What You Need to Know About Personal Loan Interest Rates in Singapore
Interest refers to the cost of using other people’s money. Whenever you borrow money, you will have to pay the interest. Meanwhile, when you lend money, you will earn interest.
Indeed, there are many ways to calculate interest. Some methods can be in favor of the lenders. The decision to pay the interest will depend on what you will get in return. Meanwhile, the decision to earn interest will depend on the options available when you are investing in money. In this article, you will learn of the many things about personal loan interest rates in Singapore:
Interest Rates on Personal Loans
Personal loans can be considered as a closed-end credit in which there are monthly payments over a predetermined period. For example, it can be settled for three to five years. The interest rates on personal loans can be expressed as a percentage of the principal. The rate quoted is known as the nominal annual percentage rate (APR). This refers to the rate applied to your loan every year. This includes the fees plus other costs. However, this does not include the costs related to compounding or the effect of inflation.
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The majority of the personal loans use the monthly periodic rate and it can be derived by dividing the APR by 12. When you apply it to the principal, the APR or the periodic rate will determine the additional amount that you will have to pay to borrow the principal and pay it in the end.
In sum, personal interest rates are the percentage of the amount you wish to borrow. The majority of personal loans are unsecured. This means it is not backed up by collateral or a recoverable asset. Furthermore, unsecured personal loans charge higher interest rates than secured loans.
The interest rates of the personal loan are calculated with three methods. These are simple, add-on, or compound. The simple interest method is the most commonly used by lending companies today. Finally, for a 24-month unsecured personal loan, the average annual percentage rate is 10.21%. You can check out this site for the lowest interest personal loan in Singapore.
Unsecured Loans versus Personal Loans
All loans are either unsecured or secured loans. The majority of the personal loans are unsecured, meaning, it is not backed up by an asset that the lender can take in case of default in the payment of the loan. An example can be the money you use when you go on a holiday vacation with your family. Unsecured loans are backed up by creditworthiness. It comes with a higher interest rate to reflect the additional risk that the lender takes.
Meanwhile, loans can also be secured and backed up by something of value. Collateral is the thing that you offer to assure the lender that you will repay the loan that you owe them. Secured loans have a lower interest rate since the lender takes less risk versus unsecured loans. You can check out this site for the lowest interest personal loan in Singapore.
Average Personal Loan Rate per Year
Over time, the average personal loan interest has fluctuated. Indeed, many factors will influence the average personal interest rate. This is also true for the interest rate on individual loans and the amount that the banks pay to borrow money. Other factors are the loan term and the purpose of the loan.
For a 24-month personal loan, the average personal loan interest rate in 2015 is 9.75%, 9.69% in 2016, 10.13% in 2017, 10.32% in 2018, 10.32% in 2019, and 9.63% in the first quarter of 2020.
Average Personal Loan Rate by Credit Score
Indeed, your credit score will play a big role in the amount that you will have to borrow. Your credit score is similar to the financial grade point average. It will include your borrowing and repayment history. The report on credit scores are numbers between 300 and 850.
Just like other types of loans, the higher the credit score, the less interest you will have to pay throughout the term of your personal loan.
The amount that you will pay for your personal loan will depend on your credit score. This is about 10% APR with the highest scores to over 20% of those with lower scores.
Because your credit score has a big effect on your interest rate, you might want to check out your credit score when you are searching for a personal loan. Checking your credit score is free. When you already know your credit score, begin shopping for personal loans. Compare the interest rates and select the loan terms suitable for you from different lenders.
Conclusion
In sum, there are many reasons why you should have a personal loan. You can use it to consolidate your credit card balances, fund emergencies, or use it for medical expenses. Indeed, it can be useful given the right circumstances. If you are not sure about the interest rates and fees included, be sure to consult an expert to help you weigh your options. Discover more about personal loan with EasyFind – instant loan in Singapore.