After going through bankruptcy in Singapore, it might seem like your world has crumbled, but there’s light at the end of the tunnel. While it’s true that bankruptcy poses challenges and obstacles, it does not define your future.

This guide is crafted to show you that getting back on your feet and securing a loan isn’t a distant dream. Take a look at these straightforward and practical tips for those eager to rebuild their financial life from the ground up.

What Is Bankruptcy in Singapore?

Bankruptcy in Singapore is a legal declaration indicating that an individual cannot repay their debts. The duration typically spans three years, during which the individual faces various restrictions, including constraints on borrowing and business operations.

However, the period of bankruptcy in Singapore can be shortened or extended based on compliance with the legal proceedings and financial behaviour during the bankruptcy period.

What Happens If You File for Bankruptcy In Singapore?

When you file for bankruptcy in Singapore, it brings huge changes to your financial life and beyond. This decision impacts your credit score and it makes future financial activities like obtaining loans or credit cards more challenging. Additionally, it can place significant restrictions on your employment opportunities since some sectors may view bankruptcy negatively. The ability to travel overseas is also affected, requiring permission for travel from the Official Assignee, and managing businesses becomes limited.

Upon successfully meeting the conditions of bankruptcy in Singapore, individuals are discharged, releasing them from most remaining debts. However, failure to follow the Official Assignee’s instructions could extend the bankruptcy beyond the initial term. In contrast, bankruptcy can be annulled either by settling the debts in full or under special circumstances, offering a pathway out of bankruptcy for those who can navigate these financial obligations effectively.

Can a Declared Bankrupt Person Get a Loan in Singapore?

Yes, it’s possible. That said, getting a loan turns into a different journey because of bankruptcy in Singapore. Lenders that help people who’ve gone through bankruptcy usually have special loans that have specific requirements, like higher interest rates or collateral.

Being able to get these loans opens a door to recovery, but it’s really important to be careful. Make sure you fully understand what you’re agreeing to with these loans to avoid more financial problems down the line.

What Personal Loans Are There for Bankrupt Individuals?

Understanding the available personal loan options can mark the beginning of rebuilding your credit history and financial stability. Here are the personal loans available for individuals with a bankruptcy record.

Secured Loans

These loans require the borrower to offer an asset as collateral, such as a house or car, which serves as security for the loan.

Benefits: The primary advantage of secured loans is their accessibility. Since the loan is backed by collateral, lenders perceive a lower risk, making them more inclined to approve your application. Additionally, secured loans often come with lower interest rates compared to unsecured loans, making them more economical in the long run.

Considerations: The risk of losing your asset is a significant consideration. If you fail to make payments, the lender has the right to seize the collateral. Therefore, it’s crucial to assess your financial stability before opting for a secured loan.

Guarantor Loans

Guarantor loans involve a third party, usually a trusted family member or friend, who agrees to take on the responsibility of paying back the loan if you are unable to do so.

Benefits: This type of loan can be easier to obtain compared to other forms, as the guarantor’s financial history provides additional assurance to the lender. It’s an opportunity to access funds and rebuild your credit score, provided payments are made on time.

Considerations: The main risk lies with the guarantor. Their credit score could be adversely affected if the loan is not repaid, potentially straining personal relationships. Both parties must fully understand and agree to the terms before proceeding.

Licensed Moneylenders

Exploring loans from credit unions and licensed moneylenders can be beneficial. These institutions often offer more flexible lending criteria than traditional banks, making them a suitable option for those with a bankruptcy history.

Benefits: Alternative lenders and credit unions typically have a more personalised approach to assessing loan applications, potentially leading to higher approval rates. They may also offer loans with more favourable terms, such as lower fees or more manageable repayment schedules.

Considerations: It’s important to research and compare different lenders, as terms and interest rates can vary widely. Ensure that the lender is reputable and licensed to avoid falling into predatory lending practices.

Post-Bankruptcy Personal Loans

Some lenders also offer personal loans specifically designed for individuals who have gone through bankruptcy in Singapore. These loans aim to help borrowers rebuild their credit while providing the funds they need.

Benefits: Post-bankruptcy personal loans can be a stepping stone towards financial recovery, offering a chance to improve your credit score through consistent, on-time payments.

Considerations: Higher interest rates are a common feature of these loans, reflecting the higher risk associated with lending to someone with a bankruptcy history. It’s essential to consider whether the cost of the loan is manageable within your budget and contributes positively to your financial rehabilitation.

How to Improve Credit Score in Singapore

Improving credit in Singapore needs disciplined financial habits and strategic decision-making. It requires consistent effort and informed choices. Here are some tips to follow.

Make Regular Bill Payments

One of the most fundamental steps in rebuilding credit after bankruptcy in Singapore is ensuring that all your bills are paid on time. This includes utilities, credit card bills, loans, and any other recurring payments. Timely payments demonstrate to creditors that you are responsible and reliable, which can positively impact your credit score.

Manage Your Finances Wisely

Creating and sticking to a budget is crucial for financial stability. It helps you track your income and expenses, ensuring you live within your means and avoid accruing further debt. Budgeting also allows you to allocate funds toward paying off existing debts, which is essential for credit improvement.

Apply for Manageable Credit Lines

Gradually taking on small amounts of credit can be beneficial for rebuilding your credit history. This could involve applying for a secured credit card or a small loan that you are confident you can repay. The key is to use these credit lines responsibly, making purchases that you can afford and paying off the balance in full each month.

Monitor Your Progress

Regularly reviewing your credit report after bankruptcy in Singapore allows you to track your progress, identify any errors, and understand how your financial habits influence your credit score. In Singapore, you can obtain your credit report from the Credit Bureau Singapore (CBS) or other accredited bureaus.

The Bottom Line

While bankruptcy can initially seem like an end-all-be-all, your chances for recovery and getting loans thereafter are viable with the right approach and resources. By carefully exploring the options available and adhering to financial recovery strategies, you can pave the way towards financial stability and creditworthiness in Singapore. Ready to apply for a personal loan after bankruptcy in Singapore? We can help. Get a tailored loan offer here.

Published On: March 6th, 2024

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