When you apply for a personal loan, this can be taken out in order to consolidate other loans into a single one which is known as a debt consolidation loan where it involves the overdrafts, store card deficits, credit card, and overdrafts as well as payday loans which will be charged with a higher interest rate.
Consolidating all of these can give you a cheaper interest rate. Usually, personal loans have a shorter term than a mortgage has and instead of paying it for a decade or more, your monthly installment is usually spanning from a year to a maximum of five years.
There two types of personal loans that you have to learn, the secured and the unsecured loans. Check out a short explanation from the licensed moneylender for personal loans in Singapore.
A secured loan is usually backed with collateral or an asset that you can present to the lender if you decide to default your loan. This asset can either be a real estates property such as a house, a condominium unit or a vehicle. Usually, a secured loan has a lower interest rate and has better overall terms.
Unsecured loans meanwhile do not have collateral that the lender can get if you defaulted the loan, but the lender can recoup the money in a legal way because this type of loan is riskier than a secured loan that is why it has a higher interest rate.
Each type of loan has its own pros and cons that you have to be educated of so that you will not be having difficulties managing it in its entire duration.