Learn about the different types of loans

Debt and borrowing
Annualised percentage rate
Credit card
Personal loans

Personal instalment loans (usually shortened to personal loan in the market) are the most common unsecured loan products. Borrowers apply for loans with a bank or a financial institution and repay a fixed monthly sum within a fixed term until the full balance is settled. Early settlement of the full sum may incur a handling fee.

Revolving loans, as the name suggests, are loans that can be drawn down repeatedly. A revolving loan is a loan amount that a bank or a financial institution offers to a borrower. There is no fixed repayment term or repayment amount. However, there is a minimum monthly repayment amount (such as 3% of the total balance). The borrower can repay the outstanding balance of the loan at any time or draw out capital again. Do note that while revolving loans are more flexible, debts can easily accumulate, and repayment can be delayed - it could worsen the debt situation because there is no fixed repayment term or amount.

Credit card cash advances refer to withdrawing the remaining balance of the credit available on a credit card. A borrower can take out cash from an ATM or transfer the balance via an online channel. There is no fixed instalment or repayment amount set out for credit card cash advances, but there is a minimum monthly repayment. The annualised interest rate for credit card cash advances can be as high as 30% or more. It is a very expensive way to borrow.

A credit card cash instalment plan means that the credit available on a credit card is drawn out and is repaid by fixed instalments within a set period of time. The concept is mostly similar to personal instalment loans.

The interest on different loan products is calculated in different ways. Additional charges may also be incurred, such as handling fees, annual fees, withdrawal fees, etc. Therefore, you should compare the borrowing costs of different loan products with reference to the Annualised Percentage Rate (APR ).

12 Decemeber 2019