There gets to a point in life when you have to get external help in terms of finances to remain afloat. The external finances could be from friends, grants, borrowing from shylocks, and even getting a personal bank loan. Whichever way you look for that extra help, you will most likely have to return that money, albeit with some interest.
This guide looks at the different types of personal loans you can borrow. Luckily, comparison websites such as MoneySmart can help you identify the best loans in banks. The site can also help you compare credit cards, car insurance, health insurance, home insurance, educative insurance, and home loan, among many other things.
You can borrow a personal loan from a financial institution and repay it over a given period in agreed instalments. However, there are different things that the bank considers before lending you a personal loan. Nevertheless, it is safer and cheaper to secure a loan from a bank than get it from a moneylender.
What Is A Personal Loan?
A personal loan is a type of loan that is issued by a financial institution to an individual for their own personal use. It can be used to finance major purchases, consolidate debt, or cover unexpected expenses. The loan amount and repayment terms are determined by the borrower's creditworthiness and income level. It's a great way to get the cash you need for any of life’s unexpected expenses.
It can help you pay off those high-interest credit cards, or maybe even consolidate your debts into one easy monthly payment. But before getting one, it's important to understand the terms and conditions that come with them.
How Do Personal Loans Work?
When applying for a personal loan, lenders will look at your credit score to determine whether or not they're willing to give you money – so make sure yours is up to date! They'll also provide information on the interest rate and repayment terms associated with the loan. In general, loans have fixed interest rates that won't change over time and usually require regular payments over an extended period of time – often several years.
It's always best to compare different offers from multiple lenders when considering taking out a personal loan. That way, you can find the best deal for your needs and be confident in your decision when signing off on those papers.
Keep in mind though, some lenders may offer attractive deals but require additional fees or charges down the line which could end up costing more than expected. So do your research ahead of time and carefully read all documents related to the loan before committing yourself financially.
What Can I Use A Personal Loan For?
If you're considering taking out a personal loan, then you need to know what it can be used for! Personal loans are unsecured loans that typically have lower interest rates than credit cards.
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They're an excellent way of funding expenses without breaking the bank. They provide flexibility and convenience that other types of financing don't offer.
Personal loans can be used for a variety of purposes, such as:
- Consolidating debt
- Financing a home improvement project
- Paying for a wedding
- Paying for a vacation
- Or funding education expenses.
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Alternatives to personal loans
When it comes to alternatives to personal loans, many people feel stuck. It’s like being between two rocks and a hard place. On the one hand you don’t want to risk taking on more debt, but on the other hand you can really use some extra cash. Picture this: You need $2,000 for car repairs so you can get back and forth to work, but all your options seem to be pulling from different directions.
That's why exploring alternatives is important when considering personal loan choices. Depending on your needs and situation, some alternatives to personal loans include:
- Credit cards: Credit cards can be used to borrow money for short-term needs. The interest rate is usually higher than personal loans, but it can be a good option if you need funds quickly and don’t want to wait for a loan approval process.
- Home equity loan or line of credit: If you have equity in your home, you may be able to use it as collateral for a loan or line of credit. This type of loan typically offers lower interest rates than personal loans and credit cards, making it an attractive option for those with good credit scores.
- Peer-to-peer lending: This type of lending involves borrowing from individuals rather than banks or other financial institutions. It can offer competitive interest rates, but borrowers should be aware that they may need to provide additional security such as real estate or other assets in order to secure the loan.
- Retirement accounts: Some retirement accounts allow people to borrow against the value of their account without incurring taxes or penalties.
No matter what route you choose for finding quick access to money, make sure it fits within your overall budget plan and doesn’t create too much stress down the line as repayment plays out month after month. Weighing all your options carefully upfront is key in making sure there isn't any buyer's remorse later!
Applying for a personal loan
Have you ever wondered what it takes to get a personal loan? Applying for a personal loan can seem like an intimidating process, but if you know the basics and understand your options, it doesn't have to be! Here's how to apply for a personal loan:
When filling out the loan applications, read each question carefully and make sure you answer questions accurately and honestly. Be prepared with supporting documents such as recent pay stubs or bank statements. You may need to provide additional documentation depending on the lender so check before submitting your application.
You may also want to consider completing an online application instead of going in person – this could save time and energy! Here are five things to keep in mind when considering an online application:
- Check whether the lender will allow online applications
- Read through all terms and conditions thoroughly
- Have valid identification ready
- Provide accurate financial information
- Keep copies of all submitted documents
No matter what kind of application method you choose, make sure that you do your due diligence. Ask questions about fees associated with taking out a loan in order to avoid hidden costs down the line. Shop around until you find one that meets both your immediate needs and long term goals while providing peace of mind along the way!
How to Compare Personal Loans
comparing loans is an important step that shouldn't be overlooked. It's essential to shop around and find the right loan with the lowest rates and best repayment terms to fit your needs.
The first thing to consider when looking for a personal loan is whether you want a secured or unsecured option. A secured loan requires collateral—something of value such as a home, vehicle, or other item that can act as insurance should you fail to repay the debt. An unsecured loan doesn’t require any collateral but typically has higher interest rates than a secured loan would have.
Once you’ve determined what type of loan works best for you, start researching lenders online who offer competitive rates and flexible repayment terms. You don't want to get stuck paying too much over time due to high-interest fees.
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Types of Personal Loans
There are several different types of personal loans ranging from smaller loan amounts such as those used for debt consolidation or emergencies, all the way up to larger loans with more stringent requirements.
GoFlex Bank Personal Loan
This personal loan is given to new customers for WeLab Bank. The loan tenor for this bank begins at six months to around 60 months. Its annual percentage rate could be as low as 1.68%, excluding rebate and 1.27% when included. With the GoFlex bank personal loan, customers can enjoy an HKD 3,000 rebate after the loan drawdown.
The loan amount for this personal loan is up to HKD 1,000,000. It could also be 18x your monthly salary. If you decide to borrow HKD 500,000, you will pay a daily interest of $10. You do not have to provide an address or income proof for this loan to secure it.
For the HKD 700,000 loan with a 24 months repayment period, the borrower pays an APR of 1.27% or 1.68% with no rebate.
Standard Chartered Personal Instalment Loan
Customers are entitled to a cash rebate of around HK$8,000 if they apply for the loan before May 2022. Every new client will receive an extra HK$1,000 cash rebate and a 36 monthly loan tenor. The loan amount for this personal loan is 18x your salary or HK$2,000,000.
This personal loan does not have a handling fee, and its APR is as low as 1.18%. The personal instalment loan comes with a monthly flat rate of 0.053%. With this loan. You will be given a 7-day cooling-off period. The monthly instalment is HK$8,553.
Citibank Card Debt Consolidation Loans
You must be a new customer with no personal loan account by Citibank. To receive this loan, you have to submit your redemption before June 2022.
You can obtain various perks on this loan, such as supermarket vouchers or a soundbar. The loan has a low APR of 3.13% and a repayment term of around 72 months.
With this loan, there are no hidden terms and conditions that will crop up in the future. Everything is clear and upfront. The loan amount could be HK$1,200,000 or 21x your monthly salary.
Fubon Balance Transfer Personal Loan
With this personal transfer loan, you get an APR of about 5.15% for the 12-month tenor. Monthly payments for this loan amount to HK$8,634. The personal loan does not have a handling fee, and the cash amount could be ten times your monthly salary. You have up to 72 months to tenor the loan.
DBS Personal Instalment Loan
To secure this personal instalment loan, you must complete the “My Financial Profile” and submit your form. With this loan, there is a reward of around HK$10,300 for applying.
Its APR is relatively low as it stands at 1.56%. The monthly flat rate for this loan is 0.01%. Customers can redraw the repaid principal.
The loan amount for the DBS personal instalment loan is HK$2,000,000 or 20x your monthly salary. The loan does not have any handling fee, and the monthly instalment stands at HK$8,343.
However, beware that the rewards and perks are subject to the terms and conditions of the institution.
Bank loans are outstanding since they will boost you a great deal financially. Ensure you understand all the perks and terms and conditions for the personal loans in banks before borrowing. Assess whether you will efficiently pay back the loan in time and with ease.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.