As the financial hub in Asia, Singapore’s brimming with loan products that its communities can access in times of financial need. However, it also promotes diverse repayment terms like an early repayment for a Singapore loan. It’s a plan for individuals who prefer to pay the loan in full before the agreed-upon tenure.
The payment strategy a borrower may proceed with varies extensively on their financial capacities. For instance, if you have a massive sum, you may use it to repay the loan earlier. Or you can also make an extra payment for every month.
People entangled in loan products are now considering making early repayments as well. Borrowers have discovered excellent advantages when paying the existing loan before its maturity.
This article will discuss the benefits of the early loan repayment plan. Additionally, you’ll learn some quick and accessible analyses of an early repayment’s total impact on your financial status.
Singapore Loan Early Repayment Advantages
Every person who borrows money from an accredited lender in the country has to go through the loan application process without fail or bias. As the loan procedure commences, the lender will provide a draft of the loan agreement. It’s your chance to read and understand the terms and conditions associated with the loan.
The standard repayment terms for a loan product are mostly in instalments, with either a fixed or variable interest rate. In many cases, borrowers pay the loan on time according to the agreed repayment schedule.
But as early loan repayment is also an acceptable reimbursement plan, these are the notable advantages accessible for you:
1. Lower Interest Rates
Every borrower desires a lower interest rate for the loan they recently approved. A lower interest rate means a lesser loan amount to repay.
Reduction in interest rate is possible when pursuing an early repayment Singapore loan plan instead. The principal amount diminishes when a borrower repays the loan earlier, resulting in lower interest charges. The lesser amount you owe, the lesser the interest you need to pay.
For instance, you acquired a $20,000 loan with an interest rate charge of 5%. The loan’s tenure is five years, with a designated monthly repayment of $377.42.
If you have $5,000 and opt to make a one-time payment using the amount, the interest charge declines. As a result, you can save $2,361.44 in interest payments throughout the loan’s tenure.
2. Shortened Singapore Loan Tenure
The loan tenure is the period a borrower must fulfil in repaying the loan. You can shorten the loan tenure by pursuing an early repayment Singapore loan. It’ll ultimately allow you to pay off the loans faster.
The result mainly involves saving a lot more money in interest charges. Of course, you’ll become debt-free much sooner too.
Let’s say a person obtained a $20,000 loan, and the interest rate charged for it is 5%. The tenure is for five years, with a $377.42 monthly payment.
3. Enhancing Cash Flow and Financial Flexibility
Money that mostly goes to the loan is set every month. Due to this arrangement, it’s likely you won’t have funds to spend on other finances unless the loan is paid in full.
But when you reimburse the loan earlier, you can free up your cash quickly. As a result, your extra money can now be distributed to other needs and financial obligations.
For instance, you currently have a high-interest-rate credit card debt. Opting to move forward with an early repayment in Singapore, now you have the extra means to pay the credit card balance and save more on interest charges.
Paying the loan presents you with the means to become financially flexible. So, now with the extra cash flow you have, you can invest it in new profitable assets. Or save it for rainy days.
It’s all up to you.
4. Improved Credit Score
Since the implementation of the credit score system in 2002 by the Credit Bureau Singapore, It’s become the main source and primary criteria when approving loan applications in the country. It’s because the purpose of the credit score system is to be the financial risk management tool that banks, financial institutions, and licensed moneylenders may use to assess the risks of credit extension to their borrowers.
Reimbursements late or missed, or the borrower defaults on the loan, will cause massive damage to one’s credit score.
Isn’t proceeding with an early loan reimbursement better than missing the repayment schedule and tarnishing your credit score?
By making early repayments, you demonstrate financial responsibility and discipline. Your actions positively impact your credit score, especially when you repay a Singapore loan early.
5. Avoiding Late Payment Penalties
Among the many terms and conditions of an accredited lender in Singapore, late payment penalties are included in this clause. If you, by any chance, paid the loan beyond the designated schedule, then you’d end up with such fines.
Banks impose an estimate of 1% to 3% per annum on the overdue amount. It’s subject to a minimum ranging from S$5 to a maximum of S$100. Licensed moneylenders in Singapore enforce a monthly 4% late interest rate on the overdue amount. It’s also subject to a maximum of $60.
Choosing to repay the debt earlier will help immensely diminish issues connected to late payment penalties. Furthermore, it also reduces your debt burden effectively.
6. Reduces Debt Burden
Although obtaining a loan is sometimes necessary, it can also take its toll. Debts can be a significant burden for anyone challenged with meeting their finances.
However, there’s a way to diminish the debt burden. It’s through repaying the loan earlier, which will free up your cash flow and reduce your overall monthly expenses.
As your debt burdens have been reduced, you can manage your finances better without worry.
7. Peace of Mind
Taking out a loan has become the “go-to” strategy involving plans, projects, and expenses. It’s excellent assistance in great financial need.
But, when the debts pile up, fees can disrupt someone’s peace and be filled with stress instead. To feel stressed is never healthy as it muddles up one’s concentration and can deteriorate a person’s overall health.
Early repayment in a Singapore loan is practical because the sooner the debt is repaid, the sooner you can quickly let go of financial stress. Thus, you can attain peace of mind and become healthier as you tread on to your other goals.
You can gain these valuable benefits when you repay the loan earlier than the designated tenure. However, it’s crucial to consider that not all loan providers in the country allow this particular payment plan. Where can you expect such a repayment option?
Lenders Offering Early Singapore Loan Repayment
Before you go ahead and pay your debt at an earlier date, first, you have to know if the loan provider you chose does offer it. In Singapore, the primary financial businesses people lean on in times of monetary trouble are banks, financial institutions, and licensed moneylenders.
Do all of these financing companies proffer an early loan repayment plan?
Banks
Banks are the traditional choices for taking out different loan products in Singapore. As you would know, these financial businesses are stringent in implementing their policies for their clients.
Yet, despite their sternness, banks may offer early repayment to Singapore borrowers, particularly on personal loans. The estimated prepayment fee is 3% and is subject to being pulled from the outstanding loan amount. But, some banks offer early repayments without fees too.
Licensed Moneylenders
Moneylending in Singapore has continued to thrive since its establishment in the early 1800s. Today, licensed moneylenders are regulated by the Ministry of Law with an intense commitment to complying with the Moneylenders Act and Rules.
Licensed moneylenders are notable for their flexible payment terms. The loan choices they provide are extensive, specifically personal loans. In truth, they proffer early loan repayment without needing prepayment fees.
Financial Institutions
Financial institutions in Singapore are mostly credit cooperatives and pawnshops. These are also recognised as reliable choices regarding obtaining different loan products that meet the financial needs of a borrower.
These financing businesses may offer the early loan repayment option to help you pay off your debt before the loan’s maturity. So, don’t hesitate to ask regarding the matter to acquire the answer you need.
But how do you ensure you get the chance to pay your debt earlier?
How to Get Singapore Loan Early Repayment
Even when businesses offering financial assistance could allow you to pay the loan earlier, it doesn’t mean you can do it whenever you like. It’s imperative to know the specific process before you apply or request it from the lender.
Here are some tips to consider to get early repayment Singapore loan:
Plan Your Finances
Understandably, you feel excited about paying your debt at an earlier time. It’s because the benefits to reap would have an incredible impact on your finances. Speaking of finances, make sure you have enough to commit to the early repayment option.
Repaying the debt earlier does require a hefty amount of money. Thus, it will still be considered an expense. Nonetheless, if you’ve assessed your finances and are sure you have ample funds available, then you should proceed with your plan.
Set aside a portion of your monthly income set explicitly for early Singapore loan repayment. This way, you handle the predicament effectively.
Review Your Singapore Loan Agreement
So, you have enough excess cash to pay your debt before the scheduled repayment terms. That’s completely fine until you have to check your loan agreement.
All borrowers must consider checking and reviewing their loan agreement before committing to the early repayment plan. Loan agreements comprise information and details associated with the loan you took. It explicitly stipulates the interest rates, charges, fees, repayment schedule and other essential information.
Here, you’ll also uncover whether the lender does offer early repayment with prepayment fees or lack thereof. It’ll give you a better scope of your obligations regarding your loan.
Communicate With Your Lender
Lenders do not solely approve your loan application. They can also guide you concerning your loan repayment options. It’s part of their obligation to ensure borrowers are assisted throughout every process necessary from the beginning to the loan’s maturity.
For situations like these, be open to communicating with your lender. Clarify whether they do proffer early repayment, inquire about the requirements, and proper process to become eligible for the repayment plan.
Communicating with your lender opens more opportunities to effectively discuss and negotiate your repayment choices. Contact your lender with questions or concerns to bridge the communication gap regarding your debt and repayments.
Singapore Loan Early Repayment is Essential
Monetary problems can cause stress and troublesome situations for a person. As a result, to resolve the predicament as quickly as possible, people take out different loan products.
It’s essential to analyse that loan products are meant to help an individual. It becomes a hassle when repayment challenges arise for different reasons or circumstances. It’s where a borrower should focus after acquiring the funds they need.
Early repayment for a Singapore loan is, without a doubt, a good option for dealing with late payment issues. So long as you have the extra funds to fulfil the repayment plan, it’s the repayment strategy you need. In no time, you’ll attain all the advantages that open better financing opportunities.
