There being so many accredited moneylenders that are offering these loan products, it’s important that you exercise caution when you are shopping around for a loan. The danger of ending up getting trapped by loan sharks is alive. To make matters worse, you may not get the greatest deal from your accredited moneylender, thus this calls for further scrutiny of all your available money lending options.
Why People Use Licensed Moneylenders
One of the most important rewards of taking out a loan from accredited moneylenders is that these lenders are under the regulation of the Singaporean Law Ministry. And when you borrow some money from these lending companies, there’s a cap on the amount of interest they are able to charge you, and what amount they will charge you in penalties when you are late in repaying.
According to the new regulations for moneylenders, which came into effect starting on 1 October 2015, all the loans are based on the following caps:
- An Administrative charge of 10% and below of your loan principal immediately after the loan has been granted
- Interest rates are to be either 4% or below each month
- Late interest rates of 4% and below for each month
- Late payment charges of not exceeding $60 each month
The total borrowing charge (late interest, interest, fees etc.) not exceeding 100 % of your loan principal. This means that the highest amount of money a borrower needs to pay to their licensed moneylender is an amount of twice their principal amount.
And above all the licensed moneylenders are not allowed to behave in a threatening manner or even harassing you.
Do Not Trust The Ads
It’s known as advertising, not actuality. It’s hard to believe any ad for toothpaste that guarantees to make teeth sparkle when you use it thus don’t depend on ads from a moneylender about their conditions and terms of this loan. Get an explanation for the exact terms of your loan contract prior to signing it.
Approved moneylenders are allowed to advertise only using the three channels below:
- Websites owned by the moneylender
- Consumer or business directories (online media or in print); and
- Ads placed on or on the outside of the business premises of the moneylender. Any other channels are forbidden.
When you get flyers, emails, SMSes or other types of advertisements that are not allowed, these could be from approved moneylenders working in breach of ads limitations, or from illegal moneylenders.
Therefore, it’s recommended that you do not respond to these advertisements. Instead, you have to report the adverts by presenting us with proof of these advertisements (a screen capture– for SMS) to the Police or the Registry. It’s recommended that you seek clarifications on particular conditions of the loan agreement before you sign up with an accredited moneylender, and not to depend only on the content of ads from the moneylender.
Ways To Help You Tell Whether A Moneylender Is Accredited
Don’t get a loan from unlicensed moneylenders. Be sure to verify whether a moneylender is approved by reading through the list of the licensed moneylenders. “Click here to check the whole list of approved moneylenders.”
Even though these moneylenders are approved, always be careful if they:
- Act in threatening ways or make use abusive language towards you.
- Asks for your SingPass password or and your user ID.
- Hold on to your NRIC card and any other of your personal ID documents (example driver’s license, passport, employment pass, work permit or the ATM card).
- Asks you to sign a blank or/and incomplete Note of agreement for your loan.
- Grants you the loan without issuing you a copy of agreement Note for your loan and without correctly explaining to you every one of the conditions and terms.
- Grants you loan money without doing due diligence (example approving a loan by phone, email or SMS before even getting your loan application forms and supporting papers, like the payslips and income tax assessment).
- Withholds any piece of the principal loan money for any reason.
These practices are not tolerable. When you come across them, you need to report that moneylender to the Moneylenders’ Registry, with information like the moneylender’s license, business name, as well as contact numbers.
To get more information about unlicensed moneylenders, you can click on the link: http://www.spf.gov.sg/ahlong/
Beware Of Stipulations
When you take out a secured loan, there’s no limit on the amount of money you can borrow. Nearly all people usually present their homes as collateral in these instances. However, you need to consider carefully whether the loan agreement you sign permits the moneylender to lodge a stipulation on the profits of your property when you default.
Once a stipulation is lodged against your assets, you will not be able to put it on the market without first paying off the moneylender loan money in full. This might wipe out nearly all when not all the profits from the sale.
Do A Thorough Research On The Best Rate
Making use of a loan is, in a way, not different from purchasing any type of a product. Different moneylenders have diverse rates hence shop around to locate the company that offers you the best interests and terms.
Do remember to look into the guide from the Law Ministry to get effective interests to recognize ways to make excellent comparisons. Do accurate research and read on different moneylenders’ evaluations from their customers before choosing the suitable one for you.
Take your time in choosing the lender to borrow from. When you don’t have the time to carry out the research, we got it all here, combined information with actual customers’ feedback and opinions to help you make the right decision.
Our key goal is to make loans more transparent at https://www.moneylendersingapore.org/. Transparency assists borrowers to exactly know the amount of debt they incur. It helps in the accurate assessment of whether or not they’ll be able to honor the loan payments. Convincing moneylenders to correctly advertise and reveal their correct interests and all associated charges, including late interest rates and penalties will undoubtedly benefit their borrowers.
Things to Consider Before Borrowing from Licensed Money Lenders
Many people seem to think that by borrowing money from licensed lenders, they’re 100% safe and sound. Naturally, that’s not in the least true. What looks like a fantastic deal can bite you really nice in a month or two.
This article is meant to grant you a peek behind the curtain, i.e. show you what you should be familiar with when you’re looking for a loan that won’t get you in a world of hurt.
- Don’t Go Straight to a Licensed Lender
Government agency schemes, credit unions, angel investors and P2P loans should be the first ones on your list. See what these entities have to offer; compare the loans from each of them and go with a licensed lender only if it makes financial sense to do so.
- Don’t Be Greedy
Licensed money lenders usually upsell borrowers, in the sense that they try to get them into borrowing more money than they actually need. On one hand, this will raise the interest rate and on the other, the terms will be longer.
See how much money you afford to borrow and take a look at the term of the loan: can you deal with it? Can you keep up with your monthly repayments or will you have to eat canned food until you’re out of debt?
- Study the Contract
If there’s anything, no matter how small, that isn’t in line with your initial talks, do not sign that contract. Look for fees you weren’t told about, the term, the interest rate and everything else that will influence your financial well-being.
Don’t put your name on that contract unless you understand everything in it. If you have any issues with that, it’s recommended that you hire a financial advisor.
- Get the Term You Want
It can so happen that the lender tries to enforce a term on you. Try to nudge him toward the term you want. It’s you that will repay the money each month, not the lender. A short term comes with a lot more pressure than a long one, so choose wisely.
The Pros of Borrowing from a Licensed Moneylender
People wouldn’t take loans from money lenders if these didn’t offer certain perks that borrowers wouldn’t get elsewhere. Let’s take a quick look at these.
- Less Stress: Borrowing money from other lenders, especially the ones that have a history of shady practices, comes as a package deal with sleepless nights and worries that you’ll get a knock on the door from a team of collectors. Licensed moneylenders can have their licenses revoked if they don’t respect the legislation.
- Quick Approval: This is generally due to the fact that licensed moneylenders don’t perform extensive credit inquiries and simply cater to people.
- Better Interest Rates: Singaporean licensed moneylenders are known for providing lower interest rates (thanks to certain governmental regulations). Moreover, they will never give people more money than they can actually afford.
- They’ve Got a Physical Address: Unlicensed moneylenders usually activate on obscure websites and don’t even have a phone number. It’s an entirely different situation when you can go down to a licensed moneylender’s office and talk things through personally.
- You Won’t Have to Provide Personal Details: Details that are too personal, to be more precise. Alternative lenders, especially the ones that do business online, commonly ask for information that doesn’t regard them in any way.
The 2 Types of Loans You Can Get
Licensed moneylenders offer two basic types of loans. Each of these differs from the other and, obviously, has different financial implications. The two types are: secured and unsecured loans.
Secured loans often come with lower interest rates because the borrower provides collateral. This is basically an asset that the borrower gets money against. As a rule of thumb, the value of the assets you put forth as collateral should be higher than the value of the amount you seek to borrow.
When you opt for a secured loan, the lender becomes the owner of your assets. In case you default, he’s got the right to liquidate them in order to get his money back. As long as your financial behavior is pristine, you won’t need to worry about that.
There is yet another reason why many people choose secured loans over the unsecured ones, apart from the generally low interest rates: the sum they can borrow. Under an unsecured loan, one can borrow more than 4x his income.
An unsecured loan is much riskier than its secured counterpart, so it shouldn’t be difficult to understand why you get a lower sum by opting for an unsecured loan.
When you get a secured loan, as mentioned previously, the lender can place a lien on your assets. If the loan is unsecured, though, the lender will have to sue you and get his money back by taking matters to a court.
You might think that you can make a strong case if you’re in this situation, but you cannot. The lender will most definitely get your money back. In extreme cases, the lender can get the right to sell your house.
To sum it up: an unsecured loan isn’t risky for the borrower, but it is very risky for the lender and that’s why the process of getting such a loan is thorough and quite steadfast. Unsecured loans often come with higher interest rates, as well, so here’s another disadvantage of getting one.
The Bottom Line
Before you get money from a licensed lender, you should always ask for his license. If a lender calls himself “licensed”, it doesn’t necessarily mean he is as such until he proves you wrong by giving you info pertaining to his license and certificate.
As you can see, you should be cautious even when you borrow money from a lender that has a license. Do not underestimate the power of thoroughness when it comes to getting a loan, as it is a big deal, even though it might not look like one.