One of the biggest challenges for start-up businesses in Singapore is getting access to funds to increase their stock, purchase new machinery, or even run their daily expenses. Taking out a business loan or an instant cash loan might seem like the easiest route to sorting out these financial issues.
A loan with high interest rates is a big challenge, especially for new start-up businesses; you shouldn’t commit to a high-interest loan to expand or furnish your business as it may impact your finances drastically when you have insufficient funds.
So, rather than apply for a loan with high interest rates – here are a few essential things you can do to lower the interest rate when securing a loan.
1. Improve your credit score
When you have a low credit score, licensed moneylenders might charge you with a higher interest rate. A low credit score indicates to licensed moneylenders that you are not trustworthy with credit, and that you could be defaulting on your payments and debt. Thus, having a low credit score makes you a credit risk to licensed moneylenders.
However, you can still improve your credit score within 60 days – that being the credit score of your own and your business. One way you can improve your credit score is by paying all of your dues on time.
2. Take your time to consider your options
It is important to note that interest rates vary widely across different licensed moneylenders and financial institutions. If you decide to look around at what other licensed moneylenders offer, you could obtain a loan with a low interest rate.
However, with a bad credit score, you could have limited options when it comes to obtaining a loan with low interest rates. Thus, you should take your time to search for a loan that does not have a high interest rate.
3. Offer a small collateral
Collateral is a security that is offered by the borrower to the licensed moneylender for the loan. Should you fail to repay the quick loan that you have obtained, the borrower will have an option to seize the collateral. In such situations, a loan with collateral has a lower interest rate than an unsecured loan. Thus, you can save yourself from loans with high interest rates by offering collateral.
However, if you fail to repay the loan, you will end up losing your collateral.
4. Begin your search early
Many small business owners begin the process of looking for a loan at the last minute. Rather than waiting until the very last minute, you should begin your search early. This ensures that you have a wider range of loan options to choose from, allowing you to pick the best one for your financial situation.
5. Refinance your interest rates loans
High interest rates could drain down your business if you are not careful. If you found that the interest rate of certain loans are too high, consider refinancing your debt.
This means that you will be able to pay off the high interest loan and replace it with a lower interest loan. With a good credit record, you can approach a different licensed moneylender to refinance your loan.
Obtaining a loan with a high interest rate could be damaging to your business. Thus, you should take your time to read the terms and conditions of the loan before applying. By following the tips above, you can avoid loans with high interest rates and continue to grow your start-up business.