Month: May 2017

Understanding several methods of money lending

When people borrow money, they have their own different reasons and we make sure that we borrow from the lowest interest personal loan singapore. From purchasing expensive needs, education needs, paying mortgages or just for fulfilling one’s daily needs like bills and groceries. The amount of borrowed money can also varied, from just a few hundreds to many thousands of dollars. Different needs of money borrowers have instituted several methods of money lending. Three of the most common methods of borrowing money are loans, overdrafts, and credit. But how should each one them be used for getting proper and effective money lending? Here are some short explanations on how they work:



Loans consist of four major types; secured, unsecured, and Credit Union loans.

  • Secured loans. With secured loans, the borrower should surrender security to the lender prior to borrowing money. The security may be in the form of assets or other valuables. When the borrower fails to keep up with the payments, the lender has the right to force the sale of the secured assets or seizure the assets as has been written in the loan agreement. As this method is less risky than an unsecured loan, secured loans are commonly cheaper in terms of interest. This kind of money borrowing is mostly suitable for borrowing huge amounts of money over a long term, for instance for home improvements.
  • Unsecured loans. This kind of loan does not require you to surrender any security, hence giving greater risk to a lender. Due to that reason, unsecured loans commonly have higher interest rates, shorter repayment terms, and more stern rules. Penalties may occur if you fail to repay after the maturity period or even if you attempt to repay the loan before the maturity.
  • Credit Union loans. This method of loan is typically regulated by financial organizations. The loan is provided by and to the members of the organization. Commonly, members of the Union share similarity so that they can bond into an organization. The similarities may include workplace, housing territory, membership in a certain association, and so forth.


With overdrafts, you usually need a bank account in processing it. This borrowing method allows you to borrow money up to certain limit when your account has no money in it. This is surely an advantage for overcoming short-term cash flow problems. This money borrowing method is flexible as you can repay the debt when it suits you. However, overdrafts are better used for short-term loans with small amounts of money, as the interest rates of overdrafts are generally high.


One of the most sought after method to borrow money is by purchasing on credit. Using a credit card or other credit arrangement, you can pay for goods or services in instalments. With credit payment, you can get better protection for larger purchases, acquire instant gratification, simplify travel plans and build a solid credit record. However, this method also has some issues such as irresponsible spending, interest payments, credit score issues and penalty risks.