At some point in life, you may require a big loan to finance a given project. It can be a loan to start up a business, expand, or for any other capital investment.
Such capital investments call for the injection of a huge amount of money that you may not have at the moment. Therefore, it calls for capital financing through a long-term loan in Singapore to bridge the gap between the available capital and the expected capital
What is a Long-Term Loan?
This is a loan advanced by a bank or a licensed money lender for a long period of time. It is classified as a non-current liability on the balance sheet.
The time maturity for a long-term loan in Singapore ranges from 12 months to 30 years, and the type of debt can include bonds, mortgages, bank loans, and debentures, among others.
Features of Long-Term Loan
High loan amount – The loan is spread over a long period and therefore, can attract high loan approval rates
Low rate of interest – Since the time period for loan payment is long, the lending institutions tend to charge low-interest rates.
Collateral Submission – Security is required for long-term loans because the amount involved is huge to safeguard the interests of the borrower.
Repayment in installments – The principal and interest are distributed in monthly installments for the entire loan term.
Tax benefit on long-term loans – This is mostly applicable to home loans
Eligibility Criteria
Must be 18 years and above
Have a regular income
Be a Resident of Singapore
Documents Required
Proof of permanent address – Utility bills or rent agreement
Proof of Identity – ID, Passport
Proof of Income – Bank Statement or Payslip
Types of Long-Term loans
Term Loan
This is a loan issued by a bank or any other lending institution, but not tradable or transferable like bonds. In most cases, the loan is open and not restricted to certain projects, as is the case with a car loan or mortgage.
Generally, term loans have a maturity of 5 to 12 years and can be secured or unsecured depending on the amount, period, and the lender.
It involves the signing of a contract between the borrower and the lender, which spells out the loan amount, interest rate, payment dates, and loan purpose.
The loan is divided into monthly installments, which comprise of principal amount and the interest
Mortgage
A mortgage loan is a type of Long-term loan in Singapore made against real estate or collateral. The lender advances the loan to the borrower but is left with the ownership documents, which act as a security to safeguard their interest in the event of default.
The lender has the right to seize the property, sell it, and use the proceeds to clear the loan in the event the borrower is not able to honor the contractual agreement.
Mortgages are usually used to finance the purchase of buildings, be it residential buildings, office buildings, factories, warehouses, or any other type of building.
Asset Loan
This is a loan advanced to finance the purchase of a given asset. For instance, a car loan is given to finance the purchase of a motor vehicle. In such a case, the vehicle logbook is used as security. In the case of other assets, the ownership documents are used as security, and in case of default, the asset is repossessed, and the proceeds from the sale are used to clear the loan.