The rules and requirements for cash loans in Singapore differ among banks and licensed moneylenders. Most applicants, particularly first-time borrowers, will need to provide proof of income and other documents. The necessary documents aren’t too different when you apply for personal loans from licensed moneylenders vs. borrowing from banks.
You’re also qualified for an unsecured personal loan if you are between 21 and 65 years old. Whether you apply for a cash loan from a bank or licensed moneylender, you’ll need to show several documents for their credit evaluation.
What Are the Common Requirements?
Borrowers should ideally earn at least S$30,000 per year to avail of low interest rates and improve their chances of approval. If you earn less than this amount, you can still apply for a cash loan with a higher interest rate. Foreign applicants must be within the same age range to qualify for a cash loan in Singapore.
However, the annual income requirement for non-Singaporeans ranges from S$40,000 to S$60,000 depending on the bank or lending company. Lenders also require a Singapore Identification Card for local applicants, or an Employment Pass and Passport for foreigners. You must also present documents that prove your place of residence. These include utility bills registered under your name.
In terms of income documents, you may need to show your Central Provident Fund contribution history statement from the last 12 months before your application. Some lending companies may also need a computerized pay slip or proof of salary crediting into the lender’s bank account.
Are Payday Loans Better than Personal Loans?
You might be thinking of applying for a payday loan instead of a personal loan, but you should know that the former carries a higher interest rate. In fact, payday loans are even 24 times more expensive than credit card debt every month. In other words, you’ll need to spend 24% of your monthly salary just for settling a payday loan on a monthly basis. By comparison, credit cards have an annual interest rate of 25% that translates to around 2% every month. On the other hand, payday loans charge up to 24% interest in just two weeks.
The reason behind the high interest rates for payday loans involves no credit check. This entices people to borrow money, especially when they have a poor credit history. While payday loans seem like a better option, most people forget that it’s not a sustainable choice because of the risk of default. A lot of people have struggled to pay off their payday loans due to the tremendously high fees.
A personal loan is better because the average interest rates range from 6% to 7%. Even if you include certain fees like processing and administrative charges, the total expenses are more affordable than taking out a payday loan. If you have a credit score above 800, you may even qualify for a lower interest rate for personal loans. You can also borrow more than $200,000 from a personal loan if necessary, while payday loans only approve less than $20,000 that you need to repay within a shorter time.
What Are the Common Types of Personal Loans?
Most consumers don’t know that there are four common types of personal loans in Singapore comprising personal lines of credit, installment loans, balance transfer and debt consolidation. Installment and lines of credit are quite similar. You can use both for various purposes. Balance transfers and debt consolidation are only applicable to paying off debt.
If you want to borrow money at any time, you can apply for a credit line from a bank that will give you access to a fund. Each time you withdraw money from it, the bank will charge an interest fee on the withdrawn amount. By contrast, a personal loan is a lump sum disbursed to your preferred bank account (usually the one where you have a savings fund). You repay the amount in a fixed number of months or years.
Personal lines of credit come in handy if you have unpredictable expenses or an unstable source of income. However, you need to have a strong sense of discipline. If you have a credit line of $10,000, the bank won’t charge anything until you take out money. For example, you may pay around $83 in interest when you take out $5,000 from the credit line for a month, which is based on the formula of 5,000 x 20% / 12 months.
What Can You Do to Increase Your Chances of Approval?
If you’re worried that banks or reputable lenders won’t approve your loan for certain reasons, you can still increase your chances of approval by getting a copy of your credit report. Check for inaccurate data such as unpaid credit card debt and other loans that shouldn’t be under your name. The Monetary Authority of Singapore only recognizes the Credit Bureau of Singapore and DP Credit Bureau as the two official credit reporting agencies.
These two agencies keep a record of loan amounts that you have taken, your payment histories, type of debt and any instances of default. The payment history and amount are the two most important factors, but you still need to check if there are inaccuracies as banks and lenders sometimes make mistakes. For instance, you could have a record of another credit card under your name even when you didn’t apply for one.
Another way to improve your credit score requires you to avoid making too many loan or credit card applications. If you recently applied for either one, you should wait for at least six months to one year before making another application.
A personal loan with a low interest rate is a better option for having money to pay for urgent expenses, as opposed to the use of credit cards that have higher rates and extra charges. You can increase your chances of loan approval by checking your credit score to fix any inaccuracies. Want to find a legal moneylender? Check out the Minlaw approved list of licensed money lender in Singapore.