Like other countries worldwide, older Singaporeans at the age of 62 and above may find it difficult to get a personal loan because they no longer have regular paying jobs. Banks require assurance that the loan would be paid and if one does not have a job, they are reluctant to approve loan requests.
Fortunately, there are still ways for older Singaporeans to get a personal loan from financial institutions.
Here are five ways that can get you started on your loan application:
Offer a collateral for your loan
Banks require a guarantee when it comes to the client’s capacity to pay the loans regularly. If you are close to retirement age or in retirement age, using a collateral can boost your chances of attaining a personal loan.
A collateral can be a property the bank accepts to be of higher value than the loan amount you are requesting. This collateral can be stock investments, house titles and gold. Some adults tend to save up their gold because of their high value and it can be used as loan collateral when you are short of funds.
If you are going to use your fully paid home as a collateral, the process is called cash-out financing or reverse mortgage. Under this process, the Monetary Authority of Singapore’s directive states that banks can lend you to 50% of the current value of your property even if you do not meet certain income requirements such as the Total Debt Servicing Ratio.
When you have a collateral given to the bank, you are charged with a lower interest rate once you get your loan approved. Currently, cash-out financing interest rate in Singapore is around 1.6% per annum.
If you are unable to pay your collateral, the bank would take your collateral as payment. At the same time, if you manage to pay off your loan, you can get your collateral back.
Collateral loans are not available in all banks so double check with the bank you wish to loan from if they can process your collateral loans.
Ask a guarantor to help you
A guarantor is simply a person that would agree to pay for your loan if you are unable to do so. In Singapore, a guarantor must be 21 years old and has an income level that would enable them to pay your loan. If the personal loan amount is high, then the guarantor’s income level must be higher than that.
Usually, guarantors can be your family and friends. However, there are cases where guarantors would decline paying on your behalf if you failed to pay the loan. Before you ask someone to stand as your guarantor, you should draft a contract with them to set the guidelines on how the loan will be handled if the guarantor steps in.
Getting a guarantor for personal loans is perfect for those who have no or poor credit history. You can check out your credit history and your guarantor by requesting it with the Credit Bureau Singapore.
Get a short-term loan
The quicker you pay your loans, the better and if you are applying for a personal loan, accepting a shorter loan term can get your request approved.
Home loans are usually the loans that have short-term loan tenures. Applying for home loans are compulsory nowadays if you wish to purchase real estate even if you have the funds to pay it in full. As a result, repayments are not very difficult to manage if one plans on how to pay for it and it can be paid quickly.
When you shorten the loan tenure, you would need to pay higher monthly repayments. Fortunately, you can minimize the impact of higher monthly repayments by refinancing, paying higher EMIs (equated monthly instalment), calculating mortgage fees, and regulating your funds.
Before you take this option, make sure you would be able to handle the higher monthly dues to prevent mishaps during payments.
Get a Co-Borrower
Usually, borrowing money from the bank can be quite tedious since you have to work with a time period on how long the payment should be done. You can also borrow money up to a certain age, which can be difficult if you have already retired. In order to bypass this problem, you can pick a younger co-borrower to stand with you when borrowing funds.
If you have a co-borrower, the bank would average out your ages and see if you can pay the money you borrowed. Usually, younger borrowers are preferred by banks since they still have a regular source of income.
When you get approved for your personal loan make sure you plan out with your co-borrower on how it can be paid as soon as possible.
Check out offers from credit unions and moneylender companies
If you do not wish to get a personal loan from a bank, non-banking institutions like credit unions and moneylender companies are available. Moneylender companies and credit unions tend to be flexible when it comes to their loan payment plans and would not focus much on the person’s age and credit history. If you have a good credit history, you can approach them to get a loan.
However, not all credit unions and moneylender companies are accredited. Before you approach these non-financial institutions, do your research. In Singapore, the list of accredited credit unions is listed on the website of Singapore National Cooperative Foundation. Licensed moneylender firms can be viewed at the website of the Singaporean Ministry of Law.
When you reach retirement age, it is time for you to take things slow and relax. However, since you need to spend to remain comfortable, you will end up spending your savings if you are not careful. Taking a personal loan can lessen the burden somewhat, but your age might be an issue.
With the help of these tips and some careful planning, you can still get a personal loan even if you already retired and pay it off as easily.