COVID-19 has resulted in economic challenges that have left many people needing financial assistance. Are you considering to apply for a loan but are not sure if you are eligible? Before applying, here are 5 things to do to improve your chances of loan approval:
1. Review your latest credit report
Check your updated MyCTOS Score report to know what your current CTOS Score is and how your credit health is doing. This way, you can take steps to improve your score or fix any errors you find (such as a low credit score or missed payments), so that banks and lenders will be more likely to approve your loan application.
2. Avoid taking on new debt within a short time frame
Every time you apply for credit, the record will appear in your CCRIS and your credit score usually takes a hit. Multiple applications in a short span could suggest to the banks and lenders that you are a riskier borrower and desperate for credit. So try not to apply for any other credit for at least six months before you apply for new credit.
3. Improve your debt-to-income ratio
Debt-to-income ratio indicates the percentage of your gross monthly income that goes towards your monthly debt payments. Try to keep all your monthly loan commitments to not more than 40% of your net monthly income.
Lower your ratio by reducing your debts and increasing your income. For instance, you could make extra payments to pay off your debt faster, and take on an extra job or start a small side business to increase your income.
4. Compare terms and rates of different loan providers
Different lenders will offer different rates because they all have their own different risk appetite. Do enough research to identify lenders with the best loan rates and terms, and check if there are any hidden fees.
5. Obtain & organise income documentation
Whether you are self-employed or work for someone else, you will need to have the right documents handy as proof of your income. Generally, you’ll need your latest 3 months’ salary slips / EPF statements (if employed by a company), or the latest 3 month’s bank statements (if self-employed). Each lender has a preferred way of doing business, and is likely to request a different set of documents. The faster you can provide the required documentation, the quicker they can process your loan application.
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