Applying For a Bank Loan? Here’s 9 Tips To Increase Your Loan Approval Chances
by CashOctopus • October 9, 2019
Many Singaporeans consider the option of taking a bank loan when they need funding for various projects. However, taking a bank loan is not as simple as borrowing money from family members or relatives. There are terms and conditions that you will need to fulfill before your loan application is approved by the bank. The following are some factors that will help to increase your loan approval chances.
1. Inquire about eligibility requirements.
Different lending institutions have different eligibility requirements for the various loans that they offer. Some are stricter than others and may require you to submit more documents when sending your loan application. It is important that you find out in advance what the lending institution requires in terms of eligibility so that you can determine whether you meet all the requirements before applying for the loan.
Many borrowers get their loan applications declined because they never bother to confirm whether they meet all the eligibility requirements laid down by the bank. It is also important that you have a comprehensive list of all the documents required. These could include copies of identification as well as proof of income. You should organize to have all the documents prepared in advance so that the approval process is made easier.
A credit score is a measure that shows your credit worthiness. This measure is derived by taking several factors into consideration. These include the amount of debt you have outstanding, your debt repayment history, your history of bankruptcy, and many other similar factors. Generally, if you have too much debt, or if you have been defaulting on your loan repayments, then your credit score will be unfavourable. You should also confirm that your credit score is correct. Some borrowers have found that their credit score has errors. A good credit score will increase your chances of loan approval.
3. Limit your debt.
Do not get into the habit of taking smaller loans then applying for a bigger loan while you still have the other debts outstanding. Your previous debt will cause a big reduction in the amount that you can borrow since your debt servicing ratio will already have been reduced substantially. Before you apply for a bank loan, make sure that you have paid off most of your previous debt so that your debt servicing ratio is still enough to facilitate the approval of the new loan.
4. Choose a more specific loan.
Banks do not give specific uses for personal loans. Therefore, there is a risk of having the funds used for frivolous purposes by borrowers, and this usually results in a high default rate. On the other hand, specific loans tend to be cheaper because they carry a lower risk for the bank. These include loans such as education loans, car loans, renovation loans and other such like loans that are pegged to one particular purpose. If you apply for a specific loan, it will be easier for you to get approval from the bank.
5. Do proper research.
When you are looking for a bank loan, it is important to do proper research on the various options available. There are banks that actually give special offers on loans to encourage clients to borrow because this is where they earn most of their profits. As you look for a lending institution, make sure that you choose the one with the most reasonable loan terms. These banks will take a shorter time to approve your loan application because they are focused on building their client base.
6. Have a good relationship with your lender.
As you plan to apply for a bank loan, make sure that you build a good working relationship with the lending institution where you plan to apply for the loan. It will be helpful for you to open an active salary account and ensure that it is never overdrawn. It is important for the bank to see that you are operating your account in adherence to all their laid down rules. This will build their trust in you and when you finally decide to apply for a loan, chances of it being approved will be high.
7. Check the requirements for collateral.
Different bank loans have different loan requirements. There are loans which are totally unsecured and you do not need to have any assets to use as collateral. However, there are other types of loans where collateral is needed. The type and value of collateral required will depend on the type of loan as well as the lending institution.
Before you apply for a loan, it may be wise for you to pay a visit to the bank personally so that you can get a clear report on the standards set by the bank in terms of the collateral needed. You can then select the most suitable asset as you apply for the loan, and this will make the approval process much smoother.
8. Ensure you give correct information.
Many borrowers have had their loan applications declined simply because they provided incorrect information when filling in the application. Before sending your application, ensure that all your details are correct so that there are no discrepancies. Banks always verify the information given by borrowers, and those who present the correct information have a higher chance of being approved.
9. Observe the current economic conditions.
If the economic climate is favourable, then most banks will lower their interest rates. During this season, a wide variety of banks will offer loans which have very reasonable terms and conditions. This will be the best time for you to look around for a loan that suits your needs as well as your budget. The chances of your loan application being approved during good economic times is much higher because lenders are more confident that most borrowers will manage to repay their loans.
As a conclusion, many Singaporeans get their bank loan applications declined because they do not consider the above factors. Getting your bank loan approved can be a relatively simple feat if you are willing to exercise financial discipline as well as follow the guidelines above.