Applying for a personal loan is never easy because there are a lot of things you need to consider before you apply one. One has to consider the requirements for the loan they are trying to apply, the amount you plan to borrow, your credit history, and which moneylender to go to when you are ready.
However, even if you have all the requirements ready, stories of those who failed to get a personal loan would cause you to have doubts about your loan preparations. If you panic too much, it will lead you to have troubles with your own applications.
Contrary to popular belief, moneylenders – as well as non-banking institutions – are actually quite straightforward when it comes to processing loan applications and what they need. They will clearly stress their guidelines when you inquire and it only takes a few hours to get processed if all the requirements are met.
If you are planning to seek a personal loan or any other loan from a moneylender, here are some tips to make it swift and successful:
- Understand the facts about the Total Debt Servicing Ratio
In order to determine if a borrower should be permitted to get a personal loan, Singapore moneylenders and other lending institutions use the Total Debt Servicing Ratio framework as ordered by the Monetary Authority of Singapore. The TDSR assists applicants in making good financial decisions and help determine how much they can actually borrow and pay.
By understanding the TDSR, you will be able to determine if you will be able to borrow the amount you intend to apply for based on your income or assets. If banks and moneylenders see that your income is greater than the amount you intend to borrow, they will approve your personal loan application without any fuzz.
- Develop your credit history
Nowadays, it is not really uncommon for people to have a lot of loans under their plate due to the expenses one has to pay monthly. However, if your loans already comprise 60% of your total income, getting another loan approved can be difficult. Some moneylenders may permit you to borrow more, especially if you are a returning client, but the amount may not be as high as you hope.
Before you apply for a personal loan, check your credit history first to see if there will be issues with your application. You can request your credit history through the Credit Bureau Singapore for a small fee. Your credit history would indicate all your outstanding debts, and your current and past transactions.
If you have a lot of active debts, it would be ideal to consolidate them into one debt through debt consolidation loans. This will help you pay your debts easier since you will only have to pay one monthly until your loan term ends.
You can also build your credit history by paying your dues on time or using a secured credit card instead of a regular credit card. You can also deposit a lot in your bank account and prevent excess withdrawals.
For those with black marks in their account, or those with foreclosed accounts or defaulted loans, it is ideal you speak to a financial expert to help you rebuild your credit history.
- Check the market
Banks, moneylenders and financial institutions often check the market to determine if they should approve personal loan applications. If the market is unstable, they will have scarce resources to lend loans to borrowers and loans will become more expensive. If the market is stable, they will be able to offer cheaper loans.
Time your loan application during the months when the market is stable so you have more chances to get your loan application approved. You may even get nice rates during this time.
- Prepare the right documents
If you wish to apply for a personal loan, you must be able to present the right documents to prove that you will be able to pay your loan. Some of the documents that may be asked from you include your income tax, NRIC, CPF Contribution History and your pay slips. They will also ask for your employment contract or sources of income.
You must make sure that you have copies on hand so the bank or moneylender will not have to wait for you to produce these files. Make it a point to photocopy these documents and ensure they are up-to-date. If you miss any one of these documents, you may find it difficult to get your application approved.
Once your loan is processed, they will return these documents to you.
- Do research about the moneylender and personal loan you plan to apply for
Finally, when you have everything ready, you must do your research when it comes to which moneylender will provide you the right personal loan that matches your needs.
Remember, not all moneylenders or financial institutions in the market are trustworthy, which is why it is important you check with the government if the moneylender you plan to use is registered. The Ministry of Law has a full registry of approved moneylenders.
You must also check which loan program you are planning to get. Consider the interest rates, the length of payment terms, amount of repayments and the type of loan it is: whether it is secured or unsecured loans.
Moneylenders will be happy to answer any inquiries you have about the loans and if you think you need a more flexible plan, they could sort it out for you.
If you want to ensure that your loan applications will be approved in no time at all, you need to prepare as early as possible once you decide that it is the solution you need for your cash problems.
If you do your research, studied all the available loans for you to choose from, and prepared your documents, you will be able to make a better financial choice.
Early preparation would also help you speed up your loan application and guarantee that you will be able to get your loans without any problems.