- December 8, 2022
- Updated 11:33 am
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All You Need To Know About Line Of Credit (LOC) In Singapore
In Singapore, a Line Of Credit (LOC) refers to a pre-agreed-upon borrowing limit that can be used as and when needed. It provides quick credit and is typically provided by banks or other reputable money lenders in Singapore. The credit is generally available without review for a set period, assuming the borrower meets all of their obligations. There are various types of LOC, including:
- A Personal Credit Line
- A Home Equity Line of Credit
- Business Credit Line
How Does a LOC Function?
A LOC, regardless of its purpose, is a set amount of money that is available when needed. It can be repaid and used again if necessary. The lender will detail the loan criteria, such as the term, interest rates, and the amount of credit available. They can be secured against a piece of collateral, such as a house or another asset. They can also be unsecured, which is usually more expensive.
The Advantages of a LOC
Because a LOC differs from a traditional loan, they are an extremely appealing form of fast credit in Singapore. If you use reputable money lenders in Singapore, you will benefit from the following:
The flexibility that a LOC provides is arguably its main advantage. A certain amount will be made available to the individual or business at any time. When the borrower’s cash flow improves, they can borrow more and repay when their cash flow improves further. The fact that repayments are flexible rather than fixed is a huge advantage.
A LOC allows you to better manage your cash flow during times of high expenditure and/or unstable income. You see, the credit amount allocated in personal loans and balance transfers is fixed per application. If you need more credit, you’ll need to submit another application and keep track of two separate loans. You can repay your LOC on your terms, and there are no early repayment penalties if you pay it off quickly (unlike personal loans).
Increased Credit Limits
Reliable Singapore money lenders are often willing to extend more credit with a LOC rather than with a traditional loan. Borrowers will naturally feel more at ease if they can get more money when they need it.
Once the amount has been agreed upon, funds are usually available in a short period of time, if not immediately. The immediate availability of funds can provide borrowers with peace of mind and a much-needed safety net if bills must be paid or an unexpected expense arises.
Because the funds can be repaid and borrowed as needed, interest is only payable on the outstanding balance. It is something that can significantly lower costs for many businesses that do not frequently need to use their LOC. It is a significant advantage when comparing a standard loan to a line of credit.
A LOC offers lower interest rates than credit cards, in which credit cards typically charge around 28 percent per year whereas LOC interest rates stand at around 20 percent per year. While LOC interest rates aren’t as low as some personal loans or balance transfers, they do provide greater repayment flexibility, which some users (for example, business owners) may value more. However, keep in mind that you can always reduce your LOC interest rate by converting your debt into a personal loan.
LOC is a versatile tool for the financially savvy as it can be used for a variety of purposes if used correctly. Its flexible repayment options, zero interest fees for the first three months, and no processing fees make it an excellent choice for supplementing your cash flow when needed. This could be a powerful and useful financial product for those who are comfortable and adept at managing their own finances.