If you want to get a personal loan and you are wondering if that is possible considering you have a bad credit score. Here we have an answer.
It is not uncommon for past mistakes to haunt us, like a bad credit score. In most cases, financial institutions are less likely to lend you money if you have a bad credit score.
However, that is not always the case because there are personal loans for bad credit. It is not anyone wishes to end up in debt because of job entrenchment, health issues or wrong money choices.
There are several factors that can lead to a bad credit score. But that doesn’t mean you cannot get a personal loan in Singapore.
In this post, we’ll be discussing what is a bad credit score, the reasons, how to improve a bad credit score and whether you can get a bad credit loan in Singapore.
Table of Contents
- What is a Bad Credit Score?
- What Causes a Bad Credit Score?
- Can you take out a personal loan if you have bad credit?
- Personal Loans for Bad Credit from Licensed Moneylender in Singapore
- How to Increase Your Chances of Getting a Personal Loan in Singapore with Bad Credit?
- How to Clear Bad Credit History in Singapore?
What is a Bad Credit Score?
Credit scores are four-digit numbers calculated based on your loan repayment history and whether you abided by the repayment terms without defaulting.
The Credit Bureau Singapore (CBS) calculates a person’s credit score in Singapore.
The highest score is 2,000, while the lowest is 1,000. Scores between 1,000 and 1,723 are considered bad credit.
You can get your credit history report at Credit Bureau Singapore Report. You’ll have to pay $6.42 for the report.
Here’s a credit score table from CBS:
|Score range||Risk grade||Min (Probability of Default)||Max (Probability of Default)|
Source: Credit Bureau Singapore
Read Also: How to Check Credit Score in Singapore?
What Causes a Bad Credit Score?
If you need a personal loan in Singapore but have bad credit, you should work on improving it before applying for a loan. You can reach this goal by first learning about what may have caused your low credit score.
Your first step should be to request a copy of your credit report from CBS. By using the information in the report, you can figure out what might have caused your score to drop so quickly.
However, we have listed some of the most common causes of bad credit scores. We have however listed some of the common causes of bad credit scores.
Having no credit history
Banks and licensed moneylenders in Singapore will think you don’t need their assistance if you don’t take out a loan.
The fact that you have never taken out a loan doesn’t mean you have a great credit score. Not everyone is aware of this.
When you don’t take out a loan, your credit score goes down. This is because financial organisations can’t tell if you are good at paying back loans or what your financial situation is right now.
Delay payment of a loan
Having late payments or paying only part of them makes it clear that you may not be able to pay back a new loan.
However, even if you have always paid your bills and loans on time, your credit report might still be inaccurate due to faulty programming.
Check your credit report regularly and dispute any errors you find.
If you receive a copy of your credit report, you can dispute any mistakes on it. You should also check your credit report often for this reason.
Defaulting on a loan means not paying it back. As a result, the bank does not keep track of it and writes it off as a loss.
You are still responsible for repaying the loan even if the bank agrees you will not be able to.
You will still see it on your credit report, which can lead to:
- Finding work is difficult, especially in the financial sector
- Money being taken from your account
- You lose the assets you used to secure the loan. Losing the assets you bought with the loan, is becoming more common among Singapore’s homeowners.
- Legal proceedings are underway
- Having difficulty getting a new loan
Make sure you pay your loans on time by doing everything you can. Furthermore, financial institutions are willing to restructure your loan or allow you to pay only the interest for a while (usually a few months) until you are back on your feet.
Taking Several Credit Facilities
Having more than one credit facility may indicate that you are stretching yourself too far.
Singaporean banks consistently run a number of offers that can’t be ignored. However, it is equally essential to refuse their requests, particularly when you don’t need their services, such as getting a new credit card.
Can you take out a personal loan if you have bad credit?
The good news is you can take out a personal loan if you have bad credit. There are licensed moneylenders in Singapore that provide personal loans for bad credit.
However, there is one important aspect you ought to understand. A licensed money lender will decide in large part how much interest to charge you based on your credit score.
Even though many lenders are willing to give personal loans to people, especially those with fair credit, those with bad credit should expect to pay higher interest rates.
Because of this, it’s important to talk to more than one lender so you can compare their terms and interest rates.
When you get turned down for a loan by one lender, it doesn’t mean you can’t get money from other lenders.
Since the approval process depends on a lot of different things and isn’t always open to review, it is impossible to know personal loans for bad credit in Singapore.
However, here are some of the best personal loans from banks that you may consider.
Personal Loans for Bad Credit from Licensed Moneylenders in Singapore
As you shop around, you will find that there are some licensed moneylenders offering personal loans for bad credit scores.
You may take advantage of it. However, make sure that you can able to repay it on time to improve your credit score. Remember to borrow only from licensed lenders and avoid dealing with loan sharks
Why? Here’s a great read for you: Licensed MoneyLender Vs. Loanshark – Know the Difference Between the Two
Here’s a table on how much you can borrow from a licensed moneylender in Singapore:
|Annual Income||Singapore Citizens & PR||Foreigners Residing in Singapore|
|At least S$10,000 and below S$20,000||S$3,000||S$3,000|
|At least S$20,000||6x of monthly income||6x of monthly income|
HSBC Personal Loan
The HSBC personal loan offers the most cost-effective choice for the majority of individuals who are thinking about getting a loan because it has the lowest interest rates on the market (starting at 6%).
The HSBC Personal Loan is unique because it can be paid back over a period of up to seven years. Most loans from other financial institutions have terms of five years or less. This strategy helps borrowers because it makes their monthly payments more manageable and spreads out the cost of a large loan.
POSB/DBS Personal Loan
One of the common reasons people, especially those with bad credit, decide to get a personal loan is because they need money right away.
Because POSB and DBS can give out cash quickly, we recommend that these customers get personal loans from those two banks.
POSB and DBS also offer quick loans to people who have personal lines of credit or credit cards with either of the two banks.
DBS and POSB stand out from other banks in Singapore because the fixed interest rates on their personal loans are among the lowest and start at 2.88% (EIR 5.79%). This is in addition to the fact that they offer tempting deals and pay out money very quickly.
It is important to note, though, that the tax rates are much higher for people whose annual income is less than S$30,000 (11% flat rate and 20.01% EIR).
Standard Chartered CashOne
Standard Chartered’s CashOne loan is a good option for people with low incomes and bad credit.
Borrowers who make between S$20,000 and S$30,000 a year can get personal loans from the bank with interest rates between 9.8% and 10.8% and no processing fee.
When compared to the rates offered by competitors, who charge flat rates of 11% to 13% plus processing fees of up to 4%, these rates are a big deal.
Even though people with lower salaries may find these interest rates attractive, it’s important to remember that Standard Chartered will only lend these people up to S$5,000 or two times their monthly pay, whichever is less.
If you need a loan to pay for a really big expense, like a wedding, this could make it harder for you to get one.
If your annual income is less than S$30,000, on the other hand, we strongly suggest that you don’t borrow more than this amount in the first place.
Citibank Quick Cash Personal Loan
Citibank Quick Cash Personal Loan is an option for people with bad credit who want an affordable short-term loan (formerly known as Ready Credit PayLite).
Citi’s credit requirements for this product are not clear, but the rates they offer to new customers are among the best in the market.
Citibank’s effective interest rate ranges from 7.5% to 8.5% for loans with terms of one to three years. This is one of the lowest rates available in Singapore right now.
Citibank does not charge a processing fee, and its minimum loan amount is only S$1,000, while HSBC’s minimum loan amount is S$5,000. This makes Citibank very easy for all borrowers to use. The least you can borrow from HSBC is S$5,000.
But there are some bad things about the Citibank Personal Loan as well. First of all, the bank doesn’t have the best interest rates for personal loans with longer terms for paying them back.
For instance, the effective interest rate on loans with terms longer than three years can go as high as 10.5%, which is much higher than the rates offered by its top competitors.
Due to this, Citibank’s Personal Loan is not a good choice for people who want to borrow money for a long time.
Even though Citibank approves loan applications within an hour, getting the cash can take anywhere from three to five days, which is longer than the average time it takes to process a personal loan in Singapore.
How to Increase Your Chances of Getting a Personal Loan in Singapore with Bad Credit?
If you don’t need a personal loan for emergencies, the best thing you can do is work on improving your credit score. It will make it more likely that you will be approved for the loan without putting you under too much stress.
Make it a top priority to pay off all of your bills when they are due. Reduce the balance on your card so that it is no more than 30% of the credit limit that has been set aside for you. Getting a new line of credit could make your current financial situation a lot worse.
Here we have listed several things to do and increase your chances of getting a personal loan with bad credit in Singapore.
Try not to apply for loans all at once.
No matter how tempting it may be, you should never apply for more than one loan at the same time.
If you act like this, you will send the wrong message to financial institutions. If you tell them this, they might think that you are having a hard time with money and need a loan as soon as possible.
A financial emergency can also be a sign that you are more likely to not pay back your debt.
So, even if you’re tempted to take advantage of great loan deals, you shouldn’t do so unless you know for sure that you need the money. It looks like you need money a lot if you apply for five loans in a short amount of time.
Also, filling out a lot of credit applications at once shows the credit bureau that you want credit badly; this could lower your score.
Go for a smaller loan.
It’s a good idea to apply for smaller loans because that will make it more likely that you’ll get one.
People with bad credit scores are more likely to be turned down for larger loans by financial institutions, but they are more likely to be approved for a smaller loan.
For example, if you wanted to borrow S$10,000 but only have S$4,000, you might want to lower the amount. This makes it more likely that your loan request will be approved.
The best thing about applying for a small loan is the following. It not only makes it easier for you to pay your bills on time, but it also shows that you are responsible for your money.
This will not only help you get out of your financial mess faster, but it will also help your credit score.
Apply for a Personal Loan from Licensed Lenders in Singapore
People with bad credit in Singapore who can’t get a personal loan from a bank often turn to loan sharks.
But it’s important to remember that unlicensed moneylenders are extremely risky, and you should never borrow money from one of them.
Getting a loan from a licensed moneylender is much better than going to a bank because licensed moneylenders don’t care as much about applicants’ credit scores and don’t charge outrageous fees as loan sharks do.
For example, some licensed moneylenders in Singapore will use their own internal systems to check the creditworthiness of their customers before lending them money. If a bank says no to your loan request, you might have better luck with a regulated moneylender.
If you borrow money from a licensed moneylender, you don’t have to worry about having to pay sky-high interest rates. In Singapore, licensed moneylenders can only charge up to 4% per month in interest, no matter how much money they lend.
No matter how good your credit is, you should never borrow money from a lender who is not registered. They are known for using annoying tactics and charging sky-high interest rates, which could hurt you and your family.
How to Clear Bad Credit History in Singapore?
Clearing up your credit history is, without a doubt, the best way to improve your chances of getting a loan.
You’ll not do that in a day or even a month, but if you keep at it, you’ll get there. Here are the steps you need to take.
Ensure that you pay back your loans on time.
You should start paying off the debt you already have, and you should make it a goal to never miss another payment deadline.
When it comes to your monthly bills, this is when you need to start being more responsible. Think about it: what are you currently spending too much money on? What are some ways you can lower your expenses?
Find out how you can cut your spending so you can start paying off your debt. With this method, you can avoid paying late fees, which will make it much easier to pay off your debt. This shows not only that you are committed to paying your bills, but also that you are determined to do so.
Renegotiate your debt.
If you want to change how you pay back your debt, the first thing you need to do is talk to your creditor about it. For example, you can ask for a longer time to pay back the loan and a lower interest rate.
If the loan is paid back over a longer time period, the interest rates may end up being higher. Even though it doesn’t sound good, this is definitely better than falling behind on your loan payments.
Your credit score will almost certainly go down if you don’t pay back a loan, so don’t take them lightly. If at all possible, you should always try to pay back all of the money you borrowed.
Use Balance Transfer
A balance transfer not only lets you combine the balances on all of your credit cards, but it also helps you get rid of things that look bad on your credit report.
This is a method that not a lot of people know about. Getting a more affordable loan to pay off your debt is a great way to pay off any debts that you still owe.
One example of this is a balance transfer, which lets you move the balances on your many credit cards to a single account that doesn’t charge interest for a certain amount of time.
You will have more time to make payments on time, which will help your credit score improve faster.
Consolidate your debts
When you have to pay back more than one loan, it can be hard to keep track of everything, and you might miss a payment deadline.
With the help of a debt consolidation plan in Singapore, you might find that everything is easier to handle.
It works by combining several smaller loans with high-interest rates into a single larger loan. This way, you only have to make one payment each month instead of several.
In Singapore, a personal loan is called a debt consolidation plan. This kind of loan is a great way to get your finances in order, and if you pay it back on time, it can even help you clear up your credit history.
Consider credit counselling.
When bad money habits have been going on for a long time, it can be hard to change them.
Credit counselling can help you manage your debt and negotiate with your creditors if you need help in the process of reorganising your debt.
The first thing you should do is get in touch with a reliable credit counsellor from Credit Counselling Singapore.
On their website, this nonprofit gives you access to a lot of information that can help you figure out how to reorganise your debt. You could also ask them to meet with you for a credit counselling session.
Put a cap on open credit facilities
If you have more than three credit lines, you should close the ones you don’t use as soon as you can.
You won’t remember something if you can’t see it. No extra credit cards, no extra spending.
Pay off all of your open credit cards and loans or refinance the ones you won’t be able to pay back on time. Don’t have more than three open credit lines.
The main reason is that having a high credit score shows financial companies that you can’t handle your money well. It shows that you are spending more than you can afford and that you may want more credit.
Also, it makes it more likely that you will be late with your payments, which can hurt your credit history.
In addition, all of these open lines of credit require you to pay a large amount of fees every year. Thus, it is best to use credit facilities only a few times.
Read Also: An Easy Guide To Unsecured Loan In Singapore
The risk of getting rejected when applying for a personal loan is too high if you have a bad credit score. However, it is still possible to get a bad credit loan. There is some licensed moneylender in Singapore that offers bad credit loans.
Moreover, there are various ways you can do to increase your credit score.
Are you searching for the best personal loan offer in Singapore?