The bills are quickly piling up, the mortgage is due, and your salary isn’t providing relief. Or perhaps you need resources for your business, but you don’t have enough money.
Then it may be time to seek financial assistance from a money lender.
What do you do, though, given that you’ve heard horror stories about individuals getting taken advantage of or into serious debt?
The best option is to be armed with all the information you will need before taking a loan.
This blog post outlines what you need to know about money lenders.
What Is A Money Lender?
A money lender is a principal lender or an agent of a company that provides loans to individuals and businesses.
They offer loans for various needs, including paying for education expenses, buying a car, and buying real estate.
In Singapore, no one is permitted to act as a money lender under the law unless they have a license or are excluded from or exempted from the Moneylenders Act.
What To Consider Before Taking Up A Loan
Before borrowing from any lender, take into account the following factors:
Think about other financing options, such as requesting financial aid from government financial programmes.
Before considering such schemes, please research them to learn how they work.
If you settle for a money lender, consider multiple lenders and choose the best deal. It would help to spend some time researching each money lender, including how to settle debt with a licensed money lender.
Remember to only sign a contract whose terms you are comfortable with.
Only Borrow What You Need
Keep in mind your income and financial obligations. Such factors will dictate the amount of money you can borrow and your ability to repay the loan.
It would help if you borrowed only what you need. Once you sign a loan contract, you must comply with all terms, including timely loan repayment.
Failure to do so may result in fines and more financial difficulties.
Familiarise Yourself With Contractual Terms
Moneylenders are required by law to give you a copy of the loan contract and to explain the terms of a loan to you in a language you can understand.
Read through the contract carefully before you sign it. Make sure you understand all the terms, including the interest rates applied.
Also, keep an eye out for hidden terms and seek assistance from a financial advisor.
It helps to be cautious with contracts that give the money lender the right to place a caveat on the proceeds of the sale of your real estate property if you don’t make your loan payments on time.
A caveat prevents you from selling your property if the moneylender has not been fully repaid. It could entirely or substantially reduce the proceeds if the repayment is deducted from the net proceeds of the property sale.
How Much Can You Borrow?
The amount you can borrow from a money lender in Singapore depends on your income, expenses, and other factors.
However, two factors affect whether you’ll be granted a loan. These are:
Your Credit Score
This is based on how frequently you’ve previously repaid bills or loans. Lenders will be more inclined to put more money in your hands if your credit score is higher.
Your Cashflow (Income)
Regardless of the employment or business venture, you are involved in, if there’s regular cashflow going into your account each month, your chances of borrowing more money are high.
This is because there is a significant likelihood that you’ll repay your loan on time.
In Singapore, there is a total maximum amount that can be taken from legal money lenders in Singapore for unsecured loans, as shown in the table below:
|Borrower’s annual income
|Singapore Citizens and Permanent Residents
|Foreigners residing in Singapore
|Less than $10,000
|At least $10,000
and less than $20,000
|At least $20,000
|Six times monthly income
|Six times monthly income
A secured loan is one for which a valuable object is used as security.
The money lender has the right to take possession of this asset, such as property if the borrower cannot repay the debt. There is no maximum loan amount for secured loans.
What Are The Requirements For Borrowing Money From Licensed Money Lenders?
The borrower must provide the legal money lender in Singapore with a correctly filled application form that includes information about them, including their:
- Full name and date of birth
- Home address
- Telephone number
- Amount of the loan requested
- Proof of income for the last three months
- Income tax documents
- Utility bills
In addition to the specified supporting documents, foreign nationals resident in Singapore must provide the following:
- A genuine, current work permit
- Bank statements
- A replica of their rental agreement;
- Letters confirming employment from the borrower’s employer
Other documents for the surety, such as those for the guarantees (an individual who promises to repay the loan plus interest should you fail to repay), must also be proved.
Interest Rates Charged By Money Lenders
The loan you obtain will determine the interest rate lenders will charge. However, there are laws in Singapore that control the interest rates that are applied to loans.
Since 1 Oct 2015, legal money lenders in Singapore are allowed to implement these regulations:
- A monthly interest rate of no more than 4%
- The late interest is 4% maximum each month
- A monthly late fine of $60 or more
A legal lender’s total fees, including interest, late interest, administrative costs, late fees, and other related costs, cannot be higher than the loan’s principal.
The interest rates from licensed money lenders are typically more significant than those of credit cards and even auto loans.
For instance, applying for a short-term personal loan may be more appropriate if you urgently require a small amount of money, and don’t have savings.
Getting a quick loan will help you address your immediate financial concerns and allow you to find extra money later when most interest rates are high.
How To Know If A Money Lender Is Licensed
It’s crucial to research the background information from the list of licensed money lenders in Singapore. There are plenty of illegal money lenders out there.
If you are approached to acquire a loan over the phone or by text message, the money lender is probably not authorised because it is against the law for them to do so.
Money lenders with licenses may only advertise their services through:
- Their official websites
- Consumer or business directories published in print or online
- Placing advertisements within the business or on its exterior (such as on the side of a wall or a door shutter)
According to the Ministry of Law, other licensed money lender harassment practices include:
- Requesting your Singpass password or ID
- Requesting your signature on an unfinished or blank note of the contract
- Failing to return your NRIC or other crucial personal identification documents, such as your passport or ATM card
- Using threatening or harsh language
- Withholding a portion of the loan’s principal for any reason
If this occurs, you should report the lender to the Ministry of Law’s Registry of Moneylenders.
What To Do After The Loan Is Granted
Make sure the contract is clear and easy to understand. Don’t sign if you don’t know what it says.
Verify that the legal money lender has given you the exact loan principal amount. The money lender can only deduct the upfront loan approval fee up to 10% of the principal sum.
- You must know the amount owed and the due dates for each month’s payments.
- Make your loan installment payments on time to avoid late payment penalties and late interest.
- Request a receipt from the lender each time you make a loan repayment, and make sure the receipt is accurate.
- Ensure you receive a statement of account for your loans at least once in January and July, and double-check that all the information is accurate (such as the name, amount, and date).
- Keep note of all transactions (statements of accounts and payment receipts) as proof of payments once the loan has been repaid.
In addition to the amount repaid within this time, any late fees or interest costs should also be considered.
Lodging A Complaint Against A Money Lender
If a licensed money lender in Singapore engages in unfair activities like those listed above, you can file a complaint with the Registry of Moneylenders at 1800-2255-529.
The registry has a team of staff who handles complaints and resolves them reasonably quickly.
You will need to fill out a form with details of your complaint (the money lender’s business name, license, and contact number) and send it to them by post or email.
A loan comes in handy in clearing up bills or topping up the insufficient funds you need to purchase a house or car.
However, it helps to approach a money lender with caution. Ensure you have all the needed information, including its license.
Once you get the loan, ensure you repay on time to avoid penalties and keep track of all transactions.
In case of any unprofessional behaviour from the lender, you may file a complaint with the Registry of Moneylenders for further action.
If you require a loan for personal or business needs, contact a consultant at Credit 21 for more information.