Secured Vs Unsecured Loan in Singapore: Which One to Choose?

Secured Vs Unsecured Loan in Singapore: Which One to Choose?

The role of banks and Pte Ltd companies in loans and financing has never been more crucial to our society. At times of great financial turmoil, it is essential that families and businesses acquire loans that will help them get by. People who apply for loans must make sure that they read the fine print of their contracts.

Singaporeans must ensure that banks help them instead of causing more troubles and problems. One popular topic of interest among Singaporeans is “secured loan Singapore.” Singaporeans want to know the different types of loans and what type of loan fits them.

What is a Secured and Unsecured Loan?

If you are thinking about a personal loan Singapore, you first have to know the difference between secured and unsecured loans. Do remember that each type of loan has its own advantages and disadvantages. You have to pay attention to their differences in order to know which best fits your financial needs.

First, let us talk about secured loans. The first thing you have to remember about secured loans is that collateral is required by the lender. Collateral may be your assets which are ready to be converted into cash. This serves as an assurance to the lender that you will pay your loan. One advantage of secured loans is that they have low-interest rates. This means that the lender will charge you with a smaller amount of interest rate compared to an unsecured loan with the same amount of loan.

Also, the lender can give you a higher loan amount. In secured loans, lenders are much secured that they can get back the money they lent to someone. Thus, they can lend people a higher amount. Another advantage of secured loans is that they provide a longer loan term. This means that the debtor is given more time to pay for their debts. Secured loans give people ample time to pay back the money they owe.

With the collateral of your loan in secured loans, the lender will have minimal risk. They are given an assurance that you are capable of paying back the money you borrowed. In a worst-case scenario, lenders can take your assets in exchange for the money you borrowed. Given all these layers of security in their part, they can give you low interest rates, higher loan amount and longer loan term.

Meanwhile, one disadvantage of secured loans is the possibility that you could lose the asset you used as your loan collateral. In case of refusal or failure to pay, the lender will take your asset. This could mean losing valuable assets that you have strived to earn in the past years. Secured loans are for people who are certain that they can pay back the money they borrowed.

The second type of loan is the unsecured loan. Here, you do not need to present collateral. Often times, lenders depend on your credit rate alone. This means that there is no risk in your part of losing an asset. You can still apply for a loan without worrying that you could lose your home or your car.

In the part of the lenders, an unsecured loan poses them a greater risk. To minimize this, they can only lend people a minimal amount which must be paid in a short period of time.

The downside is that you will have a higher interest rate compared to secured loans. The higher interest rates serve as an assurance to the lender that they will be able to recover in case you fail to pay back your loan. For many, a high-interest rate could pose many problems in their finances.

Also, in order to lessen the risk in the part of the lender, they will only provide you with a lower loan amount. This is also a way for them to ensure that you are capable of paying back the money you borrowed. Another disadvantage is a shorter loan term. This means that you are required to pay the loan in a relatively short amount of time compared to secured loans. Here, people are forced to work hard just to beat the deadline of paying their loans.

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Examples of Secured and Unsecured Loan

If you have not made up your mind between secured and unsecured loans, here are examples of these two types of loans.

As mentioned above, you have to pledge an asset when applying for a secured loan. Some of the assets accepted by lenders include car, home, stocks, bonds, and many more. Many people apply secured loans for their car loans or home loans. A car loan can be expensive for many people living in Singapore. For car loans, people choose secured loans. In purchases where you need a lot of money, a secured loan is better.

On the other hand, people applying unsecured loan would often use their loans to finance their vacation, debt consolidation, home renovation, wedding, or small business. Here, an unsecured loan is sufficient because they need a relatively small amount of money. Unsecured loans fit individuals who may not have enough assets and who are not confident of their credit score just yet.

Just remember that we have different financial situations. Choosing between secured vs unsecured loans is about knowing which type of loans fit our needs.

Picking the correct one

Tips Before Getting a Loan

Before deciding whether to apply for a secured or unsecured loan, you first have to think about a lot of things. The first thing you need to think about is the amount of money you need to borrow. As mentioned, for big purchases, you have to opt secured loan because lenders only give a high loan amount if you can provide them collateral. If you plan to apply for a car loan, research first about the price of a car you are planning to buy.

Second, research about the availability of the loan you are looking for. Look for the loan policies set by banks near you. Also, you might want to look at the loans offered by Pte Ltd companies that you trust. The policies of the lender often vary depending on the financial and economic conditions of a given time. At times when the country is facing economic issues and problems, lenders would want to minimize risk and would only allow a secured loan.

Third, you have to know your credit history. Study your credit rating or credit score just to make sure that you truly are ready to apply for a bank loan for personal use. You must know your credit rate not only for applying for secured loans or unsecured loans but for your financial decisions in the future. Bad credit score? check out our guide on how to improve your credit score.

Lenders take loan agreements seriously. At times when you fail to pay your loan at a given time, lenders can legally take your assets. If you have had problems in the past of paying your credit, it is not suggested that you apply for a secured loan. Taking a secured loan with a bad credit history can potentially make you lose everything that you have worked for.

Lastly, it is important to make sure that you are capable of paying your loan. Whatever personal loans in Singapore you choose, you have to ensure that you are capable of paying them. Never apply for a loan that you cannot pay. You have to make sure that your needs correspond to your financial capabilities.

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How to Find the Best Loan in Singapore

There are many personal loans banks in Singapore to choose from. Also, there are Pte Ltd companies that offer good deals for those who wish to apply for loans. Given all these financial offerings and loan options, it is no doubt that people in Singapore are overwhelmed by the information about these types of loans. It can be difficult for them to identify the best type of loan for their given situation.

After learning the differences between secured vs unsecured loans, you might still be confused about which type of loan fits your needs. If you are still having trouble in choosing between secured loans or unsecured loans, better consult professionals. Check out Loan Advisor website because we have a lot of resources to guide you when it comes to applying for loans. Loan advisor can help you not only with your difficulties in applying for loans but also your other financial needs.

Conclusion

It is no doubt that personal finances can be challenging in Singapore during these times. Loans are essential especially for people who do not have sufficient budget to purchase new assets or buy their basic needs. Loans, when done properly, are beneficial not only to individuals but to the growth of the entire economy in Singapore. When people are given enough financial opportunity for their needs, they can contribute better to the society.

Loan Advisor and other financial institutions in the country provide loan offerings for Singaporeans. Surely, it is not difficult to look for lenders who are willing to lend you money. The bigger problem lies with the challenge of identifying which type of loan fits your financial situation. Be sure that the type of loan you choose is suited to our needs and budget. It is best to research and find the best loan option by checking loan comparison sites.

You have to weigh your options in order to make sure that you are not causing more problems with your financial status. Hopefully, reading this article shed some light in your many questions regarding secured and unsecured loans and at the end of the day, you will be able to apply for the best type of loan that will help you achieve your financial goals in life.

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