Take a moment to find out what personal loans are, and learn what to do if and when you need them.
Never take a personal loan for home renovation though. Banks offer specialised loans, like a loan for home renovation or an education loan, that often have lower interest rates or requirements than personal loans.You can borrow anywhere from two-six times your monthly income up to a maximum of $200,000. The exact amount you can borrow often depends on your credit record, and other existing credit facilities.
A revolving loan is sometimes called a personal line of credit. Like a credit card, you can use it anytime, anywhere up to your credit limit. Each month, you only need to make the minimum payment of 2.5 per cent or $50, whichever is higher. However, because of the high level of flexibility, the interest rate for revolving loans can be three-five times as high as the interest rate for term loans.Say you want to borrow $5,000.
However, if you take six months to make full payment, your total interest is almost $500. And if you take a whole year before you make full payment, your total interest will be almost $1,000!With such high interest rates, revolving loans should only be used as an absolute last resort, like in an emergency where you can’t use a credit card and you know you can make the repayment as soon as possible. You should definitely not be looking at long-term repayment for a revolving loan.
The Effective Interest Rate is the more important one of the two, and a good bank will be upfront about what it includes. The DBS Personal Loan, for example, includes a 1per cent processing fee in the EIR.