Getting a domestic helper loan in Singapore is the best way to ensure you have the money you need to hire a domestic helper, but there are several things you should know before applying for one.
In this article, we’ll cover everything from repayment methods to interest rates so that you can make an informed decision about your application.
1. Repayment – Lump sum or monthly?
The repayment method of your domestic helper loan is another important factor to consider.
- Lump sum payment loan: You can choose to repay your domestic helper loan in one lump sum or monthly installments.
If you are borrowing a large amount, paying the entire principal and interest upfront may be better, especially if you have cash flow issues or prefer not to incur additional debt.
However, if you do not have enough funds but still want a long-term solution, a monthly installment plan might be more suitable since it allows flexibility in making payments.
- Monthly payment loan: Monthly payment loans work by setting up an agreement where borrowers will make monthly payments until all the outstanding balance is paid off completely or within a specific period.
This means that any amount left unpaid due to missed installments and penalties will accumulate interest until a full settlement has been made or otherwise agreed upon between both parties.
2. Interest rates – Flat rate or reducing balance?
You’ll want to compare interest rates.
A flat-rate loan will require you to make fixed monthly payments, whereas a reducing balance loan allows you to pay off your debt faster and more manageable.
The best choice for you depends on how predictable your income is:
- If your income is stable and doesn’t want to get into debt, go with the flat rate option.
-This type of loan has lower fees than other types—but it can still be expensive if you only make minimum payments each month because interest continues building up on top of the principal amount owed and additional fees for late or missed payments.
- If there are times when extra money won’t necessarily come in from one month to another, then choose a decreasing balance loan instead so that those times when extra funds aren’t available will not be as hard on your budget since fewer dollars go toward paying down interest rather than principal.
3. Insurance coverage – Is it compulsory?
It is compulsory for you to get insurance coverage.
This is because your domestic helper will be covered by the Employment Act, which states that employers are responsible for their employees’ medical treatment and hospitalization costs if they are injured or suffer from work-related diseases.
The Ministry of Manpower (MOM) requires all employers to provide health insurance coverage for their domestic workers. However, there are different policies with varying premiums and coverage amounts.
You should ensure you understand what each policy covers before purchasing one to avoid paying more than necessary or worse than that.
4. Collateral – How to secure the loan?
Collateral is a form of security to the lender that you will repay the loan if you fail to pay it back. This is usually in the form of assets like property, jewelry, and cars.
Collateral assures lenders that they will get their money back should you default on your payments.
If you default on your payments, all collateral will be used to pay off the outstanding amount. If there are still any outstanding debts after taking into account all of your assets, then these additional debts can be recovered through garnishing wages or accounts with interest added on them.
5. Application process – How long will it take?
The application process will take about 2 weeks, and you will need to provide details such as your employment contract and passbook.
You’ll also need to give the bank information on your helper, including passport details, employment contract, and salary slips.
If you don’t have a fixed deposit with the bank, they may ask for a guarantor who can lend money in case something goes wrong.
Understanding the type of loan is important before applying for one. Domestic helper loans are a form of credit that you may use to finance your domestic helper’s salary and other expenses.
Getting a domestic helper loan is a good option for those who want to hire a domestic helper but do not have the money to pay for it upfront.
However, you should ensure that you understand all the details about this type of loan before applying for one.