Self-employed professionals might be looking for loans for a wide variety of reasons. Personal loans are well suited for people looking for capital to cover significant but not extravagant or specialized purposes. Accordingly, you would want a personal loan if you were looking for an easy way to fund your vacation. However, home loans and mortgages would be a better option if the expense is meant to buy or modify personal real estate.
After clearing the facts mentioned above, we have good news and bad news for people looking for a personal loan. First, the good news- there are PLENTY of banks and other financial institutions in Singapore that will give you personal loans. But as a self-employed person, the bad news is that in the absence of regular employment, such financial institutions are likely to see as less suitable for getting a loan.
It is still very much possible, but it requires careful planning and proper preparation for the loan approval process. These tips will help in securing personal loans in the capacity of self-employed personnel:
Make Sure You Have A Good Credit Score
While providing personal loans, one of the topmost factors that banks consider is individual credit scores. Accordingly, the top legal money lenders in Orchard Road advise, before you apply for such a loan, ensure that it is on the higher ranges. There are a wide variety of factors that affect the credit scores of self-employed people. It would be wise to prepare for it a few months in advance and ensure that you follow best practices to ensure a healthy credit rating. If you spot any errors or factual mistakes in your credit report, make sure you raise a dispute. If the process will take some time, be prepared to give it the same.
Repay Previous Debt If Any
Before you try to secure a new personal loan as a self-employed professional, it is vital that your clear any existing debt. Not only will doing this give you enough legroom for the new payments you would need to make as a consequence of taking the new loan. Lenders consider outstanding debts to be necessarily bad. Especially if there is a substantial financial amount involved or several such outstanding debts of relatively lesser amounts. Financially it might not be possible for you to write off your debts entirely. It is best practice to pay back as much of the debt as you can in such cases. Such best practices are yet another reason that makes planning necessary for self-employed people before applying for new loans.
Start The Process Of Building A Cash Reserve
Self-employed professionals must build up a significant cash reserve, more so if you have been working in this capacity for more than two years. A considerable cash reserve will send the signal to lenders that you will be able to pay debt repayment installments even if your professional business tapers down. Cash reserves work as a great security blanket tool. Additionally. Cash reserves also serve to function as a financial backup, which would prove to be of help in dire or emergencies.
Save Enough To Offer A Large Down Payment Sum
When you offer a large down payment sum for your loan, it will send the signal that your credit offer is solid. It indicates that you will be able to repay the debt in all probability. It also shows your ability to repay the debt and your intent to do the same.
Limit Tax Write-Offs
While tax write-offs do an excellent job at lowering taxable income, it also negatively affects your loan worthiness. Often banks consider net income to be an essential factor in assessing a business’s suitability to get a loan. Accordingly, before you apply for a personal loan, make sure that your tax write-offs are pretty much limited. Don’t worry; you can always bring back the tax deductions in later financial planning. But for the few financial year tax returns preceding your loan application, try to ensure that tax write-offs remain limited. Often, however, you will not have the luxury of so much time at hand. In such cases, you should try amending old tax returns. But beware, if your accountant cannot carry out this properly, it might open up a pandora’s box as far as financial regulations are concerned.
We may sum this article up by stating that self-employed professionals and workers are at a significant disadvantage as far as assessments for personal loans are considered. Things are way easier for salaried people. While the process is indeed relatively more challenging but it is in no way impossible. Here’s hoping you have healthy and fine enough finances to get your loan application approved.