It is crucial to check the accuracy of the details, including your name, repayment amounts, outstanding balance, and date.
In case you find any error, immediately reach out to your legal money lender online, by phone, or in-person to clarify or correct any detail.
Step 5: Monitor Your Loan Balance
Avoid the debt trap by practicing smart payment habits. Aside from prioritizing high-interest loans and choosing automatic payments to pay your loans, you must never forget to monitor your loan balance.
Put all the statements of accounts, payment receipts, and other forms of documentation in a safe drawer that is easily accessible. Proper documentation of all your loan payments will help protect you from any potential mishaps related to your loan.
Tips To Properly Manage Debt
Emergencies and unexpected expenses can happen at any time that can damage your financial health. Taking out a personal loan can alleviate your financial concerns. However, you need to make timely repayments to avoid further financial distress. So how do you properly manage debt?
1. Communicate with your lender
Licensed money lenders in Singapore can provide you with tailored loan plans that will suit your unique financial situation. So before you agree to the terms of a loan, make sure that you can comfortably afford the monthly repayments and interest rate.
But what if you can’t pay?
Reach out to your lender. Licensed money lenders are willing to make adjustments to your loan terms so you can keep up with your payments. It’s best to renegotiate the terms for a longer tenure and more affordable monthly repayments than default on your loan.
2. Use the Loan Responsibly
As a general rule, use the loan according to its purpose. If you’re taking out a renovation loan, then use it for home improvement projects. However, a personal loan does not have such restrictions as it can be used for almost anything. This doesn’t mean you can take out a personal loan recklessly.
A personal loan is a smart choice when you need urgent cash for emergencies, such as medical bills, mounting utility bills, and unexpected home repairs. Avoid using a personal loan for:
- Shopping splurges that you can save for.
- Financing a lifestyle that is beyond your means, such as eating at high-end restaurants, gym memberships, etc.
- If there are alternative financing options available. For instance, if you need a loan for your startup business, consider government business grants before taking out a loan.
3. Maintain Good Financial Habits
The way to manage debt and eliminate it completely is to practice smart financial habits. Taking out a loan is not inherently bad – car loans can help you achieve your dream of owning a vehicle or a personal loan can help tide over financial gaps. However, it must be taken conscientiously and responsibly.
Here are a few tips for maintaining financial habits:
- Take stock of all your loan accounts by listing all your outstanding balances and interest rates.
- Check your credit report. Not only will you have an idea of your credit score but also keep track of any existing debt. Don’t forget to check for errors and inaccuracies.
- Consider consolidating high-interest loans. Debt consolidation involves paying off high-interest debt by taking out a personal loan with a much more affordable interest rate.
Most lenders can offer lower interest rates compared to credit cards, so consider consolidating your credit card balances.
- Take control of your spending habits. Are there any monthly expenditures you can do without, such as unused subscriptions?
- Keep track of all your monthly payments and add them to your monthly budget. If you can’t afford the monthly payments, you may need to reach out to your lender to negotiate new terms.
1. Do You Have To Accept a Loan Offer?
You don’t have to accept any loan offer, especially when you have not yet done due diligence. More importantly, you are not obligated to accept a loan offer even when your personal loan is already approved. So take your time comparing different loan packages from other lenders to find the best terms.
2. Can You Return a Loan if You Don’t Use It?
While you are allowed to cancel a loan before signing the loan agreement, there is no way to give the loan amount back once it has been deposited into your designated bank account. The best option is to pay back the loan in full before the maturity date.
3. How Long Does It Take To Get Money After a Loan Is Approved?
Licensed money lenders in Singapore can approve loans as fast as 30 minutes from application. If the borrower can provide all the necessary documents and has agreed to all the terms, the loan proceeds will be released within the same day.
4. What Does It Mean When a Loan Is Approved?
Loan approval means you are qualified to borrow from a lender or financial institution. The legal lender will need to set the terms and conditions of the loan and put them in writing. Then, you’ll have to agree to all the loan terms before the principal amount can be disbursed.
After being granted a loan, make sure to keep track of how you spent the loan proceeds. Avoid splurging your borrowed cash on unnecessary or unplanned expenditures. Most importantly, make sure to repay the loan on time to avoid hefty late fees and late interest rate.
- As soon as the loan is disbursed, check the total amount you received. Make sure that it coincides with your principal amount less the processing fee.
- Licensed money lenders can only charge a processing fee not exceeding 10% of the principal amount.
- Manage your debt by creating a budget and diligently following the monthly repayment schedule to avoid missed payments.
- A licensed money lender can provide quick cash loans at an attractive interest rate, perfect for emergency expenses.
Get out of sticky financial situations with the right loan. Loan Advisor gives you the most up-to-date information from the top licensed moneylenders at the tip of your fingers for quick and easy comparison. Request up to three loan quotes today – no obligation to apply!