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Do you know that:

There are various government-assisted SME loan financing schemes in Singapore offered by more than 20+ banks & financial institutions?

Credit criteria & interest rates are different for all banks. It is frustrating and time-consuming for you to compare every banks’ SME loans.

Now, you can compare all SME loans easily in just a minute! Use our free online loan assessment tool to compare all SME financing facilities.

Don’t have your applications declined. Compare across all banks for more options and maximize approval chances.

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Want invoice payments earlier? Need additional funds to purchase inventory? Planning to expand the business? No problem. Here’s your chance to get SME loans at attractive, low-interest rates and take your business to the next level.

Short-term capital injection or as a top-up to bank financing

Hire more employees, fund purchases, and fulfill orders

Flexibility to secure financing as & when you need

Extra firepower to launch new products & services

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    The approval of the principle is a process between a home borrower and a bank (the lender). The Bank evaluates the financial status of the borrower through this process. It guarantees that the Bank will give you the loan if the information and documents are requested.

    Approval by principle means a provisionally selected financial institution that shall have the period of one (1) year after notice of such approval in principle to satisfy certain conditions for obtaining a banking license or insurance undertaking, as the case may be.

    If you want to receive a home loan, you should know what an IPA is. An IPA, or In-Principle Approval, is a loan estimate given by mortgage lenders to prospective buyers or existing property owners before deciding on a refinance. The bank will assess your financial health and credit history when you apply for an In-Principle Approval.

    The property market provides a plethora of options, which can be overwhelming. By applying for principle approval, you can understand your eligibility to receive your home loans and focus on properties within the limit. You save a lot of time and effort when you apply for a home loan.

    The majority of the initial verification is already done if you receive approval in principle. Therefore, if you apply for a home credit, banks must only check property documents before the final approval can be granted. This is particularly useful for properties with a transaction time limit.

    You are perfectly able to negotiate with the sellers once you have a letter of approval in principle in hand. The sellers take you more seriously towards other buyers while negotiating prices.

    The significant advantage of approval in principle is that the idea of how much you have and what you need to borrow at the moment is a fair one. After you know how much money you have to arrange if you want to make a higher down payment, you can further plan your eligibility for the loan.

    How to get an IPA home loan?

    • Compare and select a mortgage package.
    • Notify the bank that you want an in-principle approval.
    • The bank will provide you with a list of documents that must be submitted and assessed.
    • The bank will process your documents and approve your in-principle application once they are received.

    Of course, approved home loans, in principle, give you a head start, which doesn’t have a regular home loan. Once you have the necessary approval, you can plan your finances well in advance and buy your home right now without being afraid that the loan will not be allowed at the last minute.

    A series of activities lead to the approval or rejection of a bank loan application in the lending process. A bank’s loan department employs various credit professionals, each with their own set of roles and responsibilities to complete the lending process.

    Financial institutions rely on loans as one of their primary sources of revenue. Banks make money by charging depositors a higher interest rate than they pay them. The amount of interest charged on loan is determined by several factors, including the loan amount, loan duration, credit score, and risk assessment. Because the lending process is so essential, banks devote a significant amount of resources to the credit department to lend to creditworthy borrowers. As a result, they can safeguard themselves against losses caused by customer defaults.

    Credit Professionals Who Approve Bank Loans

    1. Underwriter

    An underwriter is a loan officer who assesses a loan application to see if the bank can afford it. An underwriter examines a client’s financial history to determine whether they are a risk worth taking. The risk level is calculated based on the client’s previous interactions with the bank or other financial institutions.

    Based on the client’s financial ability and cash flows, the underwriter assesses the client’s ability to repay the requested loan. The loan’s intended purpose is also investigated to see if it’s viable and if the borrower can generate enough cash flow. The credit history, collateral, and capacity of the client are all examined by the underwriter.

    The client must demonstrate sufficient financial resources to pay off any outstanding debts and repay the credit in full. The underwriter must obtain a credit report from a reputable credit rating agency to verify the potential borrower’s payment history. The report contains details about the client’s credit history, past loans and credit cards, repayment history, defaults, foreclosures and repossessions, employment, and so on.

    All of the above information aids the underwriter in determining the client’s risk level and whether or not it is a risk worth taking. The underwriter also considers the loan‘s collateral and how its appraised value compares to its value. You should establish the collateral’s ownership, and ownership documents should be deposited with the bank.

    2. Credit Analyst

    Credit analysts are an essential part of a bank’s or other financial institution’s loan department. They’re in charge of the credit analysis process, which looks at each borrower separately. A credit analyst could be assigned to one or more borrowers. Their job is to ensure that the documents submitted are correct. They are also in charge of determining whether or not the client’s business or purpose for funding has the financial capability to generate sufficient cash flows to service the debt and provide an income to the borrower.

    As part of the loan approval procedure, the credit analyst may be required to visit the client’s business premises. A site visit’s primary purpose is to ensure that the information provided on the loan application form is accurate and that the loan’s purpose is viable.

    The credit analyst also confirms that the rightful owner owns the collateral and that the collateral’s assessed value is correct. The asset’s value is verified by commissioning an appraisal or comparing it to the value of similar assets in other companies or with industry standards.

    Other factors considered by the analyst include:

    • The owner’s capital contribution to the business.
    • The state of the business environment in which the client’s business is located.
    • The ability of the borrower to repay the loan in full.

    To determine the level of credit risk associated with lending to the borrower, the credit analyst also considers the borrower’s credit score.

    The credit analyst recommends to the credit committee whether or not to approve the loan, the amount of credit to be extended, and the loan terms, based on their findings on the borrower’s creditworthiness.

    Can I still deny my loan? The short answer is yes, although it’s rare. Your lender will update your credit once again and check your employment status after your loan is considered clear to close.

    Loans are one of the financial institutions’ primary sources of revenue. By charging a higher interest rate than the depositors, banks make money. Interest on loans is based on the number of loans, the length of the loan, the loan score, and the risk assessment, etc. Because the lending process is so essential, banks allocate many funds to the credit department to lend to lending able borrowers. In consequence, they can protect themselves against customer default losses.

    While credit issues are a common reason for mortgage denials, they are not the only reason. Here are a few more things that could hinder your efforts:

    Insufficient Credit 

     You will most likely be denied if you do not yet have a significant credit report. The first step toward resolving this issue is to begin building your credit history so that your lender has an idea of how you manage credit and debt. They want to see that you are capable of repaying it responsibly.

    Insufficient Income

     You may also be denied if your income is insufficient. Lenders will compute your debt-to-income ratio (DTI) to ensure that you have enough monthly income to cover your mortgage payment as well as any other debts you may have. You will be denied if your DTI is too high or your income is insufficient to demonstrate that you can afford the monthly payments.

    A Job Change

     If you have recently started a new job, you may be denied for the same reason. Lenders prefer consistency in your income and employment. With a new job, they may be concerned that you will not have the same income potential as in the past, which may cause them to wonder if you will be able to repay your mortgage. While it is not required, most lenders prefer that you have worked for the same company or in a very similar position for at least two years.

    An Unexplained Cash Deposit

     What could be wrong with having too much money? If a mortgage lender notices a recent cash deposit, provided it is sizable enough, they may be concerned that you were given the money and may have to repay it. To feel utterly comfortable lending your money, they will want to know the source of any funds.

    It is painful to be rejected. It’s even worse when it prevents you from purchasing your dream home.

    When your offer is accepted, you may feel as if nothing can stop you. But, just a little, apply the brakes. There is one more obstacle you must overcome. The underwriting process is used to determine whether your loan application results in your chances of getting the house you want will be accepted or rejected.

    You might be wondering how frequently an underwriter rejects a loan. According to a mortgage data firm, approximately 8% of mortgage applications are denied, though denial rates vary by location.

    To avoid becoming one of those hopeful buyers, it’s critical to understand how underwriting works, the most common reasons why mortgage loans are denied in underwriting, and some tips for avoiding loan denial.

    The first step is to be pre-approved for purchasing a house. If your credit history or financial situation changes, a mortgage can be refused, even with preapproval. We understand how upsetting it is, working with buyers to learn that they refused your mortgage just days before closure.

    If the buyer no longer meets the loan requirements, they can deny a mortgage after preapproval. Some of the reasons a lender may reject a loan are as follows:

    Negative credit change. 

    You missed a payment during a home search or racking up more debt; if your credit score was around the requirement (say 620), your credit score drops. You may not obtain a mortgage of this negative impact on your credit score.

    A common misconception about home buying is that you need perfect credit to do so. However, specific credit score guidelines are available for each type of loan and procedures for each loan provider. This is not true.

    One of the most frequent reasons for denying a mortgage is the negative effect on a credit score from the buyers. A purchaser must clearly understand how credit scores impact mortgages and know their credit scoring when pre-approved.

    When a buyer with a loan score in the low 600’s gets approved beforehand, he must be cautious that his loans do not suffer negatively. Of course, a purchaser with 700s should be careful, but there is a very different credit score from 610 to 710.

    In short, you will continue to ensure that the bills are paid in time and also monitor your credit score if you have already received preapproval. Credit Karma is a popular website for free monitoring of credit. It can be devastating to find out a week before a goal close is refused!

    Change of employment. 

    A change in employment is one of the common reasons for denying a mortgage. There are specific long-term requirements, depending on the type of financing that a buyer receives. FHA mortgages, for example, require a purchaser to have a good history of two years’ employment. If there is a job history gap, a written explanation is required that is subject to the approval of a mortgage contract.

    A change in the job in some cases, if in a similar field, may be acceptable. For example, if a purchaser who is a nurse switches hospitals but remains a nurse, as long as income changes are not drastic, most lenders will be in good standing with this change.

    A purchaser recently switched employers when he sold a house in Brighton, NY, following the pre-approved and fully-defined work, which led to the denial of mortgages.

    A pre-approved purchaser needs to ask your mortgage consultant before making the change about possible changes in employment. In most cases, a top mortgage consultant can predict whether there will be a problem with the financing ultimately.

    Not only do lenders see your income, but they also have a history of keeping a permanent job. Particular loans have constant employment duration requirements (typically two years). In the middle of your home search, you would not satisfy the need to start a new job.

    The property doesn’t meet mortgage contingencies.  

    You will discover whether the properties meet all mortgage contingencies in the home inspection and appraisal process. You can’t obtain a loan if this isn’t the case.

    One of the most critical methods to succeed in purchasing a house is before shopping for a mortgage. The main reason to have a mortgage approval before you buy homes is to ensure you look at homes within the price range.

    Even if a buyer is pre-approved for a mortgage, this does not imply a guarantee that it will obtain the financing successfully. Of course, the hope is if a lender approves the buyer beforehand that the buyer will get funding, but even after preapproval, it is possible to refuse the mortgage.

    One of the most common reasons for the downfall of an immovable deal is a denied mortgage. If, after the preapproval, a buyer’s mortgage is refused, it is most often the buyer’s or lender’s fault that approves it.

    Many of the reasons for denying a mortgage are pretty standard after preapproval. Below are the most common reasons for rejecting a mortgage after preapproval. If you know what it is, you will significantly reduce the likelihood that your hypothecary is denied even following a preapproval!

    Negative Item On Credit

    A popular misconception about buying a home is that you need perfect credit to purchase a house. However, this is not the case; there are specific credit score guidelines for every type of mortgage and guidelines for every creditor.

    One of the most frequent reasons for denying a mortgage is the negative effect on a credit score from the buyers. A purchaser must clearly understand how credit scores impact mortgages and know their credit scoring when pre-approved.

    When a buyer with a loan score in the low 600’s gets approved beforehand, he must be cautious that his loans do not suffer negatively. Of course, a purchaser with 700s should be careful, but there is a very different credit score from 610 to 710.

    In short, you will continue to ensure that the bills are paid in time and also monitor your credit score if you have already received preapproval. Credit Karma is a popular website for free monitoring of credit. It can be devastating to find out a week before a goal close is refused!

    Additional Debt(s) Are Incurred

    Another widespread reason for a mortgage is because a buyer accepts additional liabilities after a preapproval. Ask a seasoned immobilizer if they have experienced situations when their buyer leaves for a brand new car after receiving an offer. The chance the immobilizer has is relatively high.

    It is essential not to add any extra debts or credit lines when shopping for a home and are pre-approved. It can have an enormous impact on income debt and eventually lead to a denied mortgage.

    A bank loan may be a great way to refinance high interest-rate debt, pay home reparations and other costs. It may be a better choice than using your typical credit card because your credit could result in a lower average interest rate.

    No good credit score can result in high offered interest rates, along with other factors — if you are approved. But it can improve your chance of being approved in the future to understand what you have refused and what you need to fix.

    Why does a personal loan get rejected?

    Many factors determine whether a personal loan is eligible. A low or bad credit history, a high debt to income ratio, unstable working conditions, low earnings to match the desired loan amount, or lack of relevant information and documents in your application are the most common reasons for rejecting the application. If the purpose does not qualify – such as attempting to borrow a personal loan for investment – you can also leave your loan.

    If my loan is refused, what should I do?

    For refused applications, the loaners shall provide an explanatory letter. 

    Read the letter and determine what can be remedied if you are declined. 

    You can, for instance, improve your credit value or pay off high-interest debts so that you can enhance your debt-to-earnings ratio. You may also try to apply again with your co-owner — someone with high credit and secure income — or opt for a co-ownership loan that shares both the loan funds and reimbursement responsibilities. Both can improve your approval opportunities.

    Why was my loan declined?

    You may reject personal loans for many reasons, but it is due to poor credit or unreliable credit history in most cases. Before you apply:

    1. Check out your credit report (Equifax, Transunion, and Experian allow you to produce a free account each year).
    2. Try taking some time to improve your score if it’s less than good (660 or lower).
    3. If you see mistakes on the report, plead with the three main credit offices immediately.

    How can I prevent my personal loan from being rejected?

    As key markers in determining the eligibility of loans, lenders consider your loan score, the debt-to-income relationship, income, employment record, and credit history. Work before application to improve your personal finances or opting for a joint personal loan with an authorized co-financer to enhance your application, if possible.

    If you are worried that a personal loan will be rejected, first consider online checking your rate. Your rate check will not affect your credit score and help determine your eligibility before making your application.

    Incorrect information on your credit report

    Credit reporting errors are common and may affect your credit value and your ability to obtain a loan in turn. Some errors may include outdated personal data or have a duplicate of the same debt more than once.

    Faulty records of the number of credit inquiries and adverse notices in your file may also impact your credit rating overall. When the information provided in your loan report has rejected the loan, you have received an adverse notification from your loan lender to inform you about the reasons for failure to apply.

    The accuracy of this information is essential in your credit file, so a copy of your credit report can be obtained and amended as soon as you believe that the data is wrong. It is a good idea.

     Capacity to service the loan

    By the National Consumer Credit Protection Act 2009, crediting is a reliable measure of the adequacy of your loan. This includes a clear view of your financial situation and your ability to repay your loan based on your loan amount, income, obligations, and possible expenses. If the estimate shows, you’re potentially struggling with the amount you have requested, you will decline your application.

    A large amount of debt

    Although you can use personal credit to consolidate your debt, it may not succeed if your overall debt is too large. Suppose your credit application is successful. Lenders will look at your current debt payment percentage (known as a debt-to-revenue ratio) when they assess the application to loan so that you could help you to build success by reimbursing the balance before applying for a new loan.

    Instability in employment and irregular income

    The primary source of income for most people will be jobs. Given this, lenders need to see if you are in a stable financial position to pay for the loan repayments each month. You might decline your loan application if you have changed your work every few months and cannot show you have a regular income.

    Poor credit history

    That might mean two things. Neither have your credit history sufficient to prevent lenders from accessing your financial behavior. Alternatively, your credit report shows existing problems such as poor debt repayment backgrounds or overdue payments of up to 60 days when the debt collection activity is launched. One of the reasons why your borrowers can reject your borrowing request may be poor records.

    You must also note that the application is considered an inquiry on your credit report when applying for personal credit.

    There is no way to ensure your application for personal loans is booming, but having a good understanding of why your application is refused will help you develop an action plan. Identify that your credit report has a detailed history record, so it is essential to know what is in the file and check your credit report’s accuracy. Here are some valuable suggestions to organize for your next personal loan before applying for it.

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    About FR Capital

    FR Capital is a Singapore consultancy firm that helps SMEs to secure business loans from banks and financial institutions. We concentrate on SME finance, and through our expertise and network, we help clients secure funding with low-interest rates efficiently and hassle-free.