When looking out for a personal cash loan, lot ofpeople look to banks before all else, have you ever asked when a bank willloan you money?
Banks will gladly give youa personal loan when you have NO demand for it. Banks also extend creditsonly to credit worthy people. Financial institutions and banks have a numerousrequirements and limitations when the yoffer personal loans.Banks do not provide personal loans to Singaporean citizens and PRs whoearn no more than $20,000 peryear. If youare a foreigner in Singapore, the requirements are much tougher. What comes up if you have bad credit and you need to have an urgent personal cash loan?
Apart from family members and friends , youronly legal way is to give a try the helpof a money lender.
Loaning from relatives and/or friends can possibly be tricky and humiliating. There are quite a lotof individuals (who intends to preserve one’s honor) who ratherborrow from a licensed money lender and pay off the interests on the loan than seek a favour from someone close .
Licensed Money Lenders in Singapore
In Singapore (as with nearly every industry) themoney lending industry is highlyregulated and moneylenders are licensed by the Registrar of Money Lenders. There are very clear guidelines and restrictions on the amount ofloans they can grant, the fees they can charge and even the interest rates areheavily regulated.
Any licensed moneylender found to be flouting the Money Lenders Act in Singapore will havetheir money lending licensed withdrawed. It ishighly recommended that you comprehend and learn your right as a borrower if you are aiming to take out a personal cashloan from a licensed money lender.
It is definitely worth noting that a licensedmoney lender in Singapore is really much like any otherbusinessman. They desire to take care of their good credibility andreputation, deliver a perfect service, customize their loans in conformance to the laws and generate profits. When licensed money lenders inSingapore “chase” their debtors, they are no different to a bank– it’s letters andletters and more reminder letters.
What should you do before approaching a licensedmoney lender?
Take note that you are legally obligated to fulfil any loan contracts you enter with a licensed money lender. It is advisable to borrow only what you can repay.In Singapore, all licensed money lenders are expected by law to make clear theterms of loans to you clearly and in a language that you comprehend. You are safeguarded by law to get a copy of the contract. Always be certainthat you understand all the terms of the contract which includes very important terms like the interest rates, applicable fees involved and the repayment terms.
How much can you borrow?
For secured loans, there is no limit to the loan you can secure. For unsecured loans, theamount you can borrow depends on yourannual income:
You can borrow as much as $3,000, if your annual salary is less than $20,000;
You can borrow as much as 2 months’ income, if your yearly salary is $20,000 or more but no more than $30,000;
You can borrow up to 4 months’ income, if your yearly paycheck is $30,000 or more but no more than $120,000; and
You can borrow up any amount, if your annual income is $120,000 or more.
Interest Rates That Moneylenders can charge
For loans contracted between 1 June 2012 and 30 September 2015, moneylenders are expected to calculate anddisclose to you the Effective Interest Rate of the loan, prior tothe loan is granted. If your yearly earnings is no more than $30,000, theinterest rate which moneylenders can charge, for both secured and unsecured loans, iscapped at:
13 per cent Effective Interest Rate for secured loans; and
20 per cent Effective Interest Rate for unsecured loans.
The Effective Interest Rate takes into consideration thecompounding effect of the periodicity of instalments over a one-yearperiod. This means that Effective Interest Rate betterreflects the factual cost of borrowing over a one-year period. Visit https://www.mlaw.gov.sg/content/rom to learn more about how the Effective Interest Rate is calculated from 1 June 2012.
If your yearly income is $30,000 or even more , the limits above are not applicable and interest rate is to be agreedupon between the moneylender and the borrower.
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% monthly. This cap applies irrespective the borrower’s income and whether the loan is an unsecured or secured one.If a borrower cannot repay the loan on schedule, the maximum rate of late interest a moneylender can chargeis 4% per month for each month the loan is repaid late.
The computation of interest charged on the loan must be depended onthe amount of principal remaining after reducing from theoriginal principal the full payments made by or on behalf of theborrower which are appropriated to principal. [To illustrate, if X takesa loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken intoaccount for the calculation ofinterest.]
The late interest can only be billed on an amount that is repaid late. Themoneylender can not bill on amounts that are unresolved but not yet due to be repaid. [To explain, if X takes aloan of $10,000, and forgets to pay for the first instalment of $2,000, themoneylender may charge the late interest on $2,000 but not on the remaining $8,000 as itis not due yet.]
Banks VS Licensed Money Lenders
Key distinctions between banks and money lenders include:
Licensed money lenders supply a smaller sized loan amount compared with banks
Licensed money lenders provide loans at a higher interest rate than banks(to price in the credit risk involved).
Licensed money lenders offer loans to individuals with bad credit rating.
Licensed money lenders offer quick personal loans turn-around time (can be as fast as a few hours).
Although the legal restriction is 2– 4 times the borrower’s monthly income, most licensedmoney lenders do not provide such a big amount . They usually offersmall loans to borrowers (well below the legal curb). As with allbusinesses, licensed money lenders compete on efficiency, with all theright documentation available, it is even a possibility for a moneylender to supply the cashloan within 1 hour.
What occurs if you can not return the loans toyour money lender?
Licensed money lenders are regulated by the law. If they do not observe the guidelines, their money lending license could be voided. Just like banks, be preparedto get letters, SMSes and telephone calls if you can not repay your loans. Unlike loansharks, they can not harass you or intimidate you. However in some cases, if you can not repay your loan, they do have the right to send out a debt collector to your house.
Be careful of Advertisements From Unlicensed or IllegalMoney Lenders.
Legal and Licensed Money Lenders in Singapore are governed by law and onlyallowed to advertise through the following channels:.
The licensed moneylender’s own website.
Advertisements (offline) placed physically within the business premises of themoneylender’s location or outside of the money lender’s business premises.
Consumers or Business Directories in online or print (offline) format.
If you receive or see an advertisement that does not fall in any of the guidelines aforementioned, for instance in the form ofSMS, email or other form besides thestated above, please report to the Singapore Police Force or Ministry of Law.