Whether you are a Singapore citizen, permanent resident or foreign worker residing in Singapore, securing a loan in Singapore has never been easier. As long as you qualify for the type of loan you are applying for, the process is pretty simple, quick, and straightforward. If you’ve reached a tough spot financially and in need of emergency cash with the lowest personal loan rates, here are some tips you should follow when considering applying for a legal loan in Singapore.
1. Check your credit score
A credit score is used by banks, financial institutions, or licensed money lenders to gauge the likelihood of you paying off your loans on time. If you want to get the lowest personal loan rates, you have to have a substantial credit profile that shows a higher credit score or rating.
The higher your credit score, the more likely you are to get approved for a loan in Singapore as it shows creditworthiness. As these credit reports are sourced from credit bureaus, you will also be able to source your own credit report by requesting a copy online or from Credit Bureau Singapore for $6.42.
2. Don’t apply for too many loans at once
For a smooth sailing loan application process, you have to ensure you do not have too many loans running at once. When you apply for too many loans at one go, lenders will raise an inquiry with credit bureaus to evaluate your creditworthiness. This can be considered as hard inquiries where a lender is initiating a credit inquiry on behalf of the borrower.
Bear in mind that with each direct inquiry from a legal money lender, there is a possibility of a small reduction in credit score. Rather than having multiple credit inquiries, it is much more ideal to figure out the various types of legal loan options available and identify the right fit before applying for the loan.
3. Plan your budget before applying
As with all financial plans, it is best to budget well at the very beginning, before you even apply for a loan. This step is crucial to ensure that you are able to repay the loan on time to avoid late fees and extra charges. If you have a gauge on the range of monthly instalment payments that you are financially able to commit to, it will be much easier to choose the type of loan in Singapore.
Doing it this way would mean that you would already know the maximum interest fee you are able to commit to. Budgeting wisely also requires you to look at timelines to help you work out a comfortable repayment agreement or loan tenure.
4. Prepare substantial proof of income
It is imperative that you have the right documents so that you can have a smooth sailing loan application process. These include your NRIC; proof of income and employment documents such as your last 3-6 months of payslip or income tax notice of assessment (NOA); current credit score; past CPF statements; proof of residence or tenancy agreement; employment letter; employment pass and bank statements (for foreigners).
It is usually not difficult to secure proof of income for employees having a monthly salary arrangement. However, other employment arrangements like commission-based work or self-employment may prove more complex for verifying future income. Regardless of the reason, it is usually a must for borrowers to find a way to prove that they will honour their debt.
If you are applying for a loan without formal proof of income, you can consider showing past bank statements that indicate regular payment from an employer or credit card statements to show that you have paid your bills on time. The credit history reflects your past credit management so it can be used as an indicator of creditworthiness. Documentation of annual tax returns from IRAS can also help your cause. You should also protect your credit score to get a higher rating. Lastly, you can also consider providing a larger amount of downpayment to secure a reasonable loan tenure.
Interested in securing a legal loan in Singapore? Find out more about legal loan options with us.