Taking out a bank loan is more common than you think. Majority of us will need a personal loan for huge purchases once in a while. These can include loans when you are purchasing a home, planning a wedding, renovating your house, or even when planning to study overseas.
The customary method is to locate a bank, and get a loan from the bank. The bank will then review your details, and decide whether or not to lend money to you. Of course, as with any kind of loan, you will need to repay a certain amount of interest either monthly or yearly depending on the type of loan.
However, there are factors that will affect your bank loan approval as not all applications will be successful. In this article, we will list some factors that banks will assess before approving your loan application.
1. Your credit score
What is a credit score? It is a number that financial institutions will look at when you apply for a loan, to decide to approve your request or otherwise. Basically, it shows your financial health, and the amount of risk involved when lending you money. The better your credit score, the more likely you are to get that loan you wanted.
What may affect your credit score?
- You have a history of refusing to make repayments even though you have sufficient cash on hand.
- You have defaulted credit card payments before, as it stays on your credit report forever.
2. Your employment status
Are you a freelancer or self-employed? Or do you love job-hopping? These are factors that will contribute to lower chances of loan approval. Nonetheless, if you can prove that you are a dependable individual who is able to make your repayments on time, you should still have a fair chance of getting that approval, although it may take longer for banks to assess your application.
Another thing to note is your monthly or annual income, even if you have been in a stable job for a long time. Banks will have to consider if you will be able to repay that loan they approved for you if you meet their least basic income, and most banks will lend up to four times your monthly income.
3. Your credit history
How will banks decide if you are a reliable client? You should not be consistently requesting for loans from different financial institutions if you are sincere in getting a loan. Imagine if you are someone who hasn’t applied for a loan before, and is suddenly going to 10 different financial institutions asking for loans. Banks may classify you as someone who requires cash urgently, and is rushing to prove your income status before retrenchment or a crisis. They may choose to lower the amount they can loan you, or reject your application.
Other factors that are considered bad credit history include how well you have paid off past debts and loans, bankruptcy and whether legal action was taken against you before.
4. Your credit information
If you have never applied for a credit card or taken a loan before, it can mean it will be harder for you to get approved for a bank loan down the road. It affects your credit grade too. This is because you do not have enough credit history for the bank to decide what kind of borrower you are. One way to get past this is to apply for credit cards years before your huge loan application, and repay monthly statements on time.
If you are unable to get a bank loan application, or you find the interest and loan amount not to your liking, you can always approach licensed money lenders for your loans. Unlike banks, licensed money lenders focus more on your income status and outstanding debts instead of your credit score when deciding on approval for your loan application.
Bear in mind that whichever money lender you go to, always be sure that they have a license to operate in Singapore. Soon Seng Credit offers an array of loans, be it personal, business, wedding, renovation or even study loans. If you need an urgent cash loan with fast approval, we are a licensed money lender (Reg no. 201901887G) strictly regulated by the Ministry of Law’s Registry of Moneylenders. Drop by our store or contact us at +65 6292 5693 to enquire about our rates and procedures!