Personal Loan Vs. Credit Card in Singapore: What Would You Choose?
There comes a certain time in all of our lives when a Singaporean needs cash urgently. Some situations may emerge when you want more cash than what you have in your savings a/c. Moreover, you don’t have enough in your debit a/c to pay out instantly. In this situation, you can choose between a credit card and a personal loan option. But, you should be aware of how much it will cost you and find out better options that best suit your needs.
Why Would You Choose Options For Borrowing Money?
First, make sure what you are getting. Credit cards or cash advances may indeed be convenient, but they are exceedingly costly, and you need to have good fortune even for getting a small amount of loan in Singapore. Except for cash emergencies, we suggest you check out other reachable options, e.g., personal loan SG.
Personal Loan or Credit Card: Which One Better?
Most of the people of Singapore opt for Personal loans in need of cash flow management. Yes, sometimes people defame it, but it’s your responsibility to efficiently realise how to do cash flow management and make use of promotional interest rates for your benefit.
Singaporeans generally find a personal loan more affordable than a credit card for large purchases. The exception icon is also there. Saving regularly has the importance of paying cash in large purchases.
But your savings may not always be with you! Then a credit card will play a valuable role to help you out in financial emergencies or for a large purchase, like a car, dream vacation, or home interior decoration. So in these situations, our closest reach will be nothing but a credit card.
Here’s a detailed review of personal loans and credit cards and each option’s strengths and weaknesses.
What Are The Differences Between Personal Loans and Credit Cards?
Personal loans refer to a fixed type of loan which you have to repay in equivalent installments for a fixed and predefined period card is a preset borrowing credit that you can borrow any time, depending upon your credit limit.
Credit cards are often called revolving debt. You can utilise as you want as per your credit card’s credit limit and have to pay off your whole balance at the month-end. If you miss out, you will start to “carry a balance,” which means you will pay the interest for the debt. However, you can make new purchases.
The main drawback of credit cards is that you can continue your purchases beyond your credit limit, which can stick you in large debt. In the case of a personal loan, you are aware that you have to pay back your debt and the main pros of a personal loan are that they don’t allow you to borrow additional money without finishing a previous loan application.
Both Credit cards and personal loans are unsecured compared to a mortgage, which is protected by your deposited assets like real estate or car. Therefore if you refrain from paying a secured loan, the bank will have full authority to claim back your house or car. That’s why interest rates in personal loans are generally higher than that of secured loans like mortgages. In some cases, the annual percentage rate (APR) of personal loans is lower than that of a credit card.
When Credit cards perform Better Than Personal Loans?
Singaporeans can use Credit cards as they are better suited for purchases with smaller amounts or smaller debts, i.e., a few hundreds of dollars, which you can repay easily within a year.
If you ar going to purchase up to a few thousand dollars, you can pay it bit ack within a year or 18 months. To do this in the cheapest possible way, you need to apply for a credit card offering a 0% introductory Annual Percentage Rate (APR) on small purchases. If you are a good credit holder, you can enjoy a 0% APR credit card, which provides you with a loan without interest if you pay back the full amount of debt before the period ends.
When Personal loan Performs Better Than A Credit Card?
Personal loans are best known for bigger purchases when you need more than a year to pay off when you are not interested in overspending by a credit card’s unlimited credit facility.
If you try to borrow $5,000 and need more than a year to repay it, then opting for a personal loan is always better.
Most of the personal loan lenders can borrow a minimum amount of $1,000. In case you are a good credit holder, you have chances to borrow up to $100,000.
The main disadvantage of some personal loans is that it charges a one-time origination fee; which is 1-5% of the total loan amount. This huge amount has to pay in cash at the closing time. All the lenders on your loans do not take this fee, but first, make clear the fee amount and consider it when comparing the interest rates of different financial institutions.
To get the best personal loan, you must hold a good credit score, and the lender should mention their fees and rates without hiding any costs.
Which One To Choose?
Unlike credit cards, personal loans are the ultimate means to pay up your emergency fund if you can hold over a day or two. As personal loans offer low-interest rates against credit cards and predefined monthly installments, they are the obvious choice for financial emergencies than credit cards or cash advancements. If you want personal loans, go through the internet to check out the best personal loan providers in average costs in Singapore to make your process easy.
In The End
Before taking up a loan, search for various options available in the market, be it private money lenders or any other Govt. financial institution. Checking out carefully before signing any contract or knowing how much can I borrow from a money lender will keep you on the safe side.
For raising large amounts of cash quickly, such as for medical expenditure, Personal loans are the best way. Whatever your decision on taking up a credit card or personal loan, make sure to check out carefully the product specifications and acknowledge the reimbursement details depending on your loan amount and period.