Sometimes an individual may have a need that requires one to take a personal loan. One may require purchasing an asset or undertaking a project which requires a substantial amount of money. In such cases, a personal loan will come in handy. It is a loan that helps you sort out personal goals and targets.
However just as every loan, there are risks that come along with it. It is important to understand these risks and how to deal with them. A debt on your back is not a pleasant thing as it means it is an additional financial burden waiting for you to fulfill. A loan from any financial institution comes with a lot of terms and conditions that must be met. It also requires that you pay up the agreed amount at the agreed date each month. Failing to do this attracts charges and penalties. If you fail to meet the repayment agreement you risk your assets being auction off, and it also gives you a bad credit history.
The other risk of personal loan is over borrowing. This can lead to one spending money in ways that are not plan for and without diligence. The excess loan places an extra burden on you. Furthermore, this can affect your quality of life and your future financial plans.
Inability to repay
The other risk of a personal loan is the inability to repay the loan to money lenders. This can result in loss of job or income if they were to inform your employer. This will then present a challenge in repaying the loan. This is because the ability to repay a loan is link to one’s job and the income. Unless one has assets to sell to offset the loan or one gets another income soon, the loan charges will increase and may result in a very big amount of the loan debt. If one is completely unable to pay, one’s assets may be auction off by the debt collectors.
Another risk with unsecured personal loan is that the interest rate on the loan is higher because they tend to be unsecured. As a result, one may end up repaying a higher amount back. The interest rate in many cases may go higher if the interest rate is changed and this can be a challenge. Additionally, there may be other charges with taking a personal loan that one may not notice upfront when taking the loan.
Therefore, while making the decision to take a personal loan it is important that one considers carefully and bears in mind all the risks associated with the personal loan.
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DO NOT borrow from loan sharks as it can spiral out of control. If you need cash, approach a bank or alternatively, a licensed moneylender. You can look through our moneylender directory and moneylender review on money lenders in Singapore and find one that you think may be suitable for your needs. If you have taken a loan from any moneylenders before, kindly leave a review here for them!