Bank loans are provided by banks and they are a type of secured loan that can be provided by banks to borrowers who have no access to other funding sources. Bank loans are typically given in different forms like term loans, overdraft loans, and lines of credit. The repayment terms for the bank loan differ based on the requirements of the lender. They can be either fixed or variable interest rates depending on the lending criteria established by the lenders. In case if you default on your loan then you will face foreclosure proceedings that may eventually result in selling your property at a loss or losing any non-secured assets.
Types of bank loan in Singapore
1. Secured loans
A secured loan is a bank loan in Singapore, which is generally given to borrowers who have no personal income or whose income source is not sufficient for the repayment term. The borrower must pledge the property, which he intends to buy, to the lender as a security against the loan. If the borrower fails to repay, then he will lose his home. This type of loan usually comes with higher interest rates than that unsecured loans.
2. Unsecured Loans
An unsecured loan is a bank loan in Singapore, which does not require securing any security against it and can be availed by individuals with decent credit reports or income flowing from other sources. The lender will charge a higher interest rate on this type of loan. These loans are given to individuals who want to purchase expensive assets irrespective of the repayment terms.
Advantages of bank loans in Singapore
1. Say you want to buy a car, but you do not have sufficient cash to pay for it with. The bank may offer you an overdraft facility for your car loan until the time you can afford to pay for the whole amount. This way, you don’t have to worry about paying up something before having secured it as a loan from your banker entails a guarantee from them.
2. Most banks offer flexible repayment plans for their clients. For example, you can opt for repayment terms depending on your salary and cash flow.
3. You can easily avail a loan even if you have a poor credit score. The bank will investigate your creditworthiness in greater detail to determine if they should lend you money or not based on the loan amount and interest rate.
4. You will not worry about collateral damage to your property during the term of the loan like when taking other loans like personal or housing loans because it is secured by your property in this case.
5. If you miss any payment, penalty charges may apply, but there is no risk of losing your property like in case of an unsecured loan.
In conclusion, bank loans in Singapore are a very good option to have. The interest rates are quite competitive and you can also choose your repayment term to suit your cash flow. Also, it is secured by your property which means you do not need to worry about repossessing your home or losing any of the collateral while seeking a loan.