There will always be a time when you need quick cash.
Borrowing from a licensed money lender is the best choice if you don’t want to bother your relatives and families.
Besides, licensed money lenders offer attractive interest rates and quick approvals. However, it comes with risks.
So, in this article, let’s look at what is the risk of loaning from a licensed money lender, and how much money you can borrow in Singapore from a licensed money lender.
When Should You Take A Loan From A Licensed Money Lender Instead Of A Bank?
When it comes to borrowing, you have a few options.
These include banks, authorised money lenders, and close personal contacts.
But a personal loan from a licensed money lender is preferable to a bank loan for several reasons. These reasons are explained below:
Quicker Rate Of Loan Approval
Personal loans, such as fast cash loans, are useful for financial emergencies because of the speed of approval.
At Credit 21, a licensed money lender, we can approve a loan within 24 hours of application, unlike a bank, which can take up to two weeks.
It is because licensed lenders are subject to fewer restrictions and paperwork requirements.
So if you need cash quickly, a licensed money lender can provide it faster than a bank, whether you’re looking for a payday or an urgent cash loan.
Higher Approval Chances
Since a legal money lender in Singapore has fewer requirements, their approval rates are higher than those of banks.
If, for example, your credit is poor, you don’t have a steady source of income, or your annual income is less than $20,000, a bank will turn down your loan application.
However, licensed money lenders typically need proof of steady employment and no prior loan defaults.
Also, licensed money lenders are more likely to approve your loan even if you have a poor bank credit history.
That’s because Credit Bureau Singapore (CBS), which keeps track of your credit history with banks, won’t share that information with money lenders.
Instead, lenders will use the Moneylenders Credit Bureau (MLCB) service to see how much you owe in loans with other lenders.
This includes how often you’ve repaid those loans and how much you’re eligible to borrow.
Licensed money lenders can provide secured or unsecured loans.
However, short-term unsecured loans get approval quickly. This way, if you are unable to pay a money lender in Singapore, you won’t have to worry about losing possessions such as your home or car.
Excellent For Short-Term Loans
Since licensed money lenders typically have a higher loan approval rate and can provide funds much more quickly than banks, they are the best option for people needing an emergency loan of a smaller amount.
For example, borrowing from licensed money lenders is less of a problem if you only need a small loan.
For instance, you may need to ease your cashflow for a short period, such as a month, and can repay the loan in full when your source of funds comes in.
However, a money loan from Singapore from a bank may be the best option if you need a larger amount and have more time to pay it back.
Here is why: Banks often provide longer repayment periods of up to five years at lower interest rates (3.5-11% per year) than a licensed money lender’s interest rate (1-4%) per month.
How Much Can You Borrow From A Licensed Money Lender?
As of 1 Oct 2015, the most money lenders can charge in interest is 4% per month. This ceiling is in effect whether it’s a secure or unsecured loan and is regardless of the borrower’s income.
Borrowers who are late with their loan payments will accrue late fees equal to 4% of the outstanding loan balance per month.
Lenders must calculate interest on the loan’s outstanding principal balance. They calculate it by subtracting all principal payments made by or on behalf of the borrower from the loan’s original principal balance.
So if you borrow $1,000 but have paid back $400, then interest is only calculated on the remaining $600.
Only late payments will incur an additional fee. The Singapore government prohibits lenders from imposing fees on balances that have not yet matured into repayment.
So if you borrow $1,000 and can only afford to pay $200 back right now, the money lender can charge you interest on the $200 you’re late on.
But it won’t apply to the $800 you still haven’t paid back.
Interest Rates That Licensed Money Lenders Can Charge
With a secured loan, you can borrow as much as you need.
When applying for a secured loan from a bank, you must put up some collateral to get the loan. If you cannot repay the loan, the lender can keep the collateral.
Here is how much you can borrow with an unsecured loan:
|Annual Income||Singapore Citizens and Residents||Non-Citizens|
|Less than $10,000||$3,000||$500|
|$10,000 to $20,000||$3,000||$3,000|
|$20,000 and above||6x monthly income||6x monthly income|
What To Prepare Before You Take A Loan
Though applying for a personal loan may feel like a lot of work, it’s simple.
Everything you need to know about getting a personal loan in Singapore, as well as what is the risk of loaning from a licensed money lender, is in this easy-to-follow, five-step guide.
Let’s get started.
1. Find Out How Much Money You Need To Borrow
The first step is to calculate the loan amount you require.
Explore your loan options with this sum by contrasting various lenders’ interest rates, terms, extra fees, and repayment amounts.
Don’t forget to check a loan’s terms and conditions before committing to anything.
2. Check Your Loan Eligibility
Verify your loan eligibility before applying. You don’t want to apply for a loan only to have your application rejected because you don’t meet the requirements.
If you want to apply for a loan, you’ll need to show proof of your current income, credit score, and employment status.
There is a variety of online resources that detail the requirements that various banks and lenders have for those seeking personal loans.
3. Submit An Application
When looking for a personal loan in Singapore, it’s essential to know that the application process varies between various authorised financial institutions and licensed money lenders.
At the outset of the loan application process, you’ll need to provide your money lender with the following documents:
- NRIC or passport
- Payslip to show proof of income
- 15 months’ worth of income tax returns
- Other documents
4. Await Approval
Official financial institutions such as banks will approve your loan application more slowly than licensed money lenders.
Getting a loan approved by the former can take up to two weeks, but the latter may only take a day or two.
5. Receive Your Money
It’s the last step where you sign the dotted line. However, you’ll need to visit the money lender’s office to do this. This is a must.
So be cautious of loans that are disbursed online. All licensed money lenders in Singapore will only complete the transaction in their offices.
Once you sign the loan agreement, the lender will transfer the money to your account.
How Can You Differentiate A Licensed And Unlicensed Money Lender?
Ad restrictions for licensed money lenders took effect on 1 Nov 2011. They stipulate only the following media types are acceptable for ads:
- Online platforms run by the money lender
- Consumer or business listings in digital form or printed media
- Signs or posters displayed inside or outside the money lender’s office
The Singapore government forbids money lenders to use any other methods.
You can distinguish between licensed and unlicensed money lenders, thanks to these advertising regulations.
Money lenders that send you emails, flyers, texts, or other types of advertising are against the law or have no license. Therefore, ignore such adverts.
Can You Trust A Money Lender’s Advertisement?
Before signing a loan agreement with a licensed money lender, get answers to your questions about the agreement’s terms and conditions. Don’t just sign the loan agreement based on the content of the advertisement.
What Should You Do After Loan Approval?
Check that the principal loan amount you received from the money lender matches the amount you agreed to.
The lender can charge an initial fee of up to 10% of the loan’s principal for approving the loan. Here are some other things to look out for:
- If you want to avoid paying extra interest and fees, make your loan installments on time
- Verify the accuracy of the receipt the money lender gives you after each payment you make on the loan
- At least twice a year, receive a statement of account detailing all of your loans, which you should review for accuracy. It should include your name, the balance, and due date
- Keep all payment receipts and account statements as proof that the lender has received the money
Make Sure You Choose A Reputable Licensed Money Lender
Even if you are still wondering what is the risk of loaning from a licensed money lender, you now know what to look out for so you can spot a red flag immediately.
Always look for a licensed lender if you need a loan – even if you have a low income, a poor credit score, or need a modest amount for a short period.
If you follow our guide, you should be able to find a trustworthy lender to work with you. However, remember, borrowing money still carries some risk.
Credit 21 is among Singapore’s best licensed money lenders if you’re in a tough spot and need quick cash. We offer fast loans with easy-to-understand terms.
The best part? We can customise it according to your income level and repayment capacity.