Applying for a loan can be a meticulous process, that is why it can look difficult for some borrowers wishing to do so. However, the application process in Singapore can be relatively fast.
It is not difficult to get a loan in Singapore, as long as you know the eligibility criteria and requirements for each loan type. A good credit history will greatly help with the approval process as well, but it is not a mandatory requirement for several financing services.
While there are common eligibility criteria and requirements across all loan types, they have their own unique requirements that you must prepare in order for you to get better approval odds.
Factors That Determine Your Application Approval
Factors that will determine whether your approval will come through, and how hard it will be to get, are eligibility criteria and requirements, as well as your credit score.
1. Eligibility and requirements
Moneylenders have fewer eligibility criteria and requirements compared with banks. An example would be the existence of a good credit score requirement when it comes to bank loan applications. Moneylenders do not require high credit scores in applications.
2. Credit score
As said earlier, banks will require good credit scores. Each type of loan associated with the need for a good credit score usually involves high maximum loan amounts which, coincidentally, are offered by banks as well.
On the other hand, loans that are moderate or lower in terms of the loan amount are offered mostly by a licensed money lender, which do not require good credit scores.
Either way, a good credit score can greatly help to get approval odds (and marks you either as a low-risk or a high-risk client).
Lastly, it makes sense that other lenders and loans are not strict on credit score, as this allows borrowers with bad credit history to get better scores with a controlled gradual intake of small credit.
Related Article: 5 Ways to Improve Bad Credit Score in Singapore
Approval Odds by Loan Type
When it comes to approval odds, all loan types have more or less the same approval rate. Usually, this involves meeting the eligibility criteria and having the required documents.
Banks tend to be more strict and have more requirements compared with a licensed money lender because they offer higher loan amounts, but both of them provide a secure and legal transaction.
Banks will also take credit histories into consideration more than licensed money lenders; while for money lenders, the assessment of the current capacity to pay is more important than credit histories.
A personal loan is easier to take, but there is a difference in criteria when it comes to Singapore residents and foreigners. With either banks or moneylenders, foreigners will have a higher minimum monthly income requirement compared to residents, although the minimum monthly income requirement is lower on the side of moneylenders than with banks.
Typical requirements: For the required documents, personal loans require the usual identification requirements, such as IDs and proof of residence. You may also be asked to login your Singpass to access CPF, HDB, or IRAS statements. Note that loan providers are not allowed to ask for your login username and password.
2. Payday Loan
Payday loans are approved based on one’s monthly salary, therefore it also depends on the minimum monthly income of borrowers. One can get higher loan amounts with a higher salary.
Typical requirements: Payday loan applications will require proofs of income, such as bank statements and recent payslips, but banks will require more proofs than moneylenders, because of their more stringent process.
Business loans have a relatively long list of requirements due to its high maximum loan amount, but it is much easier to get this loan with moneylenders compared with banks. However, banks will offer a bigger loan amount for businesses wanting to apply, compared with the loan amount of moneylenders.
Typical requirements: Required documents usually involve financial information about the business itself, along with its owners, business directors and partners. This include financial statements, income tax assessment notice, and list of assets owned by relevant people inside the business.
In the case of bridging loans, a good credit score is still a requirement for banks, despite the loan’s shorter loan tenure compared to other loan types. As usual, moneylenders will offer bridging loans despite a lack of good credit scores on the side of the borrowers.
Typical requirements: As for the other requirements, bridging loans require Option to Purchase (OTP) document, CPF withdrawal statements and outstanding bank loan statements. Borrowers must also be people who are in the process of selling their property in Singapore
5. Home Loan
Home loans will ultimately require a good Total Debt Servicing Ratio (TDSR) if the application is made with banks. Also, private properties will require a higher annual minimum combined income than applying for a loan with HDB flats.
Typical requirements: For required documents, this will involve the usual personal and financial information of the borrower as well as the details of the property involved, such as valuation report (for HDB resale) and Option to Purchase/Sales and Purchase Agreement (for new purchase).
Not all banks offer this type of loan, so it is important to check your chosen bank if they offer this service. Renovation loans will also require that you own the property that is being renovated.
Typical requirements: For other requirements, this loan requires the usual identification requirements as well as property documents, including Copy of Option to Purchase (OTP) document and invoice from renovation vendor.
7. Car Loan
Again, good credit scores is a must if you wish to apply for a car loan with banks. Licensed moneylenders, on the other hand, can approve a car loan even with bad credit scores, as long as you fulfill the other requirements.
Typical requirements: The requirements include a minimum income of $30,000 or 4x higher than monthly installment, documents related to the borrowers financial information and also Sales and Purchase Agreement (Used Attached or Own Agreement).
8. Student Loan
In the context of student loans, some banks only offer this type of loan if you are enrolled in a specific university. Also, compared to moneylenders and their flexible terms, banks require that you borrow not lesser than a specific loan amount. This caan be a problem if borrowers only need a small loan amount for their education needs.
Typical requirements: For the requirements, borrowers might need to have a guarantor with them, together with a proof of relationship. Other pertinent documents such as enrollment details and financial information are needed as well.
9. Wedding Loan
Even in the case of wedding loans, a good credit score is a necessity for bank applications. It will also require that the borrower has no bankruptcy proceeding or is not an undischarged bankrupt.
Typical requirements: For the required documents, this will include work permit and records of cash flow (for self-employed individuals).
Things to Consider Before Getting a Loan
Loans require diligence and careful consideration of each aspect before deciding to get one. Here are the things you should consider before getting loans. Make sure to take note of these:
1. Loan amount
This involves a breakdown of the total principal, which includes interest rates and side fees such as processing fees or administration fees added on top of it.
Any financing company or lender will always indicate a maximum loanable amount for all types, which means that being eligible for a certain type of loan will entail you of the said type’s maximum loanable amount.
A higher principal also translates to a higher accumulation of interest rate per installment.
2. Interest rate
Interest rate simply refers to the added fees per installment. This comes monthly or yearly, depending on the agreement. This is one of the primary factors used in choosing a particular financing company or service.
3. Repayment terms
Repayment terms, or the repayment plan, decides when and how loans will be repaid. It indicates the intervals of installments (usually either monthly or yearly) and whether it comes in regular or lump sum payments.
Repayment terms also dictate what counts as a ‘late’ payment, for the purposes of late payment fees, if present in the agreement.
4. Other charges and fees
Side fees often exist in agreements, that is why all people should check if they appear on the agreement.
5. Processing fee
This is charged as compensation for the effort exerted in processing requests for loans. Processing fees are usually calculated through a specific percentage of the total principal (around 1%-2% most of the time)
• Prepayment/Early Payment Fee
This fee acts as compensation for the lenders’ lost revenue from interest rates, due to an early full payment of loans.
• Late Fees
Late fees for loans are administered when the installment payment goes over the scheduled date for loan payments. The repayment plan defines what counts as a ‘late’ payment.
• Administration/Annual Fees
Used for monitoring and maintaining credit facilities, these fees, depending on existing promotions, can be just a one-time payment or waived for succeeding months/years of installment.
It can be difficult to check these aspects one by one in any financing business and lender. If you wish to compare credit rates and lending options through an internet site, you may check out the site of Moneylender Review, a reputable loan comparison site that contains up-to-date information, news, and advice about financing rates and services.
Their site allows people and businesses who are prospective borrowers to get the best rates and find a service that is most convenient for their needs. They also offer up to 3 loan quotes from top licensed moneylenders in Singapore through your email address for your inquiry, which can help you decide on a financing business or service.
It is actually not hard at all for individuals and businesses to get a loan in Singapore, considering there are a multitude of financing companies and lenders that you can choose from. As long as you know and are prepared with the eligibility criteria and required documents, it will be a fast transaction and approval.
Aside from the eligibility criteria and requirements, it also pays off to have a good credit history, even if it is not mandatory for several financing options and lenders, because it will make your approval process much easier and smoother.
If possible, make an effort to improve your credit history before submitting an application to get better approval odds and chances. A good credit situation will also allow you to get lower interest and better repayment plans, which means that improving it is always worth the effort.