If you have a good credit score and a decent income, it’s easy to go to a money lender Singapore and apply for a loan. The hard part is paying it back, though. It only seems easy in the beginning. Once financial challenges come, repaying the loan will also become a challenge itself.
A good question to ask is, “Will I be overcommitting myself financially for this loan?” To help you answer this question, here are four things to consider. Think about these before deciding to take out a loan.
Borrowing more than you can pay back
A rule of thumb here is to only borrow what you need. Avoid borrowing more just because you qualify for it.
For example, you had a sudden medical bill that totaled S$2,500, and you can afford to pay S$1,000 out of pocket. With that, you only need to take out a loan for S$1,500 to cover the remaining bill. Even if you qualify for a total loan amount of S$2,000 or S$3,000, borrow only S$1,500 – exactly what you need.
This way, you can avoid unnecessary stress when paying back your loan. Also, you will avoid the extra cost of interest on the money you borrowed that’s beyond the amount you need.
Assuming your future income will cover the repayments
If you take out a particularly large loan thinking that a salary raise, a bonus, or projected profits from a business venture can take care of the repayments, you’re making a huge mistake.
That money has not come in yet, so what assurance do you have that it will come? What if someone else gets promoted and not you? What if your boss does not approve the raise? What if the business flops and doesn’t make as much profit?
Or what if the money does come in but you need it for an emergency? Again, you are not 100% sure you’ll get that money. So don’t bet on those things for loan repayment.
Not reading the terms and conditions
Every loan has a contract, so read it thoroughly before signing. There may be some terms in the fine print that you don’t agree with. Or you may find something that you want to negotiate with your lender, like the repayment period or amount to repay each month.
Be diligent in reading through the loan contract, and ask questions when anything is unclear. Most importantly, know that you have the right to refuse the loan if you find anything in the contract that raises alarms in your head. You can walk away and find another lender that offers more reasonable terms.
Taking out loans for non-essential expenses
Loans should be reserved for essential, urgent expenses like hospital bills or costly home repairs. It’s best not to take out loans for leisure purposes like travel abroad.
While leisure is good for your mental health, it’s certainly not good for your financial health if you have to get into debt for it. In the long run, the stress of repaying the loan will also affect your mental health a lot. Ultimately, this practise will defeat the purpose of your travel abroad – once you get back to Singapore, you’ll end up much more stressed and anxious than when you left for that holiday.
Conclusion
Getting out a loan is just a significant financial responsibility. With that, you need to make sure you have the capability to pay it back. If not, you are setting yourself up for a lot of stress and anxiety. In the worst case, you could end up ruining yourself financially. With that, you should be wise and think carefully before taking out a loan.
