Taking loans in Singapore isn’t an unusual thing. However, many people still don’t know how these loans work. If you are one of them, you have come to the right place. There are different types of loans, depending on your need and ability to repay them. If you need money to buy a house, there is a loan for that. If you need money for medical bills, there is a loan for that too. If you need to borrow some cash to repay with your next salary, you will still find a loan for that.
Another thing people don’t know is that there are different places to get loans. Yes, you don’t have to keep asking your parents or that distant cousin for a loan. And no, not only banks give loans. You can go to a licensed moneylender in Singapore to get loans. A licensed moneylender is vetted by the government and can give you cash instantly. The interest rates are also low, and you don’t really need collateral.
A personal loan is one that you can take for any number of reasons. A personal loan is good for tuition medical bills, paying off another debt, and even a vacation. Now, you cannot just waltz into a bank or money lending establishment and apply for a personal loan. You need to fit certain criteria to qualify for a personal loan.
Qualifications for a Personal Loan
- Annual Income
You need to show proof that you have an income. No bank will lend money to someone without a means to repay the loan. Even being self-employed is difficult for banks to accept. If you are jobless, your chances are very slim. Banks typically want you to have an annual income of at least S$20,000. You will also bring bank statements and pay slips to prove this. This is for salaried employees.
Self-employed persons may be required to have an income of at least S$40,000 to qualify for a loan. The same thing goes for foreigners. A money lender may require lower minimums than that. For a moneylender, the amount you can borrow depends on what you earn. So, an income of S$20,000 could get you a loan amount of S$3000. Also, they are softer on self-employed persons.
You have to be at least 18 years old to get a personal loan. Some institutions may tell you 21, but usually, it is 18. Under-aged persons can forget about getting a loan to pay for something their parents have refused to. You will be required to show some ID anyway. There is also a maximum age limit for taking loans. If you are 65 and above, you can’t go for a loan.
- Period of Employment
Just because you have a job doesn’t mean that you are qualified for a loan. You need to have held that employment position for at least three months. You will also show proof of how long you have been employed. This proof can be in the form of payslips (for the past three months) and/or your employment letter. Banks are very strict about this.
While a moneylender is less stringent, you still need to have that employment track record. You cannot come into the country after a year of absence and now work to get a loan.
The whole point of asking for your annual income stats is to know if you can repay your loan. Your income also determines how much you can borrow. Your track record for borrowing and repaying comes into focus at this point.
Some banks won’t give you a loan if you are currently in debt. Other banks and money lenders can give you a loan if you are already in debt, but with certain conditions. Many financial institutions are leery of this, though. If you are already in debt and coming for a loan, how will you repay?
- Credit Score/Report
This is the big one. When you go for a loan, the bank contacts the Credit Bureau of Singapore for your credit report. What they see there will determine your future loan business with that bank.
A credit report states how often you have fallen into debt. It also states how well you how fast you clear those debts. Your credit score shows how much the banks can trust you to repay a loan. As such, if your credit report shows any of the following, just know that you are not getting that loan.
- You consistently fail in timely payment of credit card bills
- You consistently default on repaying your home loans
- You consistently max out your credit cards
- You rarely meet the minimum balance when repaying your loan6. Interest Rates and Monthly Payments
Banks tend to charge high interest rates on personal loans. Personal loans are quite expensive, especially because you can use them for anything. Personal loan tenure can be as long as 7 years, depending on the amount borrowed. You could pay interest as high as 8%, or even more. You will be required to repay that loan every month, so you will have to work that out.
Moneylenders have a fixed interest rate. This is required by law, so you can get a personal loan from a moneylender at 4% per month.
Things to Take Note Of
- You may be wondering if you can borrow loans simultaneously from several banks. That is not possible. Banks are very rigorous in their loan process. They carry out background checks. The process of qualifying for a bank loan is almost like trying out for the Secret Service. Do not think of going for loans from different banks at the same time. You might even attract a penalty for that.
- When looking for a moneylender, always go to a licensed one. Loan sharks abound in Singapore. To avoid them, finding a licensed money lender is easy. Go to the Registry and look them up. There are over 150 registered money lenders to choose from.