Things to consider when applying for loans in Singapore

1. Your borrowing cost. i.e. the interest rate that you are paying for your loans.
A smart business man will take out a loan only if he thinks that he can fully utilize his loan to generate profit higher than the interest cost. e.g. his profit = 30%, his loan interest = 10%. Thus his net profit would be the 20% different he gained.


2. Do you have a good credit history.
Obviously, a person with good credit history will always able to get loan easier than a person with a bad credit history, because in the bank's perspective, a person with good credit history is has proven to be more likely to repay his loans.
There is this thing tagged onto everybody called credit bureau rating where one's number, type of loans and repayment history are being recorded. If you have not been repaying promptly, you will be black listed in the financial market, thus making you harder to get loan in the future.
Therefore, the next time your credit card bills come, make sure you repay on time to prevent getting blacklisted.

3. Know exactly what you are paying for.
Usually, there are processing fees or an annual fee that comes along with the loans provided by the banks. If you are to take up any loans, make sure that you are well aware of the money you are paying as it all adds up into your cost.

4. Is the interest rate going to stay throughout your loan tenor ?
Sometimes, there are certain type of loans which has their interest rate tagged to the market performance, having the interest rate going up or down depends on the economy. In addition, there are also loans which have their interest rate revised over a pre-agreed period of time. e.g. quarterly basis.

5. What is the loan tenor that you are comfortable with?
How many years you are going to commit yourself into the loan is a question that you have to really ask yourself. Shorter tenor usually comes with a cheaper interest rate as in the bank's perspective, the longer it takes you to repay your loan, the riskier the bank will be, thus charging you higher interest rate. However, shorter tenor also means that you will repay greater amount monthly and whether you overload yourself with a monthly repayment beyond your financial capabilities really depends on your own discretion.

6. What is the monthly payment you need to pay?
usually, your banker would tell you how much you are going to pay monthly depending on the tenor years you choose and the interest rate his bank is giving. Thus, make sure you explore the different tenor years to explore the differences in monthly payment before you consider taking up the loans.

7. The bank's reputation
We all know that different banks play out their competitive edge on different market segment or focus. For example, the local banks may be more interested on retail banking catering the needs for individual while the foreign banks are usually more interested to deal with business. Some banks may be known to provide better customer services, lowest interest rate or process loans faster than other banks. There, the word of wisdom is always to know who you are dealing with so to ensure you are receiving the best deals and the best services for yourself.

8. Do you need a term loan or an business overdraft.
Term loan means that you are paying a monthly installment based on your loan amount till you full repaid your loan according to the agreed loan tenor. Overdraft on the other hand is a credit facility which the bank will put aside for you, known to be your overdraft limit. Aside from probably the initial process fees or any annual fees, you are being charged only when you decide to utilize your limit. Overdraft facility works well for business who want to have ready credit as a form of insurance of your business when you are running low on your working capital due to money tied down else where or when bidding for projects, wanted to project an image where the company is financially well-equipped.

9. Do you or your company owned property?
If you are able to mortgage your property to the bank when you apply for your loan, usually you will be able to get a much lower rate than you trying to borrow without any collateral/assets for the banks.

Hope the above tips will aid you when you considering taking up bank loan in the future.
From the management of Your Boss Advisors.