Bad Credit Loans In Singapore – What You Need To Know

A bad credit loan in Singapore is exactly what its name suggests — it’s a type of poor credit loan that’s meant for people who have bad credit scores and history.

Having a poor credit rating is likely to result in loan rejection if you try to get a personal loan from a bank. If and when that happens, you can try applying for a bad credit loan from legal money lenders to meet your immediate needs. Most licensed lenders offer loans for bad credit folks in Singapore.

Having bad credit isn’t the end of the world. Here’s everything you need to know about credit score, bad credit loans, how to qualify for bad credit loans in Singapore, and how to improve your creditworthiness over time.

What’s a credit score?

A credit score is a four-digit number that’s assigned to everyone with a Credit Bureau of Singapore credit report; this four-digit number is based on one’s past payment history on their various credit or loan accounts with banks and financial institutions in Singapore. In case you’re wondering, various factors determine your credit score.

Ranging between 1,000 and 2,000, risk grades from AA to HH are assigned according to tiers. Depending on your credit score’s risk grade, the lender may or may not approve of your credit application with them. This is because your credit score reflects a certain level of default probability that the lender may or may not be willing to accept.

In general, lenders prefer borrowers with AA risk grade; these borrowers have a credit score of 1,911 to 2,000, and are deemed least likely to default on their payments.

Here’s a quick look at the credit score ranges and their associated risk grades, along with their assumed probability of default:

What’s the benchmark for bad credit in Singapore?

As seen from the table above, a credit score of 1,000 – 1,723 sets the benchmark for bad credit in Singapore.

With a risk grade of HH, these individuals have the highest likelihood of defaulting on their loans. It is only natural that traditional lenders do not like nor want to deal with people with bad credit. The same cannot be said for authorised money lenders who are much more lenient in this regard.

Is it easy to find loans for bad credit in Singapore?

Yes, if you know where to look. For the uninitiated, legal lenders do their best to offer loans for bad credit borrowers in Singapore who otherwise wouldn’t be able to obtain credit from traditional banks and financial institutions.

Note: In general, traditional banks and financial institutions do not offer loans for bad credit borrowers.

What are bad credit loans?

Bad credit loans are simply personal loans for bad credit folks in Singapore.

Bad credit loans are usually unsecured loans, meaning no collateral is pledged on the borrower’s end. Like a regular personal loan, a bad credit loan is versatile and useful for meeting urgent financial needs or unexpected expenses — the borrower can use the funds from a bad credit loan however he or she deems fit.

How do bad credit loans work?

Similar to a regular personal loan, the approved loan sum is disbursed in a lump sum after the loan contract has been finalised and signed.

Then, the borrower makes repayments according to his or her repayment schedule throughout the loan tenure. Usually, bad credit loans in Singapore are repaid via monthly instalments.

How do bad credit loans differ from regular personal loans?

The key difference between bad credit loans and regular personal loans is that bad credit loans are much easier to get — they are obtainable even if you have a low credit score. The loan quantum is also kept within limits to help ensure the borrower can better manage paying off their poor credit loan.

Because of the borrower profiles of those seeking poor credit loans, bad credit loans in Singapore tend to have higher interest rates than other types of loans, such as renovation loans. Hence, you must practise good financial discipline and consistently pay off your loan instalments on time to avoid racking up unnecessary late interest and penalty charges.

Where can you get a bad credit loan in Singapore?

Many licensed lenders in Singapore offer bad credit loans as part of their repertoire of money lending services. This is because bad credit loans are likely to be sought after by their core target audience — borrowers who cannot get their hands on bank loans.

Just in case you’re curious, licensed lenders typically offer loan tenures ranging from 3-12 months, although some lenders do offer loan tenures of up to 24 months on a case-by-case basis.

Given that there are more than 150 licensed lenders with offices peppered across Singapore as of time of writing, you can find a bad credit loan in Singapore quite easily. That being said, you should be careful to only borrow from a verified, legal lender to avoid falling victim to loan sharks and scams. Always check the Registry of Moneylenders’ official list of licensed lenders for good measure!

READ MORE: Top 9 Signs of Illegal Money Lenders in Singapore

Is it easy to qualify for loans for bad credit in Singapore?

You may be worried that having a less-than-stellar credit score will hinder your chances of getting a bad credit loan in Singapore. After all, credit scores are used as an indicator of a borrower’s creditworthiness.

Well, rest assured that providers of bad credit loans make the process easy for borrowers.

When evaluating your loan application, licensed lenders will scrutinise your Loan Information Report at the Moneylenders Credit Bureau (MLCB). Apart from checking your loan eligibility, they mostly focus on your ability to repay your loan. This just means they place more emphasis on the stability of your employment and the level of your income, which determine your ability to service your loan.

Having a poor credit score is of less concern, but you do need to prove that you are capable of holding down a stable job. To that end, you will be asked to submit your latest payslips (dating back at least three months) when applying for a bad credit loan.

How to use bad credit loans in Singapore

While bad credit loans can provide people with bad credit with a much-needed lifeline, they are not without their disadvantages.

For one, licensed lenders charge interest rates ranging 1-4% per month; loans for bad credit borrowers may come with an interest rate at the upper end of that range hence be more costly than other types of loans.

Secondly, money lenders may also impose a lower loan quantum on these loans as a way to offset the risk of default. This makes such loans unsuitable if you require a large sum of money.

For these reasons, loans for bad credit in Singapore may not be the best option for regular use. Instead, you should think of them as a stepping stone that can help you improve your creditworthiness over time.

How bad credit loans in Singapore improve your creditworthiness

The Moneylenders Credit Bureau (MLCB) is the agency that maintains credit reports on individuals who borrow from licensed lenders in Singapore. Known as the Loan Information Report, it is a different credit report than the one maintained by the Credit Bureau of Singapore — which contains information relating to bank loans and credit cards.

When a borrower applies for a loan from a licensed lender, the money lender will first check the Loan Information Report. The report contains your personal information, a summary of all your outstanding loans from licensed lenders, as well as your payment history.

Your payment history contains the details and status of your loan repayments. Note that each repayment is recorded, and any that’s late will be flagged as such — including how many days late.

Missing your repayment due dates or not paying up at all is known as defaulting on your debt, and having defaults in your Loan Information Report will lower your eligibility as a borrower.

Thankfully, repairing your creditworthiness is relatively simple. You can do so using a bad credit loan by:

• Making your loan repayments on time and in full. This demonstrates financial discipline and responsibility on your end.
• Keeping your total borrowings and number of loans to a minimum. Make sure not to overborrow when applying for a bad credit loan.

READ MORE: What If You Are Unable to Pay Money Lenders in Singapore?

Conclusion: Bad credit loans can be your stepping stone

Many people think of bad credit loans as a means of last resort, but when used correctly, bad credit loans in Singapore can act as a stepping stone to improving your circumstances.

By faithfully making your loan repayments on time and clearing your debt in full over the course of your loan tenure, you can slowly but surely rehabilitate your credit standing. After establishing a good track record of timely repayments, you may find it easier to secure a larger loan with better loan terms from a licensed loan company like Elite Investment & Credit in the future.

We provide loans for bad credit in Singapore to meet your diverse financial needs. Apply for a loan or contact us today to find out more about our highly customisable poor credit loans.