Getting a loan for self-employed individuals is very hard, yet possible. In Singapore, employees and self-employed have different terms to meet when it comes to money lending. There are stricter conditions for the self-employed compared to the other employees. If you are wondering if getting a loan as an independent individual is hard, the answer is yes. It will take more time for your application to be approved.
Some money lenders may even deny you the loan when they find out that you are self-employed but not Bugis Credit, they can give business loans as long as you can meet their requirements. You should not be discouraged. If you have been denied from a loan. It requires enough preparation to make yourself eligible for the credit. The measures needed to be taken are:
Clear your debt records
Debt is one of the major things that lead to depression. It is difficult to be calm when you have debts all over. No loan giver will be willing to give you a loan if you have a bad record. Having a hanging debt will cost you. A smart loan seeker will pay off all his debts before applying for a loan.
Most unpaid debts are owned by self-employed. It is because they don’t make monthly repayments. Only employed workers understand the pain of monthly reductions. To reduce future frustrations, pay off all your debts. After your record is clean, apply for the loan. You will not have a hard time paying it back. It will also be a good sign to the loan providers.
Know the lender
This is the most ignored step when applying for a loan. Knowing the kind of person or institution that is lending you the money will make a big difference. Have information about the lender. The most suitable lenders for self-employed are small banks and lending institutions. Make sure you choose the one that is best for you.
Getting information about the lender helps to find out the terms and conditions of the loan. This will help prepare yourself for qualifying. Know how the institution treats its debtors. You wouldn’t want to go for merciless moneylenders. Weigh your options carefully.
Check out your credit condition
If you want loan approval, your credit score should be positive. It can break or make the chances of getting approved. There are high chances of being disqualified for the loan if you have a low credit score. Confirm your credit rating a few months before applying for the loan. Failing to do so will give you unnecessary anxieties.
Knowing earlier the state of your credit card will give you the time to increase the score. A credit card is essential when it comes to acquiring a loan. There is no escape for you in this!
Have the necessary documentations
Since the income of a self-employed person is inconsistent, certain documentation is required to prove that you earn. However, the documentations depend on which work you do. Put your documents in order so that you don’t have a hard time when they are needed.
- A bank statement
The loan giver might ask you to present your bank statement. This might get you off guard if you weren’t prepared. Why is it important? This document shows all your possessions. Many lenders don’t ask for it because it does not show the trend of your income. It only outlines the properties that you own.
- Tax returns
With tax returns, the lender will get full information about your income. Most of them ask for tax returns for the last two years. It should be signed for it to be considered eligible. Some lenders may not put much consideration in this document if your credit card has a good score.
Apply at the right time
Don’t apply for the loan if you have a new job. Most lenders are hesitant to give loans to someone who is still fresh in their current places of work. You should have experience of more than two years. They need to trail the progress of your employment. They want to be sure that you are in a position to repay the loan without struggling. It is advisable to apply after you are confident your employment has a good track. But you can take chances and give it a try even when you are not sure. However, don’t have high expectations.
Make use of cash reserves
Cash reserves are the money an individual keeps aside for unplanned expenses or emergencies. Actually, this can be a great strategy to use when applying for the loan. The cash reserve will increase the possibilities of the loan. How? Through the cash reserves, the lenders will have an assurance that their loan will be paid.
What should you do if you are denied the loan?
A self-employed person is likely to be denied the loan. If you are a self-employed Singaporean, have a plan B. You don’t know how long it will take before you are granted a loan. You might not get it at all. Exploit other alternatives at your disposal. Here are some of the options you can still consider.
- Ask help from friends
Family and friends are the best people to approach when you have problems. This is because they are the closest people to you and understand you better. Going to them is an option you should consider when the loan lender disappoints you.
- Try another loan lender
Loan providers have different requirements. Therefore, it is not guaranteed that you will be denied by all lenders. However, you have to be careful as this may have negative implications on your credit.
The Bottom Line
It is a little bit challenging for self-employed Singaporeans to be approved for loans. Before applying, understand the prevailing conditions. Be ready to go through a tough process. You can still be approved. Use the strategies discussed in this blog, and you will have high chances of securing a loan.