When considering a personal cash loan, most people turn to banks first, have you everwondered when a bank will lend you money?
Banks will gladly provide youa personal loan when you have NO need for it. Banks also extend creditsonly to credit worthy individuals. Financial institutions and banks have a bunch of criteria and limitations when the yoffer personal loans.Banks do not approve personal loans to Singaporean citizens and PRs whoearn below $20,000 peryear. In case that youare a foreigner in Singapore, the criteria are indeed harder. What comes about if you have bad credit and youneed an emergency personal cash loan?
Other than relatives and friends , your best legitimate option is to give a try the helpof a money lender.
Borrowing from relatives and/or friends can be problematic and shameful. There are quite a lotof people (who wants to preserve one’s honor) who insteadborrow from a licensed money lender and pay the interests on the loan than call for a favour from someone close .
Licensed Money Lenders in Singapore
In Singapore (as with roughly every industry) themoney lending industry is seriouslyregulated and moneylenders are licensed by the Registrar of Money Lenders. There are straightforward 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 recalled. It ishighly recommended that you areaware and learn your right as a borrower if you are wishing to secure a personal cashloan from a licensed money lender.
It is well worth noting that a licensedmoney lender in Singapore is really just like any otherbusinessman. They intend to maintain their good reputation, offer a perfect service, alter 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 talking to a licensedmoney lender?
Remember that you are legally obligated to satisfy any loan contracts you enter with a licensed money lender. It is advisable to borrow only what you can pay back.In Singapore, all licensed money lenders are required by law to give an explanation of 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 surethat you understand all the terms of the contract which features very important terms including 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 relies on yourannual income:
You can borrow as much as $3,000, if your yearly paycheck is lower than $20,000;
You can borrow up to 2 months’ income, if your yearly net income is $20,000 or more but under $30,000;
You can borrow as much as 4 months’ salary, if your annual salary is $30,000 or more but less than $120,000; and
You can borrow up any amount, if your annual netincome 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 work out anddisclose to you the Effective Interest Rate of the loan, right beforethe loan is offered. If your yearly take-home pay 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 considers thecompounding effect of the number of instalments over a one-yearperiod. This suggests that Effective Interest Rate betterreflects the true 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 annual salary is $30,000 or more , the caps above are not applicable 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 irrespective the borrower’s income and whether the loan is an unsecured or secured one.If a borrower fails to repay the loan promptly, the maximum rate of late interest a moneylender can chargeis 4% each month 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 reducing from theoriginal principal the total 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 intoaccount for the computation ofinterest.]
The late interest can only be billed on an amount that is repaid late. Themoneylender can not charge on amounts that are outstanding but not yet due to be repaid. [To illustrate, 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 differences between banks and money lenders consist of:
Licensed money lenders provide a smaller loan amount as compared to banks
Licensed money lenders offer 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 offer such a high amount . They usually offersmall loans to borrowers (well below the legal limit). As with allbusinesses, licensed money lenders battle on efficiency, with all theright documentation available, it is even possible for a moneylender to provide the cashloan within 1 hour.
What happens if you can not settle the loans toyour money lender?
Licensed money lenders are regulated by the law. If they do not adhere to the guidelines, their money lending license could be revoked. 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 out a debt collector to your house.
Beware 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 receive or see an advertisement that does not fall in any of the guidelines mentioned above, for instance in the form ofSMS, email or any other form apart from thestated above, please report to the Singapore Police Force or Ministry of Law.