Taking a loan – When is enough?

Written by Cheryl Tay on . Posted in Cheryl Tay Blog | Blog Post of Cheryl Tay

Borrowing money is one thing, while the other thing is how much you want to borrow.


Many people often ask about how much they can borrow when enquiring about personal loan facilities.


The answer is pretty straightforward – It depends on your cash flow and ability to service the intended loan.


According to the Singapore’s Moneylenders’ Act, a borrower may loan up to four times their monthly salary if their annual income exceeds S$30,000 per annum.


Of course, that is the maximum amount but if it is not necessary, then just borrow what you really need.


Moneylenders are strictly short term solutions that come at a price (sometimes beyond monetary).


If you need to take a loan, try to raise the amount needed from family members, friends then banks.


Only when all possible avenues have been exhausted, then borrow the difference from authorised moneylenders. This will help to minimise the cost of your liabilities.


Over-borrowing has been witnessed quite frequently, to the extent of spiral loan taking where new loans are taken up to service existing loans, sending the borrower deeper into debt.


This is unhealthy, as it means reducing your future income before you even earn it, with each loan that is taken.


It is always wise to plan your cash flow carefully before taking up a loan and make sure you identify that the loan is a need and not a want.


Essentially, know your limits and know when to stop borrowing.


If you really do need to take a personal loan and have done careful calculations on the return plan, Credit Hub Capital is one example of a licensed moneylender.

personalloansHere are some factors to consider before you borrow money:


1. Think twice before applying for a loan

Taking a PayDay or Personal Loan is a heavy responsibility. Borrow only when you absolutely need to and consider carefully before taking any PayDay or Personal Loan in Singapore.


2. Make sure you borrow within your means and are able to service the repayment instalments

Before committing to a loan, take into consideration the other payment obligations you have, such as housing or car instalments. Make a list of all your expenses and decide if you are able to repay this new loan. This is extremely important regardless of whether you are applying for a PayDay or Personal Loan. This list will serve as an indication of your financial ability to meet your obligations.


3. Pay your loan instalments on time to avoid late penalty and interest charges

Fast cash loans can be granted whenever you need it but you are also required to pay your monthly instalments promptly to avoid late penalty and interest charges. Always keep track of your repayment dates. A GIRO plan is recommended to ensure that payment is made on time.


4. Ensure you clearly understand the terms and conditions of your PayDay or Personal Loan

Please read carefully and understand all the terms and conditions stated on the PayDay or Personal Loan documents before signing them. Do not hesitate to ask all the questions you want to clear all queries before committing.


5. Read the fee schedule and charges on your loan contract carefully

The fee schedule and charges show you all the applicable fees and charges that you will incur upon taking a PayDay or Personal Loan. Check that all terms and conditions are correct before you sign on the line.


6. Avoid multiple sources of loan

This will make it easier for you to manage and track what you have borrowed, as well as allows you to exercise better control over the sources of your loan. Having too many loans may lead to confusion and stress, or may even cause you to overstretch your financial commitment.

Cheryl Tay

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Singapore’s only female full-time motoring and motorsports photojournalist. Independent automotive consultant and prominent local motorsports personality Cheryl Tay is uniquely passionate about all things cars and motorsports. She also has a strong passion to share her interest and knowledge, hence having a dream to become the ‘Oprah Winfrey of cars and motorsports’ and create a multimedia platform for her sharing. - A female in a male-dominated world, Cheryl Tay is Singapore’s only female full-time motoring journalist and motorsports blogger and she regularly writes for prominent titles in Singapore, Asia and internationally. (See full list of titles that Cheryl Tay writes for here.)

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