Can you take a personal loan if self-employed in Singapore? Yes, you can, but the conditions for the loan are slightly different compared to those set out for the employed persons. Unlike the employed persons who have direct income that lenders can refer to, a self-employed person has to do more to prove his/her creditworthiness.
Keep reading as we tell you all that you need to know about personal loans for self employed in Singapore.
What is a Personal Loan?
A personal loan in Singapore, also referred to as a consumer loan, indicates a situation where a person borrows money to use for personal needs. If approved, the loan is deposited into your account by the lender in a lump sum and you are required to repay in instalments over the loan term.
Because it is processed in a short time, many people find it an excellent choice for addressing emergencies and or buying personal items. You can also use it for purchasing a car or paying for tertiary education.
Unlike other loans, such as mortgages, personal loans are unsecured. So, you do not require collateral to get the loan approved by the lender. Another important attribute of a personal loan is that you have a free hand on how to use the cash.
Even if you had planned to use the funds to buy a car but now want to use it for education, no one will come asking questions about it. However, it will be very important to go for the loan to address a specific need and always be careful about high interest rates and repayment time.
Personal Loan for Self-Employed vs. Employed in Singapore
When applying for a personal loan as a self-employed person, there are a number of requirements and practices, such as income and credit score that will be different compared to standard personal loans. Here are some of the variations:
● Voluntary CPF Statements are Not Accepted
When making applications for personal loans, employed persons are asked to provide their Central Provident Fund (CPF) statements. These documents indicate the cash contributions that the employer and employee have been making to the CPF.
However, CPF statements will not be a requirement in the case of self-employed persons. Instead, you are required to provide the lender with a Notice of Assessment from the Inland Revenue Authority of Singapore.
● The Amount You Can Borrow Might Be Lower
As an unemployed person, lenders, especially the traditional ones, tend to be more cautious compared to when they work with employed persons. Therefore, the amount approved for personal loans will differ from what an employed person gets, even if the income levels are the same.
Apart from these differences, most of the other requirements are pretty similar. For example, you need to be between 21 and 60 years, have sufficient income, and an impressive credit score to get a personal loan. If the credit score is poor, there is a risk of the application for a personal loan getting rejected. So, all you need to do is prepare well and apply from the right lender.
How to Improve Your Chances of Getting the Personal Loan Approved in Singapore
Although they might not openly indicate it, most traditional lenders have a preference for persons with formal income. As a self-employed person, you can improve the chances of getting your loan approved through the following considerations:
Put a lot of Attention to Your Credit Score
If your score is low, the chances of the application getting declined are very high. You will be considered a high-risk party and no lender will want to be associated with you. Therefore, start by working on your credit score. You can improve it by paying the existing loans, maintaining a good credit mix, and avoiding multiple loan applications. You should also get a copy of your credit score to check if it has errors and have them corrected by the Credit Bureau Singapore (CBS).
Consider Drifting Away from Traditional Lenders
Most traditional lenders in Singapore tend to be very rigid when considering the persons to work with and cash to approve for borrowers. Therefore, it might be a good idea to cast your net wider and try other lenders in Singapore. For example, online financial institutions in Singapore have more flexible terms and conditions, and might be willing to approve your personal loan for self employed in Singapore. See, why go for lenders with high annual charges/ fees and low chances of approving your application when online lenders with higher approval rates are only a click away.
When still at the online financial institutions, you need to be extra careful to avoid falling into the hands of unlicensed financial institutions. The sure way to do this is to work with a lender comparison site that only deals with legit lenders. A good example is Lendela.
Consider Bringing a Guarantor
If you look at the requirements for a personal loan and find it is difficult to qualify for, do not give up yet. If you can get a guarantor, it will be easy to convince the lender to work with you. A guarantor is a person who commits to take up the responsibility of the loan in the event that you are unable to repay.
The person who agrees to act as a guarantor does you a great honour and it is prudent to avoid defaulting. It will also be a good idea to keep the guarantor informed about the progress of personal loan repayment.
Pitfalls to Avoid when Taking a Personal Loan as a Self-Employed
Like other types of loans, it is paramount to be prepared well when setting off to apply for a personal loan for self employed in Singapore. Check out the following pitfalls that you need to avoid:
● Borrowing more than you need.
● Borrowing more than you can be able to repay.
● Not factoring the monthly payments in your budget.
● Failing to consider the interest rates of the loan.
● Applying for a personal loan from any lender in Singapore.
To avoid these mistakes, it is important to work with the best bank, such as Standard Chartered Bank or an online financial institution, for low rates and affordable monthly payments. The amount of cash that you will pay when the loan term ends should also be a crucial consideration. Simply put: you need a loan that you can afford the monthly amount for repayment over the years until the credit is cleared.
Apply for a Personal Loan with Lendela
One thing that is very clear from this post is that applying and getting your personal loan for the self employed in Singapore is never easy. If you have a poor credit score, getting a loan might be even more difficult. Most conventional lenders will also charge high interest rates and monthly payments. To increase your chances of a personal loan approval and enjoy better interest rates, you should consider applying through Lendela.
Lendela is a service designed to help make the process of loan application easy and fast, with full transparency and comparison. The good thing about Lendela is that in addition to helping with application for personal loan for the self employed in Singapore, you can also use us to apply for personal loans for a car, renovation, and wedding etc. Our model also makes it possible for you to get loans with low interest rates even when your credit score is not so desirable. Here are the main benefits of using Lendela.
● Helps to simplify the process of loan application. Unlike the standard loan application process in a conventional lender that can take days, you will only need a few minutes to apply with Lendela.
● Makes it easy to avoid unlicensed financial institutions in Singapore. This means that you will avoid high-interest rates, hidden fees and harassing tactics used by unlicensed lenders to recover money from borrowers.
● Enables proper comparison of real, personalised loan offers from multiple banks and financial institutions – in a transparent and independent way.
● You have higher chances of getting a personal loan for the self-employed in Singapore approved. This is made possible by working with a wide range of lenders, especially online lenders.
The process of applying for a personal loan with Lendela is pretty simple. All that you need is to visit our website and submit your application in a few minutes. Then, the application will be sent to different lenders who will review and reply with their best pre-approved offers. Finally, we will help you book an appointment so that you can sign the loan with the lender in Singapore.
As a self-employed person, getting a personal loan approved by lenders can be an uphill task. Therefore, it is crucial to take an extra step to ensure your credit score is excellent and submit your application through Lendela. Also, plan in advance how you will repay the loan and stick to the plan for the entire year/s until it is cleared.