How you can get a guaranteed personal loan with bad credit and no guarantor

In our uncertain and challenging times, getting a loan may sometimes be our last resort especially if we have to pay off emergency bills such as hospital fees. Unfortunately, if you have failed to repay your loan on time in the past, financial institutions and lenders may not approve any future loans because of your credit history.

While it is challenging to find loan lenders if you have bad credit and no guarantor, it is still possible to do so. Here are some tips on how you can still acquire a loan.

What is credit history and credit score?

Your credit history includes your past transactions and loans with banks. Based on these transactions, a credit score will be issued to each individual, which is an indicator of how likely this person would repay their loans on time.

Credit scores are evaluated by Credit Bureau Singapore and are calculated based on a number of factors including the amount of credit owed, the number of ongoing loans, and history of late repayment. A credit score ranges from 1000-2000 where the lower the score, the riskier the borrower is deemed to be and higher the possibility of default payment.

Banks usually do not provide loans to those with low credit scores but licensed moneylenders do. Typically, money lenders do not check their borrower’s credit scores. Instead, would check your borrowing limit and history with other money lenders on the Moneylenders Credit Bureau platform.

What affects your loan approval with money lenders?

Borrowing limit

Borrowers have a maximum borrowing capacity across all moneylenders in Singapore at any one time. However, a borrowing limit is only enforced for unsecured loans, and will depend on your annual income as well as your residency in Singapore, with the highest limit standing at 6 times your monthly income.

Borrowing history

Licensed moneylenders will also assess if you have a favourable borrowing history before granting a loan. This will include any default on previous loans, late repayment and past experiences with social service agencies due to debt issues.

Taking multiple loans in a short period

Moneylenders usually view borrowers who have approached several lenders for different loans within a month or two as red flags. This behaviour usually suggests that the borrower has serious financial problems and may not be able to pay off all their loans, making them a risky candidate.

Banned or self-excluded by family or yourself

Moneylenders will not authorise loans to those on the MLCB self-exclusion listing, which prohibits individuals from applying for any unsecured loans.

How can bad credit or bad borrowing history affect your personal loan?

Loan approval

A bad credit score will prevent you from getting any bank loans approved. However, licensed moneylenders could still approve a guaranteed bad credit personal loan.

Interest rates

While licensed lenders may offer you a loan despite your bad credit score, they may also increase their interest rates as a precaution. By law, moneylenders’ interest rates are capped at 4% per month.

Loan amount

Moneylenders may only offer you a smaller loan amount if you have a bad credit score. This could mean that you may not be able to obtain the full amount you require and will have to settle for less.

Loan term

An unfavourable credit history may shorten the loan repayment period offered to you, to ensure that you repay your loan on time.

Late interest and fees

If you have a bad credit history, the late interest and late fees charged to you might be higher than that charged to another borrower with better credit history. This could increase your debts even more.

However, licensed moneylenders are required by law to not charge late fees exceeding a total of $60 for each month of late repayment nor late interest of more than 4% a month.

Bankruptcy or Debt Repayment Scheme

Moneylenders may reduce your loan amount and increase interest rates if you have a history of bankruptcy or are in an ongoing debt repayment scheme (DRS). DRS is a pre-bankruptcy arrangement between the debt collector and the creditor to help pay off all loans over a period of not more than 5 years.

Ongoing or past litigations with banks

Any legal proceeding due to loan defaults with a bank or money lender may affect your loan amount and interest rates.

How can you get a guaranteed personal loan with bad credit and no guarantor with licensed money lenders?

Get a secured loan

Unlike unsecured loans, secured loans require collateral but are more likely to be approved despite a bad credit score. Some examples of collateral can be your property or car and if you default on your loan payment, the lender will have the right to seize and liquidate them to recoup their losses.

Prove that you have a stable source of income

One way to prove your financial ability to repay your debt is through a monthly income statement. With a stable income, moneylenders are more likely to trust you as a borrower.

Prove that you have a low debt-to-income ratio

A debt-to-income ratio is calculated based on the amount of your income you use to pay off your debts. A lower ratio means you are currently using a small percentage of your income to repay your existing debt, which means there is a higher probability of you repaying future loans on time. Thus, this increases your chances of getting your loan approved.

Opt for a smaller loan amount

Smaller loans equate to a higher chance of on-time repayment. Therefore, opting for a lower loan amount could increase your chances of approval.

How can you increase your chances of getting your future loans approved?

At the end of the day, it’s always easier to get a loan approved when you have a good credit score. This means ensuring that you pay your loans on time to avoid getting penalised. You can also get other sources of income to increase your monthly earnings so that your lender has more confidence that you will be able to repay your loans.

Looking for a guaranteed bad credit personal loan? We understand your frustrations at not being able to get a loan elsewhere. We are a licensed money lender that seeks to cater to the needs of all borrowers as much as possible. Apply for a loan with us today.