People engage in loans and credit to provide a cornerstone to their finances. It is essential especially if there are unexpected events that may need an emergency fund. One of the most common types of loan is a personal loan. It can be unsecured or secured credit. Here are five critical tips to consider when applying for a personal loan.
The credibility of the Debtor
Moneylenders look for the criteria of 6 C’s of the debtor:
- It is in the sense that he should pay his bills on time and his ability to meet financial obligations and credit agreements. Having these characteristics are signs of good character. His credit history is essential for lenders for them to evaluate the debtor’s credit score. That’s why there is a need to assess one’s credit reports to be aware of his credit reputation.
- It is also called debt-to-income ratio that measures the individual’s capacity to pay versus the obligations. It also implies the ability to repay one’s loan or other financial commitments. Creditors want to see the capability of the debtor if he has enough cash over after fixed expenses.
- Debtor’s assets subtracted from liabilities is his capital or net worth. Potential creditors will also assess debtor’s value to be able for him to handle loan or credit.
- Lenders will also look to the debtor’s stable life condition such as his stability in his employment and his liabilities. The longer his stay in his work, the better it is for the loan to approve.
- It only applies to a secured loan. Collateral is a possession or property that the debtor’s own that can be used for obtaining a loan. It is a guarantee for lenders once the debtor fails to pay for his credit. Examples of collaterals are automobiles, plant, property and equipment and the like.
- Cash Flow. It is the inflows and outflows of cash from the debtor. It is relevant to the lenders for them to assess if the debtor can repay a loan. Creditors also want to assure if the debtor has enough cash flows to sustain a credit obligation.
Types of Money Lenders
Debtors must also consider what kind of money lenders he should apply for a personal loan. To give a few, here are some of the licensed money lenders in Singapore as mandated by the Ministry of Law:
- It is one of the reputable lending institutions in Singapore. They are the best option regarding providing quick cash. They are sensitive to their client’s concern when it comes to their emergency fund.
- Credit 21 Pte Ltd. It is one of the top legal and licensed creditors for a personal loan. They provide best interests for their clients and assure transparency for the borrowers.
- U Credit Pte Ltd. It offers lowest interest rates, and they approve loans depending on your income or capacity to pay.
In choosing one creditor, make sure that it offers lowest interest rates, convenience, and transparency.
Do Intensive Research
It is not enough to do simple research but instead, do a thorough one. After assessing oneself, the type of lending institution to consider, one must also know the terms and conditions that are attached to a personal loan. He should compare the interest rates offered by different creditors whether it is a fluctuating or flat rate. Make sure to have pertinent information to gather before making a decision. Also, ask help from the professionals. Research process helps the debtor to decide what fits his needs.
Market Condition
The market is also a high factor to consider when applying for a loan. It has an impact on the credit condition. When the economy is doing well, the more substantial the market is, the higher chance for the loan to be approved. Furthermore, credit is more available at economical rates, and one has the assurance to get the most convenient terms and conditions for a personal loan.
Secure the Documents Needed
If one is ready and fully equipped to apply for a personal loan, he should prepare the necessary documents needed. Some of these documents are Income Tax Assessment Notice, proof of income and the like. You should also verify your application details so that lenders have no reason to reject your loan approval. One must also consider not to have multiple applications.
It is indeed a matter of preparation before entering into a personal loan application in Singapore. To be approved, one must need to be knowledgeable and aware of what he is doing. He should also seek guidance and assistance to the professionals before making decisions.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin