In a nutshell, It’s possible to get a personal loan with bad credit in Singapore, but it will take a bit of groundwork to determine the best options for your financial situation.
Whether it’s struggling to make ends meet or a sudden emergency expense comes up, sometimes you may need a personal loan to get extra money.
The good news is, there are options for personal bad credit loans in Singapore. The downside is that many of these loans are financially risky and can put you in a worse position than when you started.
That is why you must be strategic in obtaining a loan if you have bad credit. But what exactly is bad credit? Each lender has its own definition of what constitutes bad credit. But people with credit scores of 1000 or lower are generally considered riskier borrowers.
Personal loan lenders
Lenders offer “traditional” personal loans instead of higher interest rate loans, such as payday loans. In addition, these lenders may even offer potentially quick financing and a number of options for how much to borrow when you need a personal loan. But you want to make sure you understand all the terms of your loan, so you don’t end up paying astronomical interest or fees.
Personal loans to avoid whenever possible
A personal loan can be a good solution to cover an emergency or unexpected expense, but there are a few more things to know.
When it comes to bad credit loans in Singapore, some options will be better than others. The following are some common types of personal loans that you will want to think twice about before putting your signature on paper.
A payday lender may seem like a good option if you have a bad credit rating or no credit history. After all, these lenders generally don’t run credit checks, and generally, the application process allows you to get your money right away.
Payday loans are short-term loans that are generally made for $ 500 or less and are generally due on the next payday. You will often hear about them as a way to bridge a financial gap until you get paid again.
Like payday loans, pledge loans can have very high fees. With a collateral loan, you pledge your car title as collateral in exchange for the loan.
Pledge loans can cost you your vehicle if you don’t pay. And because the higher interest rates on these loans can make it difficult to pay off the loan, you may not want to take that risk.
Pawn Shop Loans
You may also have heard about pawnshop loans. With these loans, you give an item of value in exchange for a personal loan that can be up to the value of that item.
If you want the item returned, you must repay the loan before the end of the term (the term varies from state to state). Even then, you may have to pay expensive fees and interest. If you don’t repay the loan, the pawnshop can keep the item and sell it (and usually none of the money from the sale goes to you, the former owner).
Other personal loans to consider
The following loans may be one step ahead of the loan types we outlined above, but you’ll still want to plan how they will fit into your larger financial picture so that you can progress financially once the loan is paid off.
Alternative payday loans
You can explore options at credit unions for a personal loan. Some federal credit unions offer inexpensive loans called alternative payday loans.
An alternative payday loan must meet several requirements, including interest rates not to exceed 28%, loan terms of one to 12 months, and loan amounts of $ 200 to $ 2,000.
Personal loans from online lenders
Online lenders are another small personal loan option for people with bad credit.
Personal loans are installment loans where a fixed amount of money is borrowed and the debt is paid off in a predetermined number of payments. Some personal loans are collateralized, which means they require collateral like a house or car, but there are also unsecured personal loans that do not require collateral.
Some are “peer-to-peer” lenders, which means that personal loans are financed by individual investors rather than traditional financial institutions in an effort to get you a better deal.
In general, the better your credit rating, the lower your interest rate. But even a loan from an online lender will generally have more favorable terms than a payday loan, which can have very high rates and fees.
Alternatives to personal loans for bad credit
If you can’t qualify for a loan or find another way to meet your money needs, there are a few other options.
Help for budget cuts or payments
If you need a small amount of cash, the best scenario may be to release money elsewhere, if you can.
If you are someone with bad credit but have assets that can be liquidated, then perhaps you can sell items of value. Your credit card company may offer an emergency plan to reduce interest and payment. Your landlord may be willing to offer you a one-time extension or split your payments into two parts.
In these cases, you don’t even need to get a small loan.
You can check with your employer on how to get a short-term advance on your paycheck.
Another option for a personal cash advance is to get one directly from your credit card. This is a way to withdraw some of your available credit in cash, rather than buying something. Many credit cards offer this feature, although lenders often charge high-interest rates, but nothing like payday loans.
Home equity line of credit
If you own your home, another option is to take out a home equity line of credit, or HELOC. This allows you to leverage the equity you have built up in your home to meet short-term money needs.
When you apply for a home equity line of credit, you will likely receive checks or a credit card that you can use to pay for your purchases during a special “withdrawal period”. If you choose to spend some of this money, you will need to make minimum payments on the outstanding balance until the withdrawal period ends. The line of credit is then often turned into a “pay period,” in which you pay off any outstanding balance over time or all at once, depending on the terms of your home equity line of credit.