Covid-19 has impacted Singapore’s economy. While some industries have blossomed, some have shriveled. The unemployment rate in Singapore has increased and many people might find it difficult to find a job. This is also very stressful if we need quick cash for financial emergencies.
Some of us are unemployed and we might need to apply for a personal loan in order to get through the storm.
Don’t worry; you’re not alone. Thousands of people are in the same boat as you. And plenty of licensed moneylenders are more than happy to help you get back on your feet. Financial institutions are trying to help the unemployed by providing low interest loans with affordable monthly installments. They are understanding and know that these borrowers are caught in a bad time.
Oftentimes, the unemployed will face loan rejection. However, there are still fast cash loan alternatives for the unemployed individuals in Singapore. Here are your alternatives.
What Are the Factors Lenders Use to Evaluate Your Personal Loan Application?
Both banks and financial institutions use several factors to evaluate your personal loan application:
1. Your Income
The most important factor is usually your employment status because that’s where your income comes off – aka the money you’ll use to pay your debt. Lenders want to see that you have a steady income source so they can be confident you’ll repay the loan.
But there are other sources of income apart from your salary:
- Spouses income: Many lenders will also consider your spouse’s income when assessing your loan application if you’re married. You may have to include your spouse as a co-guarantor in this case.
- Investment income: If you have investments, such as stocks or ETFs, you should include them in your application.
- Rental income: If you’re renting out a property, the rent you receive can also be included as part of your income.
- Alimony: If you’re receiving alimony payments, these can also be included in your application.
Lenders like to see a steady income, not one that fluctuates erratically. Also, if you just recently lost your job but have a good employment history, your current unemployed status may not matter. That’s because your lender can see you’re highly likely to find a suitable position again soon.
2. Asset Ownership
Assets serve as collateral for the unemployed loan, which gives the lender a way to recoup their losses. Your assets increase your reliability. For you, this means that it’s essential to have a good mix of assets:
- Liquid assets, such as savings accounts and investments, can be easily converted to cash if needed.
- Non-liquid assets, such as real estate and vehicles can provide the lender with more security against losses.
3. Debt to Income Ratio
This ratio measures the amount of debt you have relative to your income.
- A high debt-to-income ratio means you have a higher risk of defaulting on your unemployed loan, making it challenging to qualify for a loan in the first place.
- A low debt-to-income ratio indicates that you are a lower-risk borrower and more likely to repay your loan on time.
4. Credit History
Your credit history is another important factor that lenders will consider before granting unemployed loans.
- They’ll want to see that you’ve made your previous repayments on time and in full.
- They’ll also look at your credit utilisation, meaning the amount of credit you use compared to your available credit.
Why does credit history matter?
Because it’s one of the best indicators of your ability to repay an unemployed loan and financial institutions want to lend money to people who are likely to repay their loans. Having a good credit history gives the banks and lenders confidence that you will be able to repay your loan.
That brings us to the following point:
What Is a Credit Score?
A credit score is a number that lenders use to decide whether or not you’re a good candidate for a loan. The higher your score, the better your chances of getting a fast cash loan for unemployed people.
Your credit score is based on your credit history, which is a record of how you’ve handled borrowing and repaying in the past.
The factors that determine your rating are:
- Payment history
- The amount of debt
- Length of your credit history
- The types of credit you have
How Can I Improve My Credit Score?
What if you have a bad credit score? There’s no need to be ashamed of having a less-than-perfect credit score. We all have room for improvement when it comes to our financial health. If you’re looking to boost your credit score, here are a few simple tips:
- Check your credit report for errors. Mistakes happen, and they can drag down your score. So regularly check your report and dispute any inaccuracies.
- Make all of your payments on time. This includes both credit card and loan payments. A single late payment can cause your score to take a hit, so set up automatic payments if necessary to avoid missed deadlines.
- Use a mix of different types of credit. Loans, credit cards, and lines of credit all count towards your score. Paying your instalments on time shows that you’re a responsible borrower.
- Keep your balances low. Using too much available credit can hurt your score, so keep your balances low – ideally below 30% of your limit.
- Review your credit report periodically. This will help you catch any errors or discrepancies and take steps to correct them.
What Are the Risks to Taking a Loan While I Am Unemployed?
Taking out an unemployed loan may seem like a quick and easy way to get your hands on some extra cash.
However, there are a few things you should be aware of:
- Unemployed borrowers are typically considered high-risk, so you might have to pay a higher interest rate than someone with a steady income.
- Lenders will often require some collateral (such as your car or house) in case you can’t repay the loan.
- If you default on the loan, it could damage your credit score, making it even more challenging to get back on your feet financially.
- While you might be able to take a personal loan for the unemployed, you might only be given a smaller loan amount.
So while fast cash loans for unemployed people may seem like a good idea now, weighing the risks carefully before making any decisions is essential.
What are the Alternatives to Personal Loans?
Other than loans for the unemployed, you can consider alternatives for extra cash. However, there are risks for each. Please evaluate carefully before jumping into them!
- Getting a cash advance from your credit card (do remember that credit card interest rates are higher than that of personal loans)
- Taking out a home equity loan
- Borrowing money from a friend or family member
- Selling or pawning some of your unwanted possessions (for more information on pawn shops and their interest rates, read our article here)
- Taking a part-time job to earn some extra income
There are definitely risks with each alternative. If you choose to rely on your credit card, you face the risk of being charged insanely high interest rates. Credit cards may seem convenient, but it comes at a price. Many Singaporeans find themselves drowning in credit card debt when they miss one or two repayments. To the surprise of many, credit card interest rates are higher than that of personal loans!
For borrowers who choose to lend from a friend or a family member, they risk burning bridges with them. the relationship can get awkward if payment is not punctual.
Some borrowers might not have the items to pawn at pawn shops either. Hence, it might be better for some to apply for a cash loan designed for the unemployed in Singapore.
If you have questions about loans, feel free to contact U Credit, where our professional staff is always ready to serve you.