We all know how important a credit score is when it comes to availing a loan. A bad or poor credit score can ruin one’s chance of getting approved for a loan. So, is it possible to apply and get approved for a personal loan with a bad credit score? Yes, surprisingly, it is! Read on to know how individuals with bad credit score can get personal loans in Singapore.
One of the best ways to get a personal loan with a bad credit score is through a co-signer. The applicant can approach a family member or a friend with a good credit score to be a co-signer on the personal loan. Banks are more willing to grant personal loan to the applicant with a poor credit score if they get a co-signer who has a good credit score. The bank will set the loan terms based on the credit score of the person with good credit, who will then be equally responsible for repayment. Every detail regarding the loan will be on the primary applicant’s and co-signer’s credit reports. It is important to ensure that you make payments on time and not default on the loan as your actions will not only affect your credit score but also your co-signer’s credit score.
Banks are reluctant to grant loans to an individual with a poor credit score but there are exceptions. Many banks and financial institutions in Singapore grant personal loans to individuals with a bad credit score at a higher rate of interest. Lower the credit score, higher the rate of interest. This might not be one of the best options, but it is one of the only options available if you possess a poor credit score.
If your credit score puts off banks or financial institutions, the best chance to get the finance you need is through a secured loan. A secured personal loan is a loan scheme in which the applicants borrows against an asset they own, such as a home, car, boat, savings or even stocks. The bank or financial institution will hold the asset as collateral against the applicant defaulting on the loan. Low rate of interest, higher loan amount, better terms are some of the advantages of a secured personal loan. Secured loans usually offer lower interest rates, better terms and access to larger amounts of money than unsecured loans. They also can improve your credit score, if paid off in timely fashion.
The bank decides the amount you can borrow based on the amount of equity in the asset that’s used as collateral. Usually homes are regarded as the best collateral to get a personal loan.
There are some banks that will offer secured loans based on the amount the applicant has in their savings account or the value of the stocks the applicant owns. The advantage of getting a secured loan against savings or stocks is that the applicant does not have to liquidate the asset.
Getting any kind of loan with a bad credit score can be quite a hassle. If the applicant fails to get a personal loan through the above mentioned ways, they should focus on improving their credit score. Making payments on time, paying off debt, balance transfer on credit card are some of the ways through which the applicant can increase their credit score.
Once the applicant gets approved for the personal loan, they should focus on making payments on time on the loan as this move will help them increase their credit score.