Many people find themselves lacking the resources needed to pay for some of life’s biggest expenses immediately, such as buying a house, a wedding, hospital bills, a business idea, or other unexpected expenses.
However, financial credit can limit ways to afford all these financial goals.If you have a low credit score, you may feel trapped in a never-ending cycle of financial worry. However, personal loans offer a way out. Personal loans can be of great help in these situations while helping in improving credit scores of its consumers.
What is a personal loan?
Banks, credit unions, and online lenders can provide you with a personal loan for a specific amount of money to be utilized for a variety of purposes. For example, you may apply for a personal loan to consolidate debt, pay for your dream wedding or finance the overseas vacation trip you’ve long earned.
Borrowed funds, generally with interest, must be paid over the agreed payment terms. A personal loan, unlike a secured loan, does not require collateral. Your income, credit score, and other financial criteria all play a role in determining your credibility in the eyes of lenders.
Why use a personal loan?
Quick access to funds
Many lenders offer personal loans with fast approval, such as Cash Mart Singapore with an approval period as fast as 30 minutes. If you are in need of a quick cash grab especially with unexpected expenses, a personal loan is the right type for you.
Lower interest rates
Personal loans are recognized to have one of the lowest interest rates compared to credit card bills and other loans available, demonstrating that it is a cost-effective option to borrow money.
Because personal loans do not require collateral, they are a more flexible borrowing choice for many people. Debt consolidation, home improvements, emergency medical bills can be covered using this type of loan.
Fixed repayment terms
The payment terms for personal loans are clear-cut. You are aware of how much you pay monthly including the interest and for how long, therefore it is easier to budget and pay for.
If you make your payments on time, getting a personal loan might help you steadily improve your credit score. As a result, being authorized for other loans could become simpler in the future.
Importance of getting a good credit score in Singapore
According to a report by the Monetary Authority of Singapore (MAS), better credit scores improve their chances of obtaining credit from banks and other lending institutions. Because they have a better credit track record, lenders will identify the creditors more trustworthy and will be more willing to offer them better loan options.
MAS also points out that those with strong credit can acquire loans with cheaper interest rates and bigger credit limits than those with bad credit.
Unlocking the Secret to a Higher Credit Score
While it may appear counterintuitive, strategically utilizing a personal loan can be a useful strategy for increasing your credit score. Here are some of the ways personal loans can help you obtain good credit:
- They can help you diversify your credit portfolio. Diversifying your credit portfolio means spreading your credit exposure across multiple sources of credit. This is important because it can help reduce the risk of default and mitigate the impact of any one source of credit performing poorly. Personal loans can also be utilized to add to your credit mix. Greater credit mix shows the lenders that you are able to manage different types of credit responsibly.
- Your credit utilization ratio will improve if you take out these loans and use them to pay off high-interest credit card bills. Debt consolidation is one of the ways you may utilize personal loans. For example, you’re paying for two credit card bills. You may opt to pay for your bills with a lower interest rate by getting a personal loan. This helps with your credit utilization ratio since it is determined by your credit card balances.
- Personal loans can be made without collateral so you can apply for one to help you have a better payment history record. If you make all your payments on time and in full, a personal loan can help you establish a positive payment history, which can develop your credit score over time.
Ready to see real progress in your credit score? Call Cash Mart and apply for a personal loan to take the first step towards a brighter financial future.