While a lot of us still think twice before getting a personal loan. What if you have bad credit? According to The Straits Times, 9 out of 10 credit applicants in Singapore have never seen their credit report before applying for a loan. This can make it a bit challenging to get approval for a personal loan and this is one of the reasons why individuals often encounter challenges securing approval for personal loan in Singapore.
While there is indeed a huge gap in approval ratio for a personal loan with bad credit across the world. To create awareness among people, we have come up with tips on how to get approval for a personal loan in Singapore even if you have bad credit.
Let’s walk through this stellar list of tips :-
Calculate your credit score
Before diving in, understanding your credit score is crucial. Credit score is a number that represents your ability to repay a loan. The higher the score, higher are the chances to get approved for a loan. Singapore uses two credit bureaus :- Credit Bureau Singapore (CBS) or Experian, where you can identify your past credit score report.
With this report you will have a detailed overview of your credit history. This overview includes your credit score and gives you a better understanding of your financial standings. Also helps you to take necessary steps to improve your credit score.
Apply for Small Loan Amount
Generally, banks hesitate to approve large amount of loans who have bad credit history. So you need to start by applying a small loan amount to show the commitment you have to responsible borrowing and on-time repayment. Over time, this builds trust and improves your credit score.
Some licensed money lenders in Singapore also provide specific small loan programs which are especially designed for people who have bad credit. Small loan means smaller monthly repayments, which means in a particular period of time you can easily pay the loan amount.
Consider a Secure Loan
If you have bad credit, considering a secure loan can increase your chances of getting a loan. Basically a secured loan is a type of loan that is backed by assets you have like a car or home which act as a guarantee for the lenders. In case if you are unable to pay the loan the lender has full rights to seize and sell all the assets to recover their losses.
Considering a secure loan is a good approach to get the money you need. Since there is less risk involved for the lender, they might be more likely to approve you for a secured loan even if you have a bad credit.
Consider Alternative lenders
Always consider alternative options, don’t worry if you have a bad credit score. A loan will still be approved by a licensed moneylender but their interest rate may be higher. Beware of lenders who offer loans with high-interest rates or fees. According to law the maximum interest rate moneylenders can charge is 4% per month.
Licensed money lenders approve your loan quickly. If you need a loan right now and banks turning you down then licensed moneylenders are the right fit for you.
Bad Credit? No worries! Get pre-approved for a personal loan in minutes.
Provide Additional Document
Providing extra documentation is always necessary when looking for a loan. They enable you to access the loan quickly, and they give the lenders an indication of your capacity of repaying the loan.
Key documents that are require when applying for a loan : –
- Additional documents should be submitted for all the sources of money in order to prove income, if you have more than one source. Therefore, this will enable lenders to ascertain whether your earnings are steady for payments of the loan.
- Self employed persons and those who have uneven earnings should file tax returns to be used for confirmation of earnings within long periods.
- Bank Statement – Lenders need only check your bank statement and they have the overall view of financial strength.
Look for a Co-Signer
It’s an advantage to get approval for a personal loan in Singapore despite the bad credit score when you have a co-signer. Co-signer is a person with good credit who agrees to pay the loan on your behalf if you default. Finally, co-signer can increase your possibility of getting approved for a loan. However, remember that your co-signer’s credit may also get affected if you fail to repay the loan.
Increase Your Debt to Equity Ratio
Your debt-to-income ratio indicates how much money you owe relative to your salary. Lenders use your DTI as a metric to determine whether you are in a position to borrow more money. If the ratio of the debt-to-income is high, it might not be easy to get approval for a personal loan in Singapore.
These suggestions will help you increase the likelihood of your personal loan application approval. Ensure that you have understood the conditions in the mortgage and you are capable of paying for it before proceeding.
Pro tip – Ensure your credit scores increase if you would like to get better loans in future.
Getting a personal loan with a bad credit score can be challenging but it is still achievable. You may speed up the approval process by taking into account your credit score, exploring other lending options, lowering your debt-to-income ratio (DTI), and considering a secured loan or co-signer. Remember to make your payments on time if you want to increase your credit score over the long run.