Advancing in age comes with several disadvantages and limitations. There is a high chance that you will develop some illness, walking for a long distance becomes a problem, vision is a calamity, and the things that enticed you when you were agile and young no longer have a meaning in your life. This is the hard truth that most of us will avoid hearing or even be brave enough to face it. These things are guaranteed to happen. The certainty of them happening is like day and night. There must be a day and a night.
Adding salt to the injury, there is yet another calamity that looms as you advance in age: Your Credit Worthiness. The truth is that as you grow older, your chance of getting a loan diminishes. There are several factors that would make a Credit Excel shy away from lending you a loan. The reasons may include; reduced income as you age, reduction of agility of earning income, high mortality rate and thus reduced chances of repayment, among other reasons.
However, your creditworthiness is not rigid. It has the characteristic of being elastic. It can be stretched to increase your chances of getting a loan approved by your money lender. We have gone out our way and provided you with some tips on how you can get your loan approved no matter what age you are.
1. Loan Collateral
Collateral is one of the fundamental requirements that a bank will always ask you when you approach them for a loan. Now, if you are past the age of retirement, using collateral is one of the fastest and easiest ways to get a loan. Collateral is a commitment to the money lender that you will repay the loan and in the event that you violate the loan agreement and abscond repayment, the money lender can recover his money using the collateral.
Collateral is always of higher value that the amount of loan taken. Hence the term secured loan’. Collateral can range from a house, stock portfolio, your truck or even gold. This explains the narrative why most people store a portion of their wealth in physical form e.g. Gold. They are usually fully aware that they will require it someday when their income is inconsistent and the only way out is a loan.
Another easy way of getting a loan is using what is termed as reverse mortgage. This is also called cash-out refinancing or second mortgage. As a senior citizen in Singapore, you can use your fully paid house to get a loan. Banks are mandated to give you up to 50% your private property’s value under the Monetary Authority of Singapore loan curbs. This is regardless of whether you have your income meets Total Debt Servicing Ratio (TDSR) requirements.
The beauty of using Collateral is that you are assured of low-interest loan since your loan is secured. For example: In the case of a reverse mortgage, the current interest rate is about 1.6% per annum. Normally, your CPF will accrue 2.5% per annum. These interest rates are not comparable.
A guarantor/surety is an individual who agrees to pay your loan in the event you default and you are not able to repay back that loan. In Singapore, your guarantor needs to be 21 years and above and who is a Singaporean citizen. In addition, he/she need to have an income seen to be appropriate for your money lender/bank. The principle is that a higher loan will attract higher income from the guarantor.
In most cases, guarantors are close family members. However, you can always make arrangements with other people who can become your guarantor. This can happen when there is no close relative willing to guarantee you and the items you have are not acceptable by the bank as Collateral. In some instances, some individuals have entered into a contract to give away their stock portfolio or even an art collection to a surety/guarantor if they fail to repay back the loan.
3. Shortening the Loan Period
When you approach a money lender like a bank, they will conduct a risk assessment to determine the possibility of repayment. This will, in turn, affect the approval rate of the loan being borrowed. One of the factors that affect the approval of loans by a bank is the repayment period. Short loan tenure leads to a higher rate of loan approval. So, consider shortening your loan tenure/period if you want your loan to be approved.
A good example is when you are borrowing a home loan. If your loan tenure plus your age exceeds 65 years, then you can only borrow up to 60% of the value of your property. On the other hand, if your loan tenure is shortened such that your age plus the loan tenure does not exceed 65 years, then you can borrow up to 80% of the value of your property.
However, shortening the loan period has its demerits. You will be slapped with higher monthly installments. Therefore, do your math before thinking of this.
4. Co-borrowing With a Younger Partner
This is another method that you can use to get your loan approved. This would involve a young adult who has a stable income. This can be your grandchild or even the youngest of your children. What will happen is that, the bank will take of your ages and average them which results to a younger age as compared to your normal age.
This can have two effects: It can make you feel young than you really are which may contribute to better health indirectly. Most importantly, it can quicken the approval of your loan.
5. Consider Non-Banking Financial Institutions
This should be a method of last resort. They are usually not banks but they operate like banks. A good example is credit union which is also referred to co-operatives. When banks are reluctant to give out loans, these institutions can come to your aid. If your credit worthiness is good, then it is better to approach them than banks. These institutions have their own advantages as the loan interest may be lower than that of the banks.
Nevertheless, be cautious when you consider this method. Be keen on which you approach. Due diligence is an important step that you should take to ensure that the credit union you are approaching is legitimate. Not all licensed moneylenders can provide a loan. Some are conmen. In the event that you are doubtful of the moneylender, do not proceed to take up the loan, regardless of how enticing the terms are. Always be on the lookout.