Is it difficult to get a loan? Yes, if you go about it the wrong way which, unfortunately, too many people do. The common approach is to scour through pages of fine print and find all the relevant criteria before applying for a loan. The faster and simpler alternative is to read this post.
We have summarised the 5 criteria most commonly used by licensed moneylenders in Singapore and around the world. It is your essential guide to getting a personal loan in Singapore. Note that certain criteria are given more importance by different lenders for different loans.
1. Credit score
Credit ratings are used all over the world as a gauge of an individual’s ability to repay a loan. In Singapore, credit scores are calculated by the Credit Bureau of Singapore (CBS). There are 8 possible assessment outcomes.
|Rating||Score||Likelihood of Default|
|AA||1911 – 2000||Less than 0.27%|
|BB||1844 – 1910||0.27% to 0.67%|
|CC||1825 – 1843||0.67% to 0.88%|
|DD||1813 – 1824||0.88% to 1.03%|
|EE||1782 – 1812||1.03% to 1.58%|
|FF||1755 – 1781||1.58% to 2.28%|
|GG||1724 – 1754||2.28% to 3.48%|
|HH||1000 – 1723||Greater than 3.48%|
Anyone with a credit rating of AA to CC is virtually guaranteed approval when they apply for a personal loan. Those with ratings between DD and FF are likely to be approved as well, but often with additional conditions and possibly higher rates of interest.
Most banks will automatically reject loan applications from individuals rated GG or HH. However, these applicants may be able to secure personal loans from licensed lenders such as Synergy Credit. With guidance from our experienced consultants, even a normal income earner can get a personal loan.
2. Debt-to-income Ratio
While income is a major factor that lenders consider for all loan applications, the crucial criterion is the Debt-to-income ratio (DTI). This is the percentage of your monthly income that goes to servicing your current debt.
Someone in a high-income bracket who spends recklessly and often approaches or exceeds their debt limit is considered bad news. Another applicant with a lower monthly income but more level-headed budget management is considered a comparatively reliable borrower.
Make sure that you are living within your means before you apply for a personal loan. Even a correction in the months prior to your application will greatly improve your chances of success.
3. Gainful Employment
Licensed moneylenders go through the trouble of an application and approval process because each applicant is a possible business risk. One of the best ways to weed out potentially troublesome borrowers is to look at their employment history.
Individuals who have maintained consistent gainful employment over many years represent the ideal applicant. It shows that they are willing to shoulder responsibility and also that they have the means with which to repay a loan.
While full-time employment is best, even part-time or casual employment is distinctly better than huge gaps on your resume. Hold down a steady job whenever possible and you will be much more likely to get personal loans.
4. Co-signer or Collateral
A co-signer is someone who signs for the loan with you and takes responsibility for repaying it if you cannot do so. Co-signers should preferably have a Good or Excellent credit rating. Collateral is an asset (or assets) that you sign over to the lender as a guarantee of repayment. The collateral has to be of equal or higher value than the loan principal.
Applicants with a poor credit rating can certainly be approved for a personal loan in Singapore if they can present a suitable co-signer or collateral.
5. Paperwork and Documentation
Licensed moneylenders in Singapore are very particular about adhering to the relevant legal framework. Among the chief requirements of this framework are identity and financial verification.
For identity proof, you will need either:
- NRIC or FIN card; or
Financial documentation for a personal loan in Singapore can include:
- Salary slips (past 3 months)
- Letter of employment/offer
- Bank records
- Tax statements
- CPF statements
The more of these documents you can provide when you apply for a personal loan, the faster and smoother the process will be.
Every good licensed money lender in Singapore considers these 5 criteria for personal loans. If you do not meet one or more of them, all is not lost. Speak to the understanding Synergy Credit team and we will try to work out a suitable arrangement for you.