Personal loans are convenient and quick solutions for bridging financial gaps. Though many of us think that meeting the eligibility criteria and getting the loan approved is the toughest part, the real challenge lies in utilising the loan responsibly after accessing it. Many people have suffered financial instability due to mismanagement or irresponsible use of their personal loan s . Therefore, it is crucial that you carefully monitor your repayments and adhere to a strict budgeting practice to meet the ultimate objective of repaying the loan in time.
How Personal Loans Work
Personal loans provide you with a specific amount of money you must repay within a predetermined timeframe. The monthly repayments are usually structured to include both interest charges and the repayment of the loan’s principal amount.
5 Tips to Manage Your Personal Loan in Singapore
Here are five tips that will help you manage your personal loan effectively:
Create a budget and adhere to it
Staying mindful while planning your expenses and finances after taking a personal loan is always advisable. The best way to do so is to create a budget with a comprehensive overview of your income and expenses. By setting spending limits and saving goals, you can repay your debts in a shorter period of time.
Understand the terms and conditions of your personal loan
A comprehensive understanding of the terms and conditions of your personal loan is essential. It also advised to have a fair idea about the interest rate, repayment schedule, due dates, and any potential penalties or fees associated with the loan. This knowledge can help you avoid missed payments, monitor your repayments, know your outstanding balance, and create an early repayment plan if feasible.
Pay the instalments by the due date
You should always pay your instalments by the due date, as missed payments will affect your credit score negatively and incur potential penalties that could increase your debt. An effective way to avoid such a situation is to set up standing instructions for direct debit with your bank. The automatic payments will ensure that your instalments are paid on time with minimal or no chances of a missed payment.
Only utilise the loan for essential needs
Personal loans should only be used to fulfil essential financial needs like medical emergencies, home renovation and wedding expenses. Before taking up a personal loan, make sure to check whether it is absolutely necessary to do so. If the expense is a ‘want’ and not a need’ required in the immediate future, you probably should not take up a personal loan for it.
Avoid using personal loans to repay existing loan instalments
Avoid taking up a personal loan to pay for your existing loans. Doing so may result in more debt since you will need to pay the interest on both loans, increasing your borrowing costs and compromising your financial stability.
Conclusion
Personal loans are a valuable tool for meeting your financial needs, but they must be utilised responsibly. To avoid falling into spiralling debt, you must exercise financial discipline, establish a sensible budget, and make sure to make timely repayments. You should also compare the terms of various personal loans before making a decision.
Disclaimer
The content reflects the view of the article’s author and does not necessarily reflect the views of Citi or its employees. Please read the products and offers on the Citi Singapore website for accuracy or completeness of the information presented in the article.
Contact Information
Sonakshi Murze
Manager
sonakshi.murze@iquanti.com