When seeking a loan, it's vital to understand how lenders evaluate your income. Lenders carefully examine various aspects of your financial situation to make responsible lending decisions. Here are some things lender consider when assessing your income for your loan application.
If you're not eligible for CPF (e.g., non-Singaporeans or PR), NOAs can be used. However, NOAs have limitations as they lag by a year and may not reflect current income fluctuations accurately, especially for self-employed individuals who might report income inaccurately.
Many banks require pay slips as income proof. These not only show your latest salary but also the composition of fixed and variable components. They're essential for determining salaries exceeding S$6,000, which CPF cannot cover.
Self-employed individuals, particularly sole proprietors, might have discrepancies between their personal and business income. Lenders may refer to business bank statements to verify income, typically using the lower of the two figures.
Freelancers should retain receipts for at least three months, helping lenders calculate an average monthly income. Consistency in income sources and payment methods (preferably bank transfers) is crucial for stability and credibility.
Gig economy workers, like private car hires or delivery personnel, may not have CPF or traditional income sources. Lenders often request 12-week platform statements to determine earnings, though they usually discount it by around 20% due to expenses like petrol and car rental.
As a final step, lenders may examine your bank accounts to match deposited income amounts and identify the source of your salary. Cash payments are typically rejected as income proof due to their potential for disputes.
Understanding why lenders scrutinize income proof is vital, as it ensures they conduct thorough due diligence on borrowers, preventing them from taking on excessive debt relative to their income capacity.
If you're in need of a personal loan and want expert guidance to navigate the lending landscape, consider reaching out to Lendingpot, your trusted personal loan concierge. Our dedicated team can assist you in finding the right loan options tailored to your unique financial situation. Don't hesitate – connect with Lendingpot today and let us help you secure the funds you need with confidence!
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