Differences between a Licensed Money Lender and a Loan Shark
Borrowing money is imminent. There comes a time in life when you need financial help. But sometimes, it can be difficult to comply with all the conditions required by banks.
This is the primary reason why more and more people consider licensed moneylenders as a more favorable alternative. Nevertheless, while they can be helpful, recently, numerous loan sharks have emerged in this industry. These sharks employ merciless business tactics, and they are known for charging unbelievably high interest rates, which go up to 40 percent.
The downside is that these loan sharks present themselves as reliable licensed money lenders, which could make borrowers fall into their trap. That is why we want to outline the main differences between licensed money lenders and loan sharks.
- Licensed Money Lenders Are Transparent and Upfront about the Loan Terms
The first thing that sets a licensed money lender apart from a loan shark is transparency. That is to say, a reliable lender should openly discuss payment method alternatives, the interest rate, and the other terms of the loan. Simultaneously, he/she must be willing to answer any questions.
Hence, if the lender you’re collaborating with doesn’t want to discuss the terms, you should look for financing elsewhere.
- Licensed Money Lenders Consider Your Income for Unsecured Loans
When it comes to unsecured loans, your income is the most significant element that dictates the terms of the loans. Therefore, it makes sense that this is the most important aspect.
So, if a lender is surprisingly willing to provide an unusually high sum of money – in light of your current income, this poses a serious question mark. Essentially, your income should allow you to make repayments. Otherwise, you’ll end up sinking in debt before you know it.
- Licensed Money Lenders Sign Contracts with Borrowers
There’s no such thing as a reliable lender that closes a contract based on a verbal agreement. In other words, there should always be a contract. This must contain critical information including interest fees, repayment period, late payment fees, additional charges, so on and so forth.
If you don’t have to sign a contract, or you are offered an incomplete document, you shouldn’t enter an agreement with that lender. The odds are that you’re dealing with a loan shark.
- Licensed Money Lenders Charge Market Interest Rates
You should note that licensed money lenders have to respect a range of strict guidelines when it comes to setting interest rates. In other words, if a lender intends to charge you more than the maximum legal amount – up to 40 percent – it’s crystal clear that you’re dealing with a loan shark.
- Loan Sharks Might Use Offensive and Threatening Language
In order to collect their fees and repayments, loan sharks might eventually use threatening language. Licensed money lenders won’t turn to these tactics, due to common-sense professional guidelines. By all means, if you’ve stumbled across a money lender whose reputation isn’t the best, because of the use of offensive claims, you should stay away from him/her.
The bad part is that you don’t find about such tactics unless you’ve signed the loan papers and you didn’t make timely repayments. That is to say, a loan shark may embrace a friendly, professional approach at first, but in time, show their real face. That’s why it’s best to assess the Registry of Moneylenders, to determine if a lender is indeed licensed to operate or not.
- Licensed Money Lenders Charge Three Types of Fees
Loan sharks may be quite vague when it comes to the additional fees you might need to pay. However, you should know that licensed money lenders may charge three types of fees, depending on the situation.
Firstly, if the loan goes into default, you’ll accumulate late interest fees. Note that these aren’t the same as the regular interest fees. Secondly, there are up-front service fees, and, lastly, we have the legal fees associated with a court challenge.
So, if you’re dealing with a lender that charges more fees than the ones enumerated above, you should look for financing elsewhere.
- Money Lenders Should Have a License
You should note that licensed money lenders must have an official license. Look for one before you work with any lender. For example, you can check the website of the Singapore Ministry of Law. There, you will find all the information you need about licensed money lenders so that you can differentiate them from loan sharks.
The only scenario in which a licensed money lender might not appear on the website is if they have received the license recently and the information on the website hasn’t been updated.
- Licensed Money Lenders Should Have a Physical Office
According to Singapore’s law, licensed money lenders must have a physical office. And the office address should be identical to the one listed on the Ministry of Law website. That being said, make sure that this information matches.
Essentially, licensed lenders operate in a well-maintained office. When you meet up to sign the papers, the meeting should take place in this specially designated office space, even though, afterward, you might also communicate via email or phone.
On the other side, loan sharks don’t have offices. Thus, if you’re dealing with a lender that doesn’t have an office, it would be safer to look for financing in another place.
- Always Double Check the Address Information with the Ministry of Law
Ultimately, you should always take the time to double check that the information listed on a lender’s website is correct and is the same as the one featured by the Ministry of Law. That’s because sometimes, loan sharks might use a false identity in order to trap potential victims.
To conclude, as long as you’re an informed borrower, you’ll be on the safe side. There are numerous loan sharks out there, but when you do your research, you can differentiate them from licensed money lenders and make a sensible choice.