When faced with a situation when you need more money right away, two things can come to mind. First is taking out a personal loan from a money lender Singapore. The other option is a credit-to-cash promotion, where you can convert your credit card’s credit limit into cash.
Both choices can give you the money you need quickly and easily. But loans are still the better choice, and here is why.
Lower interest rates and more predictable terms
In Singapore, personal loans charge interest rates of 3.5% to 7% annually. Credit to cash promos, on the other hand, are a lot more expensive. Their interest rates can go as high as 15% to 26% annually.
Even promo rates offered by some banks are only temporary. Once the promotion period ends, a higher interest rate may apply. This also makes budgeting more complicated, as you have to account for the changes in interest rates.
This is unlike a personal loan, which has a fixed rate. The interest rate you get when you sign the loan contract will remain until you pay off the loan.
Most importantly, personal loans have more well-defined repayment plans. This way, you can adjust your budget more easily and allocate a specific amount of your income to repaying your loan.
Higher loan amounts
With credit-to-cash promos, you are limited to whatever is left in your monthly credit card limit. This can vary depending on both your bank and how much you use your credit card. All the same, this limit may not give you enough funds for large expenses, like sudden hospitalisation or a major home repair.
Personal loans, on the other hand, can help you cover the amount you need. If your credit score is good, you can borrow an amount up to six times more than your monthly income.
3. Longer tenures
Personal loans have repayment periods ranging from 1 to 7 years, which can make the monthly repayments more manageable and affordable to you.
On the other hand, credit-to-cash promos usually have shorter tenures of 6 to 36 months only. This means higher monthly payments that can strain your budget.
4. Protect your credit score
Using credit to cash promos increases your credit utilisation ratio, which may upset your credit score. A lower credit score can make it harder to secure loans in the future, especially for major financial goals like buying a home.
Personal loans help you get extra funds without overreaching your credit card’s limit. And if you are consistent in your monthly repayments, it will not have a great negative impact on your credit score.
5. Transparency and cost savings
Many banks offer low introductory interest rates on credit-to-cash promos, but these are often short-term. Once the introductory period ends, you may face much higher interest charges.
Personal loans provide more transparent interest rates and repayment schemes. This way, you can avoid unexpected costs and plan your finances better.
Conclusion
In Singapore, personal loans offer lower interest rates, fixed payments, longer repayment terms, and higher borrowing limits, making them a more cost-effective option over credit-to-cash promos. Always compare loan options from different banks and assess your repayment ability before borrowing. A well-planned decision ensures financial security while meeting your needs.
