If you are considering a payday loan from a moneylender you should read the “Notes for Borrowers” (PDF) from the Ministry of Law Singapore.
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Loans for bankrupts
Being blacklisted doesn’t have to be the end of the road. Here are some personal loan options for bankrupt borrowers.
Filing for bankruptcy is not an easy step for anyone to take. However, usually the most challenging part is trying to rebuild your finances, your credit and your life. During bankruptcy or after you are discharged you may find yourself in need of a loan, but are there lenders willing to consider you?
Can I get a loan if I’m bankrupt?
Yes, you can get a loan if you are a discharged bankrupt, or even if you are currently bankrupt. You are more limited in your choice of lender, and the fees and rates will be considerably higher on a bankrupt loan. The insurance provider may require you to attach an asset as security or apply with the help of a guarantor. Have a look at your loan options below and see which loans you might be eligible for.
Risks of applying for a loan while bankrupt
Taking out a loan should never be done lightly, and even more so when bankrupt. Watch out for:
- Unreputable lenders. Check the lender has a credit licence. The lender should be easily contactable.
- Unaffordable repayments. Consider the size of the regular repayments and ensure the loan is able to be repaid during the loan term. If not, extra fees apply to extend it. Be careful, since repayment periods for these kinds of loans tend to be shorter than regular loans, and bankruptcy can affect available assets and income.
- Multiple applications. Every loan application shows up on credit reports. While lenders might not consider credit history, several applications within a short period can have a negative impact on your credit score moving forward.
- Check rates and fees. Be crystal clear on the total cost of your loan. Look out for charges such as set-up fees and monthly fees; plus, understand the penalties of late payments or a default on the loan. The total cost of the loan matters here – lenders can charge interest rates on top of everything else.
- Long-term repercussions and legal issues. Once the loan agreement is signed, the customer is bound to its conditions until the loan and any associated rates and fees have been paid. Typically these loans are unsecured, which means that the lender can initiate legal proceedings against the customer if they can’t repay.
Things to consider before applying for a loan while bankrupt
- Bankruptcy may affect your assets and income, so deciding whether you can afford the repayments is an essential consideration. What will they be and how will it work with your budget?
- Applying for a loan when you’re in a challenging financial situation isn’t a decision you should take lightly, which is especially true when you are bankrupt. Consider why you are taking out the loan and if there is another way you can pay for what you need.
- Speaking to a financial counsellor or debt advisor might be a good option to consider before you think about applying for any financial product.
- Similarly, it may be a good idea to seek legal advice to find out if/when you’ll be relieved of any of the legal implications of your bankruptcy.
What kind of bankrupt loans are available?
If you need finance and are currently bankrupt or have a bankruptcy listed on your credit file, the following loan options might be suitable:
- Payday loan. These are short-term loans – typically for smaller sums of money – with a repayment term ranging from two days to one year. Lenders have more flexible lending criteria, and while they won’t all consider bankrupt applicants, some will.
- Personal overdraft. Your current bank may be willing to approve you for a small personal overdraft if you have a good history with them.
- Personal loan. Bad credit personal loans are available from lenders, some for large amounts.
- Business loans. If you’re bankrupt, you still may be able to apply for a business loan. These loans are for more significant amounts than a personal loan and finance a range of business purposes.
- Car loan. You may receive approval for a secure loan more easily, as they are less of a risk to a lender. You can consider a bad credit car loan and attach your new vehicle to the loan as security.
How can I receive approval for a bankrupt loan?
While there are lenders who consider applicants who are or who have previously been bankrupt, filling out the application is not all it takes to receive approval. Here are some of the criteria you need to meet when the provider considers you for a bankrupt loan:
- Employment. You may need to be employed, although unemployed loans are available. Different criteria are in place; for example, your work may need to be regular and ongoing, and the provider may not accept you if you’re self-employed or part-time, etc. Check what the lender’s restrictions are before you apply.
- Income. How much do you earn? Lenders often have minimum income requirements in place. They may allow your income to be from employment and Work and Income, or it may need to be solely from regular work, but it usually needs to be over a specific amount per week or month.
- Assets. For bankrupt loans, the lender may require you to secure an asset as a guarantee, in case you default.
- Ability to manage your repayments. Your ability to repay is the primary requirement lenders have when considering you for a loan. Does your income allow you to easily manage your repayments after taking into account your liabilities and debt? If your repayments are manageable and you meet the lender’s other criteria, you can apply.
- Guarantor. If you don’t meet the lender’s criteria, you may be able to apply with a guarantor to increase your chance of approval.
Again, it may be best to seek out professional financial and legal advice regarding your individual circumstances before you decide whether or not to apply for a bankrupt loan.
And as always you should read the “Notes for Borrowers” (PDF) from the Ministry of Law Singapore if you are considering a payday loan.
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