Campus Articles || DBS & *SCAPE || DBS & *SCAPE Financial Literacy # 2
When borrowing money from banks, consider shopping around for the best rates and repayment plans. Most banks will help you determine the amount you are eligible to borrow based on your monthly income and financial assets. Usually, unless you’ve got a full-time job, you will need a guarantor for your loan. Students are not eligible for most loans unless an immediate family member becomes their guarantor.
Basically, there are 4 types of loans:
Further Study Loan
Further study loans cover fees for students pursuing a tertiary education either locally or overseas.
Most banks have a list of approved institutions, and students must be accepted into a programme before the loan can be disbursed. These lists are extremely comprehensive, and can usually be obtained from the banks’ websites.
Some banks, like DBS, feature partnership programmes with local universities, and students of these institutions can obtain preferential interest rates. Also, look out for programmes that allow students who perform well academically to reduce their interest rates by 0.5%.
Automotive loans are meant for the purchase of new and used vehicles.
Before taking out such a loan, you need to consider the peripheral costs that accompany the purchase of a vehicle. These include road tax, insurance fees, parking charges, maintenance and servicing, petrol, and the all-important Certificate of Entitlement, which must accompany all automobile purchases in Singapore.
Personal loans is usually used to help you manage your cash flow, for instance, if you need to make big-ticket purchases, start a business, or if you need cash for emergencies.
Most personal loans can be used in 2 ways:
Line of credit: you just pay the interest on whatever you use and for how long you use it for. Interest rates range from 10-18% per annum, and it’s useful if you are confident that you can repay it in a short term, say, in 1 to 3 months.
Instalment loans: you pay back a fixed amount every month, as it is meant for long term borrowing of around 12 to 60 months.
Property loans go towards funding the purchase of a new home. However, as home loans are long-term expenses, evaluate your monthly costs carefully before committing to one. As a general guide, your monthly long-term repayment commitment should not exceed 40% of your monthly income.
While you have options on repayment tenure, buying a home is a long term commitment. You should consider your repayment ability carefully before taking a property loan.