Nowadays, it’s all too common to face a financial emergency that needs your immediate attention. When people don’t have cash on hand, they usually rely on loans. But what if you do not have the best credit score? In this situation, you can turn to a secured loan in Singapore.
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Unsecured vs. Secured Loan Singapore
A bank that offers an unsecured loan will base its approval decision on your credit score and income.
Since there’s more risk involved for the lender, it generally means that an unsecured loan tends to have higher interest rates than secured loans. Of course, there is an upside too. Since you don’t have to put up any assets as security, then there’s less risk for you as the borrower.
A secured loan Singapore, in contrast, is backed by some form of collateral such as your HDB flat. Keep in mind that the lender has the security of your asset so they’re generally willing to offer improved terms.
Advantages Of Secured Loan In Singapore
Higher Loan Amount
With this type of loan, borrowers can enjoy a higher amount of money compared to an unsecured loan. This is because the lender has the protection of your collateral. This is very helpful if you need to finance an expensive purchase.
Lower Interest Rates
Secured loans in Singapore also tend to come with lower interest rates than unsecured loans since the collateral will lessen the risk for the loan provider.
Good For Those With Poor Credit
A bad credit score will not stop you from getting approved for an unsecured loan because the providers will be more focused on the value of the collateral instead of your creditworthiness.
Read also: Guide To Getting A Personal Loan In Singapore With Bad Credit
Flexible Repayment Options
You may be able to choose a longer loan tenure which can reduce your monthly instalments. Plus some banks also allow for early repayment without penalty fees which is a great plus.
Improves Credit Score
Believe it or not, having a secured loan in Singapore and making your payments on time can help to improve your credit score. Why? When you show your ability to responsibly manage debt, banks will see you as a trustworthy borrower so you can also open up more financial opportunities down the line.
Disadvantages Of Secured Loan In Singapore
Risk Of Losing Collateral
Of course, the biggest downside of a secured loan in Singapore is the risk of losing your collateral if you’re unable to make the repayments. This can be devastating so borrowers like you must be absolutely certain to keep up with the loan payments.
Higher Stakes
There is no way to sugarcoat it. You’re putting your assets on the line with a secured loan Singapore. Considering this, you have to be extremely diligent about making your payments on time all the time. After all, defaulting could result in you losing something as important as your home and nobody wants that to happen.
More Paperwork
While a secured loan Singapore may give you better rates, it’s not a great option if you need fast cash because the bank or licensed moneylender needs to verify your ownership of the collateral and assess its value.
Not Suitable For Everyone
Not everyone has a property which means secured loans Singapore aren’t a good fit for those who do not have a house or a car to pledge as collateral.
Potential Damage To Credit Score
Making on time repayments on a secured loan can increase your credit score but the opposite also rings true: defaulting on the loan can have the opposite effect. If this happens, then a secured loan Singapore will make it so hard to access financing in the future.
So What If You Can’t Pay Your Secured Loan Singapore?
The harsh reality is that for thousands of people, there may come a time when they cannot pay back their secured loan because of other priorities. So what should you do if you find yourself in a situation like this?
Do not be afraid and do not panic. You can still save your assets by having an honest conversation with your lender.
At the end of the day, loan providers want to help you. Most banks a are willing to work with borrowers who are facing genuine hardship. This is done by restructuring the loan terms to make it manageable. A loan provider may even grant you a temporary break. However, you must be proactive and reach out as soon as you can. Do not wait until you’ve already missed several payments.
If you and your lender can’t come to an agreement, which may realistically happen, it may be worth seeking the guidance of a professional to review your entire financial situation. You may even apply for a debt consolidation plan just so you can get back on track.
The worst-case scenario is that you’re unable to resolve the issue, and the lender has no choice but to seize your collateral. It is an outcome that no one wants.
We Can Help
Taking out a secured loan Singapore is a major financial decision. It needs your consideration so make sure you think about it and consider everything that you need to think of. The last thing you want is to be in a financial bind and lose your prized asset too. Evaluating is really the secret here, which means do not rush the process. If you don’t have a solid plan of paying back the loan, just don’t apply for one.
LenderSG knows that securing a loan is hard. To help make this more stress-free for you, our loan matching platform can connect you with a reliable loan provider that will give you the best terms.