When looking for a personal cash loan, the majority of people turn to banks before all else, have you ever asked when a bank will lend you money?
Banks will delightedly grant youa personal loan when you have NO need for it. Banks also stretch creditsonly to credit worthy individuals. Financial institutions and banks have a numerous criteria and limitations when the yoffer personal loans.Banks do not grant personal loans to Singaporean citizens and PRs whoearn lower than $20,000 yearly. If youare a foreigner in Singapore, the criteria are even harder. What turns out if you have bad credit and youneed an urgent personal cash loan?
Other than relatives and friends , your primarily legal alternative is to give a try the helpof a money lender.
Borrowing from relatives and/or friends are daunting and uneasy. There are considerably a lotof people (who prefers preserve one’s honor) who insteadborrow from a licensed money lender and pay off the interests on the loan than call for a favour from someone close .
Licensed Money Lenders in Singapore
In Singapore (as with pretty much every industry) themoney lending industry is intensivelyregulated and moneylenders are licensed by the Registrar of Money Lenders. There are clear-cut guidelines and restrictions on the amount ofloans they can offer, 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 invalidated. It ishighly advised that you recognize and identify your right as a borrower if you are planning to apply for a personal cashloan from a licensed money lender.
It is definitely worth noting that a licensedmoney lender in Singapore is really a lot like any otherbusinessman. They desire to keep their good track record, provide a perfect service, alter their loans in accordance 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 contacting a licensedmoney lender?
Take note that you are legally obligated to fulfil any loan contracts you enter with a licensed money lender. It is well-advised to borrow only what you can pay back.In Singapore, all licensed money lenders are required by law to spell out 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 crucial terms such as the interest rates, applicable fees involved and the repayment terms.
How much money can you borrow?
For secured loans, there is no limit to the loan you can secure. For unsecured loans, theamount you can borrow bases on yourannual income:
You can borrow up to $3,000, if your annual paycheck is lower than $20,000;
You can borrow up to 2 months’ income, if your yearlyincome is $20,000 or more but below $30,000;
You can borrow up to 4 months’ income, if your yearly paycheck is $30,000 or more but lowerthan $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, beforethe loan is offered. If your yearly earnings is under $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 account thecompounding effect of the periodicity of instalments over a one-yearperiod. This indicates that Effective Interest Rate betterreflects the actual cost of borrowing over a one-year period. Visit https://www.mlaw.gov.sg/content/rom to figureout more about how the Effective Interest Rate is calculated from 1 June 2012.
In case that your annual earnings is $30,000 or even more , the limits above are not applied and interest rate is to be concededupon between the moneylender and the borrower.
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4%per month. This cap applies no matter what the borrower’s income and whether the loan is an unsecured or secured one.If a borrower cannot repay the loan without delay, the maximum rate of late interest a moneylender can chargeis 4% monthly for each month the loan is repaid late.
The computation of interest charged on the loan must be based onthe amount of principal remaining after subtracting from the initial principal the full payments made by or on behalf of theborrower which are appropriated to principal. [To clarify, if X takesa loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken into consideration for the calculation ofinterest.]
The late interest can only be charged on an amount that is repaid late. Themoneylender can not charge on amounts that are unsettled but not yet due to be repaid. [To clarify, if X takes aloan of $10,000, and fails 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 consist of:
Licensed money lenders provide a smaller sized loan amountcompared to 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 swift 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 supply such a big amount . They often providesmall loans to borrowers (well below the legal cap). As with allbusinesses, licensed money lenders fight on efficiency, with all theright formalities available, it is even possible 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 fulfill the guidelines, their money lending license could be withdrawed. Much 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 a debt collector to your house.
Be mindful of Advertisements From Unlicensed or IllegalMoney Lenders.
Legal and Licensed Money Lenders in Singapore are regulated 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 get or see an advertisement that does not fall in any of the guidelines aforementioned, for instance in the form ofSMS, email or other form except thestated above, please report to the Singapore Police Force or Ministry of Law.