The main difference between an approved in principle and a fully closed loan is that whereas an approved in principle only has approvals by one lender, a fully closed loan includes multiple lenders. A loan with approved in principle in Singapore has a varied duration as it can be as short as one month or a few months or as long as a year.
There are many reasons for wanting to borrow money and through financing with the loan with approved in principle, many of these reasons can be achieved. Many borrowers are not able to access financing for a variety of reasons and this is where an approved in principle loan can help. These reasons include individuals having no credit history, no income, bad credit, or even students who want to borrow money for tuition and living expenses. Here are the reasons why an approved in principle loan is the best option.
The application process is simple
An approved in principle loan application form is a one-page document with the only basic information required. This information is to be completed and signed by the applicant, the applicant’s bank, and the guarantor if available. The more information that can be provided, the more time allows the lender to evaluate the application. This means there is less risk of having incorrect or incomplete financial statements and as long as these statements are up to date, and approved in principle loan is guaranteed to be approved by most lenders.
The interest rate is low
The approved in principle loan has a lower interest rate because it is still being approved. This means the risk of default and repayment problems is very low. Whereas an unapproved loan, the rates are higher because of higher risks that are associated with lending money to an individual who may or may not be able to repay.
The repayment terms are flexible
The interest rate on a loan approved in principle can be lower than the general market interest rate thus giving a potential borrower more time to repay their loan. For example, if the individual has an approved in principle for a two-year loan and the lender is willing to let that person borrow for three months, then that person will have three months of free money. This free cash can change the lives of many individuals who are looking for extra money from somewhere. With this flexibility comes lower risk and higher security.
The loan is guaranteed
A guarantor is a person who guarantees that the borrower will repay the loan. In Singapore, the guarantor requirement for an approved in principle loan is up to 50% of the loan amount depending on their age and income level. This means that by having a guarantor approved in principle, an individual can borrow more money with far more certainty than if they were being offered a fully closed loan.
The loan is secured
The approved in principle loan is secured by the guarantor. If the borrower does not repay the loan according to the agreed terms, then their guarantor will be responsible to pay back the full amount of the loan. This gives a lender more security and comfort when offering approved in principle loans because they know there is someone else they can pursue if needed. In case of default, this reduces pressure on an individual’s home, car, or other assets that are typically used as collateral.
A loan approved in principle helps many individuals without the need for full documentation and collateral. With flexibility and low-interest rates, many people can get the financing they need to make a dream become a reality. Whether it is a home purchase, university tuition or medical bills, approved in principle loans are available for almost any type of financial situation. The approval process is simple and fast so there is no need to stress about waiting for funding that could take days or even weeks to be approved.