First-Time Loan Taker? Read This.

Key Takeaways

• 1. Explore situations when taking on a loan could be a viable option to improve your cashflow.
• 2. Examine your intent when you are considering taking out a loan: What is the loan for? Can I repay it? Am I aware of all the terms?
• 3. There are two broad categories of loans, secured and unsecured. An example of a secured loan is a mortgage where if you default on loan repayments, the lender may seize your home. An unsecured loan generally may not be tied to an asset.

Growing up, you might have heard: Cash is King, debt is bad, and as far as possible we should try not to take a loan. Because of this narrative we’ve grown up with, taking on a loan can be intimidating for many first-time loan takers. Not to mention, understanding the types of loans available and the terms of repayment can be overwhelming.

This article provides an alternative perspective from what you might be familiar. Explore situations when taking on a loan could be a viable option to improve your cashflow. Additionally, you will learn the types of loans available and which ones might be more suitable for your financial needs.

Before You Proceed

Before we dive into the topic, let’s address the elephant in the room.

Getting into debt by spending beyond one’s means is never desirable. For example, buying frivolous items like luxury goods to keep up with the Joneses or impulse purchases. These can never be justified if you don’t have the money to finance these wants.

Examine your intent when you are considering taking out a loan. Some questions to ask yourself before taking a loan are:

• 1. What is the loan for? Is it for something frivolous or to fulfil an important life milestone?
• 2. Do I really need to borrow the money? Do I need the extra cash now, or could I instead practice delayed gratification by saving up for the purchase?
• 3. What is the loan amount needed? Can I afford to repay the monthly instalments with my current income?
• 4. Am I aware of the interest rate or any additional fees, including late fees, on the loan I am about to take? Can I afford it?

What is a Loan?

A loan, or a line of credit, is a financial instrument that allows you to borrow cash from the bank to finance either a planned or unplanned event. This is also known as the principal amount. Borrowers are charged an interest on the principal and must return the money within the stipulated period.

There are many factors which determine how much you can borrow and the interest at which a loan is given. Here are some of the following criteria:

1. A good credit score: A credit score, which is based on your credit history, informs the bank how likely you are to repay your loan. A good credit score may demonstrate your creditworthiness, can improve the likelihood of having your loan application approved. In contrast, a low credit score may result in being offered loans with higher interest rates.

2. Monthly Income: This ensures you can comfortably commit to the repayment schedule without defaulting.

3. The duration it will take for you to pay it back, whether it is a short-term or a long-term loan.

When to Take a Loan

There are instances whereby the additional cashflow from loans can come in handy. These can largely be divided into planned and unplanned events.

What Types of Loans are there?

There may be different types of loans but they fall into two broad categories of loans: unsecured and secured.

A secured loan is tied to an asset or a collateral. Examples of assets are stocks, bonds, and personal property like a home. Secured loans are typically taken for big ticket items like taking on a mortgage for a new home. Hence, if you default on a payment, the lender can seize the property used to secure the loan.

On the other hand, unsecured loans are not tied to any collateral. The loan is taken out on your credit card facility and is dependent on your credit limit. Credit limit is up to 4X your monthly income, and 8X of your monthly income (subject to bank’s approval).

Types of Unsecured Loans

There are different kinds of unsecured loans to suit your different needs. Here are the common examples of unsecured loans which Citi offers.

Loans to cover bigger expenses

Citi Quick Cash is Citibank’s personal loans product. Users will be able to apply for such a loan through Citibank Ready Credit. You may also convert the unutilised credit limit from your Citi Credit Card to cash in your Citi Deposit Account. Customers can choose repayment periods between 12 to 60 months. You may lower your monthly repayment by stretching your tenure to 60 months. Note that the monthly interest must still be paid.

Payment by instalments

In addition to Citi Quick Cash, there are other types of unsecured loans which allow for payment by instalment.

Citi PayLite allows customers to break down big purchases like a laptop into more affordable instalments of up to 36 months. Upfront service fee or monthly interest applies.

Citi FlexiBill allows customers to convert eligible card statement balances into instalments. With a minimum amount of S$200 taken up with Citi FlexiBill, the instalment tenure can stretch up to 36 months, allowing you to better manage your cashflow. Upfront service fee or monthly interest applies.

Citi FlexiBuy is available only at participating retailer’s Point Of Sales. Instalments can stretch up to 36 months. There are no processing fees.

Instalment Payment Plan is a loan available on an invite-only basis. Citi may send you an invitation to convert your transactions into more manageable instalments.

Loans that leverage on lower interest rates

Balance Transfer allows you to potentially shrink your interest payments towards your Citi Credit Card and/or Citibank Ready Credit and maximize your interest savings.

Citi Debt Consolidation allows you to transfer your outstanding balances from other banks into a single loan from Citi. This refinancing of your debt allows you to enjoy a lower interest rate for affordable monthly fixed repayments.

At Citi, we believe in helping you achieve your life goals without compromising your financial plans. Take the first step and learn more about the loans that Citibank Singapore offers to better help you with your cashflow.

Terms and Conditions

Please note that terms and conditions apply to the Citi loan programs featured above and all applications for loans are subject to the Citibank’s approval at its discretion. To view the respective terms and conditions, please visit the relevant links for each loan program.

Disclaimers

This article is for general information only and is not intended to be a forecast of future events nor a guarantee of future results and should not be relied upon as financial advice. All views and opinions are as of the date hereof, and are subject to change based on market and other conditions without notice. The article has no regard to the specific objectives, financial situation and particular needs of any specific person. It is neither an offer nor a solicitation to purchase, nor endorsement or recommendation of any products or services mentioned therein, and the products or services mentioned may or may not be offered by Citibank Singapore Limited, its related entities and their respective directors, agents and employees (together "Citigroup").

This article and its contents do not constitute the distribution of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such distribution, offer or solicitation is not authorised or to any person to whom it is unlawful to distribute such information or make any offer or solicitation.

Citigroup is under no duty to update this article and shall not be liable for any complaint, suit, action, claim, expense, loss or damages directly or indirectly arising out of or in connection with any person’s reliance on, or acting upon, or use of, any contents on this article. The article is subject to amendment without notice.