Individuals who do not have enough savings to pay for financial emergencies will sometimes require a personal loan. Since the borrower is not offering any collateral while taking a personal loan, a personal loan is an unsecured loan. Since the risk of losing the entire amount is higher for a personal loan for the lender, borrowers should be aware that in some cases, their loan application will get rejected. Hence they should be aware of what qualifies me for a personal loan, so that they can manage their finances accordingly, and ensure that their loan application will be approved.
Since the lender does not ask for collateral while giving a personal loan, he has to use other methods to assess whether the borrower can be trusted and will repay the loan on time. One of the most popular methods of checking whether the borrower is likely to repay the loan is checking the credit score of the borrower, whether he repaid other debts on or before the due date. A financially disciplined borrower who is repaying all his loans, debts on time, will have a good credit score and is more likely to repay the personal loan on time. Hence the lender is more likely to give a loan to a person with a high credit score.
Another factor that most borrowers should be aware of is that the ability to get a loan depends to a large extent on their current income. Only individuals with an annual income of $20000 or more in Singapore are eligible to get a personal loan. Additionally, the loan application approval will also depend on the loan amount. If the borrower is having a low income, he will not be able to take a larger loan, since it will be difficult to repay the loan. In contrast, citizens with a higher income can get their loan applications approved more easily since they will find loan repayment easier.
In Singapore usually, only citizens or permanent residents can easily get personal loans. Most banks and money lenders will reject the application from foreigners since they may leave the country without repaying the loan. In a few cases, the money lenders will approve the loan application from foreigners if they provide all the documents required like the work permit and income documents from the employer. Also, the foreigners should have a higher annual income to have their personal loan application approved, the amount is at least $40000, which is twice the amount for Singapore residents.
While the credit score, income is considered by the lender, the money lender will also look at other criteria like the loan amount and repayment period while giving the personal loan. For most loans, the borrower has to repay part of the loan monthly, and this amount is fixed at the time of taking the loan. The lender will check the monthly loan repayment and compare it with the monthly income, before taking a decision. Most people have living expenses and if the monthly amount they have to repay is very large, they may not be able to repay the loan on time.