Plenty of folks borrow money for different reasons. In a city like Singapore, people take out loans to fund their dreams and finance their ambitions. However, access to money is never easy, especially since lenders generally have pretty high qualifications for borrowers. The primary determiner lenders look at is a person’s credit score.
The only problem with this is not everyone has a good credit history. The good news is that lenders also look at other factors to determine your creditworthiness. Let’s take a look at some of them below.
Factors Beyond the Credit Score
A good credit standing is one of the first things banks and lending companies look at. However, if you don’t have a good credit history or are still establishing yourself financially, there are other things you can present to lenders when applying for loans.
1. Income and Employment
Other than one’s credit score, banks and lending companies often look at a person’s income and employment. Lenders can determine a borrower’s capacity for repayment by looking at these two things. A stable source of income shows you have a greater capacity to make timely repayments on your loans.
Those who are just starting as professionals can demonstrate potential for future growth. Freelancers and self-employed individuals can submit bank statements and tax returns to prove income stability and responsible financial management.
2. Debt-to-Income Ratio (DTI)
Another crucial metric that Singaporean lenders use is one’s debt-to-income ratio. A DTI is the ratio of your gross monthly income counted against your debt obligations, like a mortgage or car loan. A lower DTI ratio means a bigger part of your income can be directed toward loan repayments.
3. Savings and Assets
One more puzzle piece lenders look at when assessing your creditworthiness is your history of savings and asset accumulation. A healthy savings record shows financial discipline while assets simply provide a safety net for you. Having these in place can increase a lender’s confidence in you as a borrower.
4. Citizenship and Residency Status
While not exactly a major factor, one’s citizenship and permanent residency status can affect your application. Lenders are more wary of granting loans to non-residents because of the risk of relocation. Typically, each lender has a different policy for non-residents so you need to do your homework first.
5. Loan Purpose and Collateral
Lastly, whether you approach a bank or an online money lender in Singapore, your intentions matter. A purposeful loan application, such as home improvements or debt consolidation loans, can help increase your chances of getting approved.
Additionally, collateral acts as security for the loan and boosts lender confidence. If you miss out on a payment and default on a loan, the collateral can be secured by the lender to recoup their losses. Putting up collateral can get you better loan deals so this is something to consider.
Wrapping It Up
No doubt, maintaining a good credit score will help you get a loan to finance your goals. However, if you don’t have a good credit history, MM Credit or other lenders can look at other aspects of your financial capacity and well-being. The important thing when taking out a loan is you need to do your due diligence and manage your debt properly.
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