Hi, my name is Ka Hoe and I’m the founder of J Advisory and today, I’m back with another money misconception, which I get asked a lot. Is it true? What do you think? Let me put it into context. If you are a business owner, you probably have heard of such things before and in fact, this is true. But actually today I’m talking about more from an individual point of view, normally for banks, if you actually have bad credit scoring what the bank will do is just they don’t approve your loan. They won’t take the hassle of approving your loan and then eventually charging you a higher interest rate. 

What will the banks do before approving your loans? 

So this is one of the things which I cover in my earlier video talking about CCRIS and CTOS which is actually a credit scoring report for the banks to evaluate how credible or how worthy or how well you are as a paymaster. So of course the tendency is that if you pay your loans on time every time your loans get approved and they will always stick with the same credit score or the same interest rate whether is being offered to you or offered to another person. The only difference that as an individual, you need to be aware of when there’s a difference of interest rate is normally the banks look at whether you are taking a loan with collateral or without collateral. 

So what do you mean by collateral? 

Collateral is actually let’s say you’re taking a housing loan, your loan interest would be lower if the bank gets to charge your house as a collateral that means in the event that you cannot pay, they will just forfeit your house and then auction it or lelong it. So but if let’s say you don’t have or you have a loan, which you don’t have a collateral, like a housing loan, for example your personal loan or your credit card. That’s why naturally the interest rate is a lot higher. So you can see the ratio from housing loans being low, then the next one is the car loan. Because car loans naturally have a collateral. And in the next two will be your credit card, personal loan which you don’t have any collateral. If you are a business owner, yes, it is true that you may have different interest rates. 

Can I still borrow money if my credit score is bad? 

If you are having a bad credit score so far, I’ve seen a lot being applied in those non financial institutions, non banking institutions like Fundaztic or Funding Society, the P2P lending platforms. They do have for example, if you are not so strong in your credit scoring perhaps, they will charge you interest of maybe 12 to 13 percent. If you are actually better, they may even give you a 8 to 9 percent interest rate. So, let me know if you have experienced something other than this, I’ll be happy to learn more because eventually, why am I doing all this video is for you guys to learn, and as well as for me, I need to get my facts, right? So I’ll see you guys in the next video. Take care guys.