If you have an emergency or financial flow issues, one of the go-to options is a personal loan in Singapore. However, if your past mistakes have pushed down your credit score, you might be wondering if it is possible to access a personal loan and the amount you can get from licensed financial institutions.
Your credit score is the single most crucial factor when applying for loans and it can be challenging to borrow money when it is poor, especially from licensed lenders like banks. Well, it is not all lost because we have the best suggestions for you.
Keep reading as we demonstrate how to get a personal loan in Singapore with bad credit. We will also list some expert tips for improving your credit score.
Bad Credit Score: What is it?
In Singapore, the personal credit scores of individuals are calculated by the Credit Bureau Singapore. The score is a 4-digit figure based on several parameters, such as your previous payment history, and shows the likelihood that you will default on loans.
The highest score on the scale is 2,000, while the lowest is 1,000. If you have the highest credit score or anything close to 2,000, the credit score in Singapore is considered good. However, scoring between 1,000 and 1,723 is deemed to be a bad credit rating, and you are considered a high-risk party “HH.”
A number of factors impact your personal credit score, and it is vital to know how it is calculated. So, here are the main factors that are used to calculate it.
- The credit account history: This is perhaps the most important factor when calculating credit scores for Singaporeans.
- Your recent credit activity: If you make very regular applications for loans, the credit bureau sees like you are stretching yourself. They view the multiple loan applications as a red flag, and it pushes the score down.
- Account delinquency: This is another essential factor when your credit report is being prepared because it captures how effectively you have been making payments. For example, have you been making loan repayments late? Have you been declared bankrupt?
- Credit utilisation pattern: This demonstrates how you have been using different lines of credit, from loans to credit cards. The aim is to try and identify changes in financial or money spending patterns, which lenders see as a red flag.
How to Get a Personal Loan in Singapore with Bad Credit
Now that you know what a personal credit score is and the factors that affect it, the truth is that improving it is not a quick fix thing. So, if you need a personal loan urgently, here are your options.
Go For Smaller Personal Loans
When your credit score is poor, most lenders will be unwilling to trust you with large amounts. However, they might be willing to take the risk when the amount involved is low. So, instead of borrowing $5,000, it might be a better idea to start with $800 from a licensed financial institution. If you repay this loan plus interest faithfully, it will send a signal to the lender, "see, I am now responsible and can follow the agreed repayment schedule to clear the entire loan amount." Indeed, taking short loans in Singapore and repaying them faithfully can help to build a positive credit history and improve the bad score progressively.
Borrow From a Credit Union
Credit unions in Singapore come in handy to assist when one needs a personal loan, but the credit score is poor. They have more flexible terms and conditions than banks and other licensed institutions because they are classified as non-profit entities. Therefore, they are able to work with clients who are considered riskier by banks. You might want to compare several credit unions because their terms and conditions, such as monthly payments and interests, for loans differ.
Consider a Home Equity Loan
If you have a home, it might be possible to get some money against its equity. It can be a good channel to get some funds if your application from a bank or other lenders is declined. In Singapore, home loans come with fixed interest rates and terms and conditions for repayment. They also allow the borrower to repay over a long period, up to 30 years. If itemised, the interest can be deductible from your taxes.
What you need to note about home equity is that your home becomes the collateral. So, you need to be extra careful because failing to repay the loan could result in your house getting auctioned and a bad score.
In Singapore, there are some home equity loans with fees while others require one to reach a significant level of equity to qualify. Therefore, it will be good to research these loans well and settle for the most appropriate option for your situation.
Use Lendela to Apply for a Personal Loan
Although some lenders will automatically stamp your loan applications rejected if the credit score is bad, there are also others who might be willing to work with you. For most people, how to get these lenders is the challenge, but we have the best method for you: using Lendela.
Lendela is a lender comparison site that was developed for the sole purpose of simplifying the process of a loan application. Instead of taking hours or even days trying to make the application for a personal loan in Singapore with bad credit, Lendela makes it a few minutes affair. So, here is how it works.
To use Lendela, all you need to do is visit our website and submit a short application. This will only take a very short moment. Once you provide all the required details, Lendela sends the application to different lenders, but we do not do this blindly.
Instead, we use an advanced matching algorithm that helps to check lenders who are willing to work with your profile. So, if you have a bad personal credit score, the application will be sent to lenders who are willing to take the risk.
Then, the lenders who are okay with your details get back with their pre-approved offers. This means that if you are fine with the terms and conditions, the only remaining thing to get the money is final checks and your signature. So, carefully review the loan agreement, especially interest rates, and only select the offer that comes with the best conditions. Then, Lendela will help you book an appointment with the selected lender for signing the loan agreement.
Finally, sign the loan agreement and the money is disbursed to your personal account. From there, all that remains is for you to repay the loan. So, it is paramount to have a good plan for repaying it. We recommend that you revisit your monthly budget to factor in the repayment alongside other personal expenses.
How to Improve Your Credit Score
One notable thing about applying for a personal loan with a poor credit score is that it usually attracts a higher interest rate compared to when you would have taken it with good credit. Therefore, it is important to work as hard as possible to try and improve your credit score before making the decision to apply. Here are some useful tips for improving your credit score:
- Apply for short loans in Singapore and repay them quickly to build a positive credit history.
- Repay the current debts to improve the score.
- Consider taking a debt consolidation loan in Singapore if you have multiple loans.
- Correct errors that might be in your credit report before applying for loans from a licensed lender. Remember that you need to start by first getting the credit report and reviewing it closely. For example, does the report indicate you have a debt whereas you do not have any?
As you can see, bad credit can be a serious challenge for you, especially when trying to apply for a personal loan from conventional lenders. However, you can use the four options we have listed above to get a personal loan in Singapore with bad credit.
Working with Lendela is particularly awesome because you can simplify the process and get the loan approved fast even when you have some debts and a not-so-good credit score. However, you need to focus on improving your personal credit score to make it easy to access loans in future. Again, make sure to carefully follow the monthly repayment plan until the loan is cleared.