With increasing age comes many emotional and health problems. But, perhaps the most problematic issue many seniors face is a decline in finances. On top of that comes the stress of knowing that it could be very hard to get a loan if the need for cash should arise.
Senior or not, getting a loan is all about convincing the bank that you will be able to pay the amount borrowed. Most banks set certain criteria for lending. With increasing age, it might be difficult to fulfill these criteria.
Here are some of the possible hitches in the way of getting a loan and ways to deal with them:
- Your age
- Your income
- Your credit score
- Your residency status
The age of the applicant could be the single most impactful criterion because it often affects the other criteria as well. In other words, your age would have an effect on how much money you make and also how much time you have to repay the loan. The working of a loan is simple- the bank wants the money as soon as possible with the prescribed interest. To convince the bank that your age is just a number, you could provide proof of your income. If you think there is still a possibility of rejection of your application, you could consider signing up for a loan with a young person, such as a son or daughter. Using a younger person as guarantor will ease the process, as banks are more likely to make a loan when more people are liable to repay it.
Apart from the fact that income is mostly dwindling in the latter years, your employment status in the past matters as well.
If you were self-employed or worked as a commissioned earner, it could be difficult to get a loan, as the bank may be unsure of the means of your repayment. You must present proof in the form of latest 6 months commission statement and latest 2 years income tax notice of assessment to convince the bank.
Since most banks will be reluctant to provide a loan to seniors, you could gain the approval of the bank by providing a collateral. If you own a home or have rental property or any other valuable asset, you could consider offering it as a collateral to the amount you wish to borrow.
This trick is used to win the trust of the bank that even if you are unable to pay back the amount, the bank has a backup of recovering the money. The value of the collateral that you offer should be more than the amount of the loan you apply for.
The amount of money the bank is willing to lend you again depends on your financial standing at your current age. Usually banks may offer you a loan of an amount equal to your monthly income. If you wish to apply for a higher amount, you could ask the bank for a loan with a shorter repayment term. This might increase your chances of approval. However, this means your monthly repayment amount will be higher.
Your Credit Score
How you handled credit in your youth will pay off when you are old. Call it karma, but how it works out for you completely depends on the past.
All the credit inquiries you make are recorded and if you apply for too many loans it could flag you as a potential over-borrower. It is better to try to build a good score before applying for a loan.
Conversely, if you have never borrowed, this too could be a hurdle in getting a loan. This is because a credit score is used as a yardstick to gauge your financial behavior by your prospective lender. In case you have never taken a loan, the prospective lenders do not know your behavior and it might be difficult for them to decide without data.
Your Residency Status
Foreigners staying in Singapore can also apply for loans in Singapore, but obviously the rules are more stringent for expats than for citizens due to the risk involved. You may show documents mentioning your stay in Singapore or any other documents to prove your worth to the bank.
Other loan schemes you can look into:
There are three loan schemes that could be useful to you at a senior stage in life called the Deferred Downpayment Scheme (DDS), the Temporary Loan Scheme (TLS) and Lease Buyback Scheme (LBS).
Deferred Downpayment Scheme (DDS)
- If you are above 55 years old and own an HDB flat you could use the Deferred Downpayment Scheme (DDS) which will allow you to get the right value of your flat, in case you want to sell it.
- If you have booked a 2-room Flexi/3-room uncompleted flat or not sold your current flat, you can apply for this scheme.
- With DDS, you just need to pay the legal fees and the stamp duty when you sign the agreement. You must pay the amount when you receive the key of the flat. In case you cancel the application, you will have to pay a forfeiture of 5% of the value of the flat.
The Temporary Loan Scheme (TLS)
- This scheme will help you to use the money you get from the sale of your current flat to pay for your new flat. This will eliminate the need to take up a long-term mortgage loan.
- If you need extra financial help, you can take up a temporary loan, which can be paid off once you get the money from the sale of the current flat.
- To be eligible, you must have booked a flat and must have applied for sale of the flat.
Lease Buyback Scheme (LBS)
- If you are 65 years or older having a 4-room or smaller flat, you could sell a portion of the lease to HDB while maintaining the tenor of lease in view of the age of the youngest owner. The amount you receive from this sale will be utilized as a top-up your CPF Retirement Account (RA). This account can be utilized to buy a CPF LIFE plan which will give you an amount every month.
- The eligibility criteria is that your total income every month must be less than S$12,000 and you must have lived there for at least 5 years. One of the owners must be Singaporean.
- You could also terminate the lease before the end of the term by returning the flat. However, you will continue to gain the benefits of the CPF LIFE plan.
If you are looking for a personal loan in Singapore, there are banks that offer loans to senior citizens. For example, POSB offers a personal loan to applicants till the age of 65 years for an Effective Interest Rate of 7.56% p.a. for a term ranging from 1 to 5 years.
If all the above methods do not make the cut, then you have the option of approaching the cooperatives to get a loan.
Even though it might be difficult to get a loan approval for seniors in Singapore, it is not completely impossible if you use all your resources to convince the bank that you will pay it back.