When thinking of taking a personal loan, make sure to direct it to where it will deliver the highest value for money. Always remember that it is advisable to start by checking for alternatives before taking out a personal loan to fund an activity or buying an asset.

Are you in need of urgent cash? Many people in Singapore have been looking for ways to raise funds for buying personal items or filling financial gaps because of the hard times caused by the COVID-19 pandemic that has persisted since 2020. One of the most preferred methods is using personal loans in Singapore because they come with low-interest rates and provide borrowers with a free hand on how to use the cash. However, this does not imply that you should not be prudent in how you use the funds.

Unlike home renovation loans or car loans, the freedom that comes with personal loans increases the chances of using the funds in areas that do not guarantee a good return on investments. This is one of the main risks that borrowers face, and you should avoid it at all costs. To help you out, here are the seven ways to avoid using personal loans for.

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Borrowing for Things You can Save For

Are you feeling it is time to go for your 30-day vacation in French Polynesia, but the pocket is dry because we are just getting out of the pandemic? Perhaps it is that latest car model that has just been released into the market that you want, yet the current one is still running okay. Do not go for a personal loan to fund these activities

One of the expert pieces of advice for borrowers is that it is a bad idea to go for a personal loan to satisfy your wants. The better route is developing financial discipline and saving money to fund your holiday or purchase the newer car model.

Think of it this way. You borrow $40,000 to spend on holiday in the Caribbean and enjoy every moment for one month, only to return home with a huge baggage of debt that will require the next couple of years to clear. If you can save and fund what you want, do not take a personal loan!

Funding Investments with Low Returns on Investments

There are different types of investments that you can direct your resources to, but it is essential to be smart. A savvy investor will not direct his/her investor to investments that have a very low return on investments. Think of the current stock market, where most stocks are on a downtrend and other companies bowing out because of the impacts of COVID-19. In such a situation, you should not target assets that might be tough to liquidate.

Even if the targeted investment appears to be okay, you need to think about the returns. For example, it will be a bad idea to buy property if its value is tumbling. The net effect will be a loss, which does not make any economic sense.

Funding a Lavish Lifestyle Beyond Your Means

Let us put it plainly here; there are so many things that we would want but are simply out of reach. If you have a home theatre and feel that another fancier model is the better option, but your cash is limited, it is advisable to avoid going for a personal loan.

When you take a loan to fund a lavish lifestyle beyond your means, whether it is business class travel or buying fleets of cars after seeing what top billionaires have, the truth is that you will be left with a heavy debt burden. This might also impact your credit score negatively and compromise your ability to access credit when in urgent need of cash.

The best thing is to live within your means. If you dig a little about some of the people who live lavish lives out there, most of them started the journey years ago and what you are seeing are fruits of their patience, hard work, and sacrifice. So, you should also be ready to grow your investment, and the results will be impressive.

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Home Renovations that Do Not Add Value to Your Investment

We know that people have special attachments to their homes, but you should not be blind when it comes to renovations. If the renovation does not add value to your home, do not take a personal loan to do it. Think of a repainting job, which is targeted at changing the theme of the home from the current yellow outlook to a golden appearance in line with your new status. If you do not have the cash to fund the renovation, avoid taking a personal loan.

When it comes to home renovation, especially in areas that do not add value but mean so much to you, it is advisable to think broadly. For example, instead of borrowing money to repaint the house, why not use wallpapers? What about investing in indoor plants or changing the lighting? The truth about home renovation is that there are many ways of achieving your goals, only if you take some moment to think about them.

Hey, you know what? You can even do some renovations as a personal home project. It will give you a stronger attachment to your home instead of bringing a contractor.

Investing in Stocks as a Beginner

You have probably heard of people who made a lot of money within a very short time trading stocks. However, that is only half of the story. The truth is that 80-90% of people who invest in stocks lose their money. Investing in stocks (or investing in cryptocurrencies) entails buying assets, especially shares of different companies, and expecting them to grow in value before selling at a profit. The risk comes from the fact that you do not know how the selected stock will perform. If you are a beginner, there is a bigger danger of losing your money.

Stocks respond to different activities on the market, such as competition, new technologies, and policies being made across the globe. These factors are too many, and you do not have control over them, implying that even with a good analysis of a certain stock, the price can still go against your prediction. This is why you should avoid taking a personal loan to invest in stocks as a beginner.

If you must use a personal loan to invest in stocks, we suggest that you begin by comprehensively studying how the market works. This way, you will have learned about the best risk-management strategies in the stock market, such as using stop-loss orders and selecting high potential stocks.

Adding Cash to Your Account to Sound Big

One of the major news that hit the headlines in April is the release of the list of top Billionaires, and Forbes captured them well, from Elon Musk to Zuckerberg and others. If you are one of those people who strongly feel that it is time to grow and edge closer to the millionaire or billionaire club, taking a personal loan to simply make your account look bigger will be a bad idea. Please, don’t do it.

The wealth of most of the richest people is spread in different areas, from the properties they own to shares in the most revered companies on the planet. Indeed, most of them, such as Bill Gates, have lived their lives growing their investments and investing in businesses that others would consider too risky. So, instead of borrowing money for your bank statement to look bigger, consider putting cash in investments with impressive returns. Then, start your journey to growing your account, and don't forget to diversify the investment portfolio.

When there is a Better Alternative

Before taking a personal loan, it is imperative to ask the big question; "Is there a better alternative?" In most situations, whether it is buying a car, house renovations, or funding higher education, you will discover that there is an alternative.

A home loan might be a great alternative for buying a home, car loans for purchasing a car and education loans when pursuing higher education. Some of these alternatives come with impressively low-interest rates and good conditions. Take the example of a student loan. If you qualify for the Ministry of Education Tuition Fee Loan in Singapore, which is open to students in public universities, no interest is accrued when you are studying. Again, you will only be required to start repaying the loan after graduating.

Only go for a personal loan when you do not qualify for these alternatives.

How to Borrow a Personal Loan in Singapore

The bulk of this post was dedicated to highlighting things that you should not use a personal loan for. However, we must indicate that a personal loan in Singapore is still one of the best options if you aim to use the funds well. For example, it will be an excellent idea to take a personal loan for consolidating high-interest loans.

Once you make up your mind on taking a personal loan, the large number of lenders in Singapore can make it a challenge to pick the best. However, there is a simpler way – using a lender comparison site, such as Lendela. All you need to do is to submit a short application (this should take no more than a few minutes). Thereafter, you will receive offers from lenders which allows you to compare your options and pick the best loan deal. This way, you can feel confident that you found the best financial institution in Singapore. It is that simple!

When thinking of taking a personal loan, make sure to direct it to where it will deliver the highest value for money. Always remember that it is advisable to start by checking for alternatives before taking out a personal loan to fund an activity or buying an asset.