For most people in Singapore, micro loan necessarily connote cheap finance. How can they not get cheaper finance when they have offered lien on home to loan provider? Loan providers however devise ways to overcharge borrowers who are not much conversant with the ways of the financial market. Interest is generally charged on the higher side, and borrowers also have to shell a larger sum as fees for the services of the lender.
So, does the concept of cheap micro loan not exist in Singapore? Micro home loans do exist, but not as a rule. Micro loans have to be supplemented with sufficient efforts on the part of the borrower to make them possible. Though borrowers may not rest at any stage of the life of the loan and keep an eye on every cost that is added to the loan, efforts will have to be primarily made during the planning and decision making stage. The fate of cheap micro loan is largely dependant on the work done during these two stages.
Every borrower need not be well informed about the rules and regulations of the financial market. The advice gained from external sources will be as much helpful as ones personal knowledge or experience. Among external sources, independent financial advisors are the most revered. Independent financial advisors are bound by Financial Services Authority rules to offer genuine expert advice. Because of the professional and independent advice that they offer, it will be difficult to discount their importance.
Micro loan can be offered against the equity in one. Equity is the approximate value that a house will fetch if sold. For a more appropriate valuation of equity, all mortgages and loans secured against home are to be deducted. Equity plays a decisive role in lowering cost of micro loans. Moneylenders vie to lend to homeowners with larger home equity because of the potential safety that they allow. The safety will be in terms of the risk that a loan venture poses for the lending agency. As potential risk on micro loans can be easily covered through repossession of the home itself, micro loans are termed as low risk ventures. Accordingly, micro loan borrowers are preferred over borrowers of unsecured loans.