Having to apply for a loan can be daunting, especially if it’s your first time borrowing from a licensed money lender in Singapore. But with the right mindset and financial knowledge, you’ll be able to take up personal loans at ease. Check out the step by step guide below on how to apply for a loan from a licensed money lender in Singapore.
1. Run the numbers on interest and potential charges
If you want to apply for a loan in Singapore, the first thing you would have to consider is your financial capacity to make repayments on time. You should plan your budget for not only repaying the original principal amount but the cost of interests and charges overtime. Some factors to consider would be annual fees, late payment fees or any changes in tenure fee. For example, some financial institutions may charge a fixed sum every year on top of the interest you are required to pay.
2. Check your credit score
A credit score is used by financial institutions or licensed money lenders to gauge your creditworthiness. It’s primarily based on a credit report sourced from credit bureaus. Generally, the higher your credit score, the more likely you are to get approved for a loan and the lower your interest rate could be. You can request a copy of your credit score online or at any of the SingPost branches and/or the Credit Bureau office at a small fee.
3. Consider your loan type
Interest rates can differ depending on the type of loan you’re taking. Consider what you’re utilising the loan for and your lifestyle needs; would it be a student loan, wedding loan, renovation loan or medical loan? Either way, you will need to decide if you’re applying for a secured loan or unsecured loan.
A secured loan is one that is connected to a piece of your major asset or a collateral that is valuable like a car or a home. With a secured loan, the lender can take possession of the collateral if you don’t repay the loan as agreed in the signed contract.
An unsecured loan on the other hand, is not protected by any collateral. In the event that you are unable to pay the loan, the lender can’t automatically take ownership of your asset. For example, credit cards, student loans, and personal loans are the most common types of unsecured loans.
4. Compare rates of licensed money lenders and apply
After choosing the type of loan you would like to apply for, compare several licensed money lenders to have an idea of their rates and what you might qualify for. You should do your due diligence and research before choosing one that best suits your financial needs. When you apply for a loan online, you usually need to provide documentation such as your contact information, NRIC and proof of income and employment as well as reason for the loan.
Once you apply, it usually takes a few days for licensed money lenders to process the application, but you will generally get the funds much faster than if you borrow from a bank as speed is an important consideration during emergencies. How quickly it gets approved varies from lender to lender, so it’s important to find out before you apply.
5. Accept the loan and start making payments.
This is where you should start budgeting wisely and strictly so that you would be able to repay the loan on time and save on interests and/or late fees. Take a look at your policy to check your instalment plans and how much you need to put aside each month. You can even automate the monthly payments.
Be aware of when the interest rate would kick in. You might start accruing interest immediately or at a later time, depending on the type of loan. For example, if you’re taking a study loan, interest might only kick in at the end of the repayment period close to when you’re graduating, so try to budget earlier and pay the most when the interest hasn’t kicked in. Interested in applying for a loan in Singapore? Find out more about legal loan options with Synergy Credit.