Understanding Different Types of Personal Loans



There is a variety of personal loans out in the market. This can complicate the process of deciding which type of loan is suitable for an individual borrower. Readers who would like to have a better understanding of their options on types of bank loans in Singapore can read on to find an introduction to the different types of personal loans that are available to them.


Term Loans

One of the most common types of personal loan is known as a term loan. Term Loans allow consumers to get access to quick cash and pay it back with a predetermined amount of interest over a preset period of time which is defined as a loan term or loan tenure. Many term loans are offered by banks, but other financial institutions also offer such loan options for consumers looking to get access to quick cash that they can pay off over a period of predefined timeframe.

Once consumers received their money, they can spend it accordingly based on their needs. Most often, personal loan purpose includes medical bills, car repairs, holiday, or vacation expenses. As long as borrowers pay off their monthly instalment (which comprise of principal and interest) on time, there are no additional fees and charges.


Personal Lines of Credit

Personal line of credit is similar to credit cards. They have predefined credit limits and require borrowers to pay interest on the amount the borrower draw down, similar to term loan. There are few important differences between credit cards and personal line of credit.

Borrowers do not have to pay additional fees to withdraw cash from their personal line of credit. Credit lines are perfect for short-term loans, as interest rates tend to be low and consumers can draw down on a need basis without having to worry about paying additional fees.

Consumers find that if they are eligible for opening personal line of credit, they will likely be eligible for term loans as well. Some banks and other lenders offer credit lines to consumers with an annual income as low as $20,000. This solution is great for entrepreneurs who are likely to require repeated access to small amounts of cash.



Secured Overdraft

This type of secured personal loan differs from personal line of credit in a few ways. It requires collateral, so the amount of money that can be borrowed will depend on the worth of the assets consumers pledge to their banks to secure their loans. A variety of different forms of collateral, including fixed and structured deposit bank accounts, unit trusts, and insurance plans are accepted by most banks.


Debt Consolidation Loans

These specialized loans are for consumers that are trying to get their debt under control. They allow borrowers to consolidate their loans so that they can manage repayments with less hassle. Plus, they also tend to be of lower interest rates than other types of personal loans.


Education Loans

Students often find themselves struggling to pay their university bills and maintaining an adequate standard of living while they are pursuing an education. Since most students don't have the kind of annual income required to take out other types of personal loans, education loans allow them to apply with a guarantor such as an immediate family member. Guarantors must have an annual income of $30,000 or higher.

Most education loans need only be repaid once the student has graduated. At this point, students can start making manageable monthly repayments once they have jobs and are already on their feet financially.



Alternatives to Bank Loans

Readers who are wondering, "but why do people take bank loans?" should realize that banks are just the most obvious place to go for loans. Bank loans aren't the best option for every consumer, as they often have strict requirements regarding who they will approve for loans.

So, what are some alternatives to bank loans in Singapore? That's a good question. The best bet for readers who either can't or don't want to take out loans from banks is to find an independent lender. Just make sure to borrow from a company like Credit Culture that prioritizes customer service, speed, and transparency.