How to Know If You are Ready for a Loan
Singapore is one of the fastest-growing economies in Asia. As a result, many licensed and experienced moneylenders are seeing more borrowers who want to finance their house, car, small business, and other possible assets. A loan, no matter how big or small, is a significant responsibility. If you are thinking of getting a loan, here are some signs you are ready:
1. You have no existing debt
Have you finished paying off your existing loan for your house or car? Do you have no outstanding balance on your credit card? If so, then you may be ready for a new loan. With no existing debt on your back, you will have more cash to pay for a new loan, and lenders will be more willing to let you borrow.
2. You have a good credit score
Once you’ve finally built your credit score to qualify for a better interest rate, you’re much more ready to take on a new loan. If you get a loan while having a low credit score, your repayments will be much higher than if you’d spent more time building your credit.
3. You have a steady income
The longer you’ve had your current job, the more stable your income will be in the eyes of a money lender. Before you even consider applying for a loan, think about the stability of your current job or business.
4. You have enough money your savings and emergency funds
Do you have enough money in your savings and emergency fund to cover your expenses in case something unexpected happens? Having no extra money for emergencies can lead you to spend your budget for your monthly expenses, and even money that you set aside to pay off your loan. That’s the best way to fall behind on your payments and get penalties on top of your debts.
5. You have a solid plan for your loan
Whether you are using the loan to buy a car or start a small business, you have to have a solid plan for the money you are borrowing. Otherwise, you may end up spending the money on things that you don’t need.
6. You are responsible with money
We learn how to be financially responsible at varying points in our life. Some of us may be already smart with money at 16, while others may still be struggling to keep their finances in check at 30. If you know how to manage your money well, that’s a good sign that you are ready to take on a loan.
7. You can still afford to live comfortably
Don’t take out a loan if you are going to have to sacrifice other essential expenses in your house for it. Consider the repayments into your monthly budget and see if you can still afford your basic needs as well as other costs that will keep your family happy (e.g., weekend activities, after-school lessons, vacations, etc.).
Taking out a loan is a big responsibility and in Singapore, having extra funds can open up more opportunities for you. If the answer is ‘yes’ to all the things mentioned above, then you are ready to get a loan.