Borrowing from a Moneylender: Factors to Consider When Planning
Loans from a licensed moneylender in Singapore may be valid for short-term needs but should not replace sound financial planning.
A well-thought-out decision about your situation, budgeting for it, and understanding your needs can turn what may be a potentially significant financial burden into a helpful tool.
Therefore, this post will discuss the factors to consider when borrowing from a moneylender.
Your Loan Repayment Capacity
One of the touchiest areas in borrowing, as far as financial planning is concerned, is your repayment capability. Although a Licensed Moneylender may consider extending a loan based on income level, it all comes down to how you determine your monthly repayment against budget. The best way to do it is to calculate your monthly income after deducting all necessary expenses.
Importantly, assess precisely how much you can realistically keep for loan repayment.
Unforeseen expenses
One of the main expenses that may affect your loan repayment capability is your medical bills, which are difficult to foresee. But, you have to plan for these expenses, too, to enable you to do a proper assessment of your repayment capability and avoid falling into any debt trap.
Cost of Borrowing
Lenders in Singapore charge higher interest rates than traditional banks. Therefore, you must consider the cost of your borrowing and make sure this will not overburden your finances. Also, please inquire about the administrative fees, late fines, and other charges that would add to your obligation.
Your Financial Goals
Before getting into any form of credit, you must have well-defined financial objectives. The definition of your objectives prescribes the nature and urgency of your financial needs.
Establish what it is that you intend to achieve with the money you are going to borrow. This may be a way of passing through unexpected expenses, financing your business venture, or even debt consolidation.
Analyse Your Current Financial Situation
Analyze your income, monthly expenditure, savings, and outstanding debts to estimate how much new debt you can afford. This will give you an idea of how much you can borrow comfortably and repay without disturbing your financial stability.
Repayment Terms and Frequency
You should find out the type of payback option associated with the loan. Consider key repayment aspects such as the number of installments payable, whether fixed or any facility for extra payments, frequency, etc. A pattern of repayment schedule suiting your income can reduce the possibilities of delinquency or costly penalties.
The Credentials and Conformity of the Lender
Valid lenders are licensed and operate within the law. You can go through reviews, ask around, and check on their license to make sure you are not falling into the hands of some unscrupulous operation. Importantly, a licensed moneylender will disclose all fees, due dates, and other contractual requirements.
Available Alternative Funding Sources
Consider all other possible sources of money, including bank loans, credit unions, and even peer-to-peer lending that might be cheaper. Weigh each against all the others based on interest rates, fees, and ease of approval, finding which option suits your situation best.
Legal and Contractual Obligations
Always read and understand each word of every contract before signing an agreement. Read the terms related to the event of default, penalties, or any clause that may impact your financial decisions in the future. If necessary, consulting a lawyer or a financial advisor helps you avoid later pitfalls.
Conclusion
By considering the above factors, you can make the right borrowing decision, guaranteeing financial stability, decreasing borrowing habits, and securing your future in Singapore.
Whether you borrow or not, there is a need for good habits that are affiliated with finance. With all this, now you are ready to make an appropriate decision and responsibly handle your money.
Lastly, at Credit Empire, we walk with our clients throughout their borrowing journey to ensure they consider all the appropriate factors and avoid financial pitfalls that may land them in debt.
