Interest Rates and Personal loans

Finance

There is always this requirement of a personal loan from at the lowest interest rates, from the private lenders. Interest rates may not vary much from one private lender to another, but the truth is there would be a small difference, with a few offering better rates than the other. It is possible to source these personal loans from such lenders in Singapore. There is little doubt that you must have browsed such interest rates, and would have got confused, which is better. For this exercise, you need to know what the types of interest are. Here is that information;

1.Advertised interest rate:

This rate is a synonym to the nominal Interest rate. This method of calculation is simple. If you have taken a loan from the lender, and they charge 5% per annum, that percentage is the expense portion. Advertised rate does not throw light on the bifurcation between various costs. In other words, this is the original cost to the lender. This rate is the interest rate the lender is willing to offer. The rate is published in a big way, to lure clients.

  1. Effective Interest rate:

This rate is the ‘Real “rate. You pay interest to secure the loan from the personal money lenders in Singapore. Al the charges, including the processing fee, are cumulated and added to the loan amount. This is divided by the tenor, for which you are borrowing, arriving at your monthly installment. This rate should be displayed next to the Advertised Interest rate, and it is mandatory to do so.

  1. Loans at zero Percent:

One should not be misled by banks in Singapore, lending at zero per cent personal loans. Yes, they do not charge any interest, but they charge a hefty processing fee, which would be deducted from your loan amount and credited to your account. These personal loans are only short term based, and the charges collected upfront would buoy up while calculating Internal rate of Return.

  1. Personal loans for foreigners in Singapore:

Banks in Singapore, generally avoid personal loans to foreigners, unless they are earning a minimum of $3000.00 per month. This is not the same yardstick for the citizens of the country. Therefore, foreigners have to turn to Private money lenders, who would be willing to take the risk. The borrower has to take certain precautions too. He should borrow only from the licensed money lenders, whose name and details would be available in the registry, maintained in the registrar of money lenders. The advantage is that the private money lenders are monitored by the Ministry of Law, and they need to mention the effective /nominal interest rates they are lending at, in its reports to the Ministry. The borrower is protected that way, from any unlawful deals by the licensed money lender. It is advisable to borrow a small amount from such lenders because the interest per annum would be as high as 48 %.

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