4 Alternative Credit Sources To Consider When Getting A Loan

When it comes to getting a loan for personal needs, many people will probably first think of personal loans. After all, that’s what the loan is for, right? Personal loans can be issued by banks or moneylenders, without any restriction on how the loan can be used.

However, there are also other alternative credit sources that individuals can apply for if they are looking for a loan. Although all of them give you access to a certain amount of funds, the ways the funds are disbursed and repaid are vastly different. Thus, some are better for some scenarios than others.

Here is a quick introduction to get you familiarised with these credit sources:

Personal loan

Let’s tackle the most obvious one first. Personal loans are typically instalment loans that you can obtain from a bank or moneylender. The lending company gives you the sum of money that you borrow, and then you will have to repay the loan with interest over a fixed number of months, as agreed in the repayment contract.

While banks may seem more reputable, personal loans from moneylenders can sometimes be the preferred choice due to the looser eligibility requirements, higher approval rates, and faster processing times. As long as you borrow from a legal moneylender in Singapore, you can still be assured of professional, secure service.

Line of credit

If you are familiar with the concept of credit cards, that’s what a line of credit is. Sometimes called a revolving loan or cash line, a credit line allows you to borrow a set amount of money each month. However, the money won’t be counted as ‘borrowed’ until you withdraw it to spend on something. At the end of the month, you will need to pay back the amount you spent. If you default on this payment, the debt will roll over to the subsequent month, and you will have to pay more in the form of interest.

A line of credit is good for covering small spending in times of unpredictable cash flow, but isn’t so practical if you need a large sum of money at once.

Balance transfer

Sometimes people look for loans to repay a debt. It is wise to replace a high-interest debt with a debt with lower interest, and doing a balance transfer is one of the best ways to do so. Essentially, this lets you transfer your debt to another loan provider, which gives you a zero-interest debt for a fixed period (e.g. 12 months).

The catch is, you have to repay your debt within the zero-interest window, otherwise you’ll be charged with hefty interest rates (as high as 20% p.a.) for the remaining debt. Thus, being very disciplined with your repayment plan is key to taking full advantage of this loan.

Debt consolidation loan

Something like a balance transfer, a debt consolidation loan transfers your debts from multiple lenders into one debt. Although you still have to pay interest on this consolidation loan, it is typically lower. An additional advantage of this is that it makes it more convenient to pay your debts, as you now have to pay to only one lender, instead of multiple.

Debt consolidation loans are typically reserved for those who have a huge amount of debt. Thus, the repayment period is usually also quite long, as compared to a balance transfer or personal loan.


Now that you know about these 4 types of personal credit sources, you can make a more informed decision. Depending on whether you just need some cash for one-off spending, or you are looking to clear some debts, one of these loans might be a better choice than the others.

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