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Many people who are looking to get a personal loan can find themselves in a predicament when it comes to their credit report. This is due to how many loans you have applied for will show up on your credit report. The lender who offers you the loan has every right to show up on your credit report. In most cases, it will be in one of two places: on your credit report, and the loan itself.
For two people standing on different ladder steps, their perspectives are not the same. If there is someone in need to borrow money, there is another to lend it. For the two people moving money, the borrower and the lender, their perspectives are also not the same. The borrower looks at the money to pay for certain expenses, and the lender looks at the money as an investment recurring from interest gained. Thus, it is only fair to discuss both perspectives hand in hand.
What’s important to know is that even if the credit report shows the credit that you have received on your credit report is a loan, it should be changed as soon as possible. Once this information gets posted, it is permanent. It can’t be removed. To correct this issue, you have to be willing to find out how to dispute the loan. How do you dispute a loan? Read on to find out!
What about a personal loan if I’m a foreigner in Singapore?
In Singapore is not that difficult to find a personal loan for foreigner. This is probably because most banks and financial institutions have an extensive set of loans available for foreign citizens in Singapore. Some banks and financial institutions even offer money transfers to foreigners to pay their bills and other debts in Singapore.
This article will briefly define a personal loan, with the advantages and disadvantages attached to the borrower and lender.
What does a Personal Loan mean?
A personal loan is borrowing money from a party or lending money to someone. To be paid or collected in a fixed installment, with a specific interest rate. This interest rate can vary depending on the borrower’s credit score.
For the borrower, that money is used to pay various expenses, such as a mortgage, or even for a car. For the lender, it is an investment to retain the value of the money. Instead of leaving it in the account, the interest will keep the value afloat.
Advantages of Personal Loans
For the borrower, the main advantage of a personal loan is fixed payment, with a fixed interest rate. Another advantage is the time available to repay the loan, it can be from 3 to 5 years. A high credit score is not required. Also, collateral is not needed if the payments are on time. Besides, the interest rate will decrease if the loan is paid early.
Subsequently, for the lender, the main advantage is the interest collected especially that it is a fixed interest, and therefore suitable if the lender needs specified installments at a specific time to pay for something.
Disadvantages of Personal Loans
In comparison, for the borrower, the same advantage of fixed interest can also be a disadvantage. Through the period of payments, the interest rates may drop, but it is kept the same for this account. Lack of sufficient funds or other debts can hinder the regular payment of the loan. This can lead to a lower credit score, and the borrower is at risk of being sued by the lender.
The disadvantage of the fixed interest for the borrower is also a disadvantage for the lender but in reverse. The rates could increase; thus it is an opportunity cost for the lender.
How is a Credit Report Formulated
Credit Report is a financial profile that shows all the credit accounts, with the loaning and debt history. It is how much a person borrowed, how much they owe to other parties, and how much they own.
The report is divided into four parts:
- Personal information of the person.
- Credit accounts
- Inquiry information
- Bankruptcies and collection information
Credit Report: Lender’s Perspective
After years of spending, it is a good idea to sit down, apply got a Credit Report (Which is available for free once every 12 months). A thorough review of the credit accounts 2 to 3 months before taking a loan will help to forecast the financial position and strength. Knowing what is owned and owed is a vital part of needing a loan. Maybe some expenses can be cut down, specifically from credit cards. And the borrower may find that he or she does not need a high loan, if not altogether. It helps identify all accounts, and ensure that all information is correct. This protects the borrower from identity theft and fraud. This type of inquiry is considered a ‘Soft Inquiry.’
Credit Report: Borrower’s Perspective
Before giving out the money, a lender should ask for the borrower’s credit report. The report shows the name, address, and ID number in the Personal Information section. As well as the type of credit accounts whether it is a loan or a credit card. It shows how much he or she owes, previous bankruptcies, and collection accounts, required by another party. The type of inquiry is considered a ‘Hard Inquiry.’
In both inquiries, the report contains a list of all previous account inquiries, which are other parties who reviewed the report. In both the lender’s and borrower’s case, the final decision is aided with a credit score-a mathematical computation of the report’s data.
Credit Score Ranges
The score ranges from 300 to 850, and the average score for Americans is between 600 and 750. An abysmal score ranges from 300 to 579. The borrower probably did not pay on time or is at a collection amount case. The lender should be cautious and review the report very carefully. A fair to a perfect score is from 580 to 799, the lender should decide according to the data provided. Finally, an outstanding rating is from 800 to 850. (source: Experian) .
You may also like: 5 Ways To Plan Personal Finances Better According To Lyle Advisors
Conclusion
Does a personal loan appear on a credit report? Yes, it does. The credit report contains all the information about the borrower, and that includes any personal loans. A lender will look at the credit report to decide whether to lend his or her money or not. The fine line is to pay the debts on time and aim for a good credit score.
