If you require emergency funds when you’re in a tight spot, a personal loan is a sound and legal option that you can turn to. However, one criterion that you often need to meet would be having a good credit score.
If your credit rating is poor, you may find it tough to find licensed money lenders in Singapore or banks willing to approve your loan application. However, not all is lost because there are loans in Singapore for bad credit which can be obtained legally.
This article will highlight what loan options there are should you have a bad credit score, what “bad credit” means, and how you can improve your credit score.
In Singapore, your credit payment history is recorded and aggregated by Credit Bureau Singapore (CBS) and it influences how financial institutions such as banks and licensed money lenders in Singapore view you as a borrower.
Even if you’ve never taken on any credit, you’ll still receive a rating, albeit a non-scored one. There are 13 credit risk grades in total, including scored and non-scored ones. This ranges from CX (insufficient credit activity) to AA (lowest risk of defaulting).
If you have a bad credit score or a poor non-scored risk grade, it indicates that you are a borrower with a higher risk of defaulting on your loan. The following three factors are just a few that can lead to you having a bad credit score:
- Defaulting on your loans
- Failing to pay off debts promptly
- Recently declaring bankrupt
You’ll be relieved to know that it’s possible to obtain legal loans in Singapore even if you have a bad credit score. However, it’s more difficult to obtain loan approval should you have a bad credit score as compared to a good or excellent one.
Licensed money lenders in Singapore would be your best bet as banks are much stricter when it comes to loan approval.
Firstly, check your loan eligibility (i.e. minimum age or income requirements) for the personal loans that you intend to apply for. The qualifying criteria vary slightly across licensed money lenders in Singapore. That being said, most institutions accept applications from individuals between 21 and 65 years old. However, licensed moneylenders could extend the loan to individuals who are at least 18 years old.
Secondly, compile a list of the money lenders whose loans you’d potentially qualify for. Some may offer affordable interest rates for your legal loans. However, qualifying for a loan in Singapore for bad credit may result in lenders quoting higher interest rates. Therefore, always check whether they offer guaranteed rates for the personal loan that you’re thinking of applying for.
Once you’ve shortlisted your list of loan providers, you can start making your applications. The outcome of your loan application may differ as it’s up to the lender’s discretion, but consider the loan conditions from one lender before starting your second application at another firm.
This is because concurrently applying for legal loans at multiple financial institutions in Singapore such as banks can trigger a flag to the CBS that you’re rushing to get hold of money and potentially reduce your credit score. On the other hand, applications made at licensed money lenders would not affect your CBS credit score. This is because loan information pertaining to licensed money lenders would be stored in the MLCB report.
Reputable lenders in Singapore offer various types of loans to suit your financial needs and capabilities. Some of these include:
You are more likely to get a secured loan approved as you’ll be offering collateral to the lender to ensure that something can be liquidated should you be unable to repay the loan. This can include your home, car, or even jewelry.
Adding a co-signer for your legal loans will help your application get approved even if you have a bad credit score. A co-signer ideally should be someone with a steady income, and a better credit score than the primary borrower. This assures the lender that the loan will be repaid on time. Getting a co-signer with a higher income and a much better credit score than you can potentially help you secure a larger loan quantum and lower interest rates.
Debt consolidation is a refinancing programme that offers you an option to consolidate all your existing debts into a single loan. You’ll then receive a fixed monthly repayment plan that bears a lower interest rate as compared to your existing loans.
Although there are legal loans available in Singapore if you have a bad credit score, you should still aim to make your credit rating better. This goes a long way in improving your financial situation as well, even though it might not seem apparent at the start. Here’s how you can do so.
Start by knowing what loans you have, their interest rates, and terms. By organising them, you’ll have a clearer view of the amount you owe and you can start making plans to start effectively paying them off.
Your credit score will slowly improve if you’re consistently paying off your loans on time and in full. The record of your consistency in settling debt demonstrates to lenders that you are a responsible borrower.
Additionally, taking on smaller loan amounts in the future also means that it’s easier to repay them. Read more on how to get your fast cash loans approved here.
If you need advice on improving your credit score or adjusting your financial habits, Credit Counselling Singapore is a good place to start. It is a non-profit organisation that can help you restructure your debts.
Your credit history, even from many years ago, might still haunt you when applying for loans with banks, decreasing your chances of getting a loan in Singapore for bad credit.
Licensed moneylenders in Singapore like Dio Credit, however, might still be able to approve your legal loans on a case-by-case basis. Contact us to speak with our experienced loan executives and get more information on bad credit loans.