Some circumstances call for a much-needed loan such as paying off medical bills, mortgage, or even student debt. With Singapore’s cost of living steadily increasing, the demand for loans is getting higher as the years go by.
While the local banks offer loans as well, legal money lenders are getting increasingly popular as their transaction and process operations are swifter and less stringent than a bank.
However, they tend to get a bad rep because of preconceived notions and false stereotypes despite being authorized and legitimate.
Before approaching a legal money lender, here are five things you should know about licensed money lenders in Singapore.
1. Legal Money Lenders Are Not Loan Sharks
Unlike what many might think, licensed money lenders are definitely not loan sharks. While loan sharks are illegal, every authorised money lender is reviewed by the Ministry of Law and you should be able to find the license number of these authorised lenders on the ministry website.
Moneylenders are not permitted to harass their clients unlike what most illegal loan sharks are known for and if you ever do face such a situation, you can report them to the respective authorities.
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Before approaching a moneylender, ensure that they have a legitimate badge number and if they attempt to initiate the transaction online, this is a tell-tale sign that they are unauthorized and illegal.
2. You Can Get Different Types of Loans
Most licensed money lenders in Singapore are known for their unsecured loans, but many don’t know that these lenders provide both secured and unsecured loans.
Unsecured loans are usually for sums that are smaller and for those who are looking for an urgent source of money that can be retrieved within an hour or two.
Furthermore, your credit history and assets do not need to be declared when opting for an unsecured loan. On the flipside, secured loans do require a review of your credit score but the advantage of these loans would be the higher loan payout.
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Moneylenders also provide a range of loans that are not limited to personal loans. Some of the best money lenders in Singapore offer loans for medical, business, study, renovation, and even wedding needs.
3. You Can Borrow up to 6 Times Your Monthly Income
While small loans are common when it comes to legal money lenders, these establishments also offer unsecured loans of up to 6 times your monthly salary with a minimum income of $20,000 a year.
An unsecured loan is dependent on your annual income and citizenship. Here is the breakdown of permitted unsecured loan sums:
4. There Are Capped Interest Rates
Licensed money lenders in Singapore can provide you loans within an hour compared to banks, which take a couple of days to process but that swift service also comes with a higher interest rate charge.
Their interest rates can range with some of the best money lenders in Singapore offering competitive and affordable prices but the maximum rate is capped at 4% per month, according to Singapore law.
Regardless of your income or loan amount, the interest rate cap remains the same and if you are ever coerced into paying a higher rate than 4% per month, you can lodge a report to the relevant authorities.
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Do also note that when applying for a loan, your money lender is permitted to charge a fee not exceeding 10% of the principal loan.
5. Late Repayment Can Be Taxing
Many are worried about having to pay extra fees due to late repayment and this is definitely a source of concern if you are not diligent in paying off your debts.
Even though legal money lenders are open to negotiating your repayment terms if you are ever struggling to pay off your loan, it also comes with added charges.
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Under Singapore law, money lenders are permitted to charge a fee of not more than $60 for every month of late payment.
However, the total charges of additional fees cannot exceed the principal amount of your loan.
If you continuously refuse to pay off your loan, your money lender is authorized to sue you and also charge you for any legal fees incurred. Therefore, make sure to manage your finances carefully to ensure you are capable of paying back your loan.