When considering a personal cash loan, lot ofpeople go to banks before all else, have you ever asked when a bank will lend you money?
Banks will joyfully grant youa personal loan when you have NO need for it. Banks also extend creditsonly to credit worthy individuals. Financial institutions and banks have a great deal ofrequirements and restrictions when the yoffer personal loans.Banks do not approve personal loans to Singaporean citizens and PRs whoearn below $20,000 peryear. If youare a foreigner in Singapore, the requirements are much tougher. What comes up if you have bad credit and youneed an urgent personal cash loan?
Besides relatives and friends , youronly legitimate approach is to have a go at the helpof a money lender.
Borrowing from relatives and/or friends can possibly be tricky and awkward. There are quite a lotof people (who prefers save face) who ratherborrow from a licensed money lender and pay 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 closelyregulated 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 called back. It ishighly recommended that you understand and identify your right as a borrower if you areintending to apply for 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 want to keep their good reputable name, provide a wonderful service, customize their loans in conformance to the laws and make money. 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?
Keep in mind that you are legally obligated to fulfil any loan contracts you enter with a licensed money lender. It is recommended to borrow only what you can repay.In Singapore, all licensed money lenders are demanded 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 certainthat you understand all the terms of the contract which involves important terms forexample, 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 depends upon yourannual income:
You can borrow as much as $3,000, if your annual income is less than $20,000;
You can borrow as much as 2 months’ income, if your annual net income is $20,000 or more but no more than $30,000;
You can borrow as much as 4 months’ income, if your annual salary is $30,000 or more but less than $120,000; and
You can borrow up any amount, if your annual paycheck is $120,000 or more.
Interest Rates That Moneylenders can charge
For loans contracted between 1 June 2012 and 30 September 2015, moneylenders are demanded to work out anddisclose to you the Effective Interest Rate of the loan, beforethe loan is offered. If your annual salary is lower 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 frequency of instalments over a one-yearperiod. This suggests that Effective Interest Rate better demonstrates the real 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 yearly net income is $30,000 or higher , 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 irrespective the borrower’s income and whether the loan is an unsecured or secured one.If a borrower cannot repay the loan timely, 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 depended onthe amount of principal remaining after deducting 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 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 clarify, 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 consist of:
Licensed money lenders supply a smaller sized loan amount opposeded 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 provide such a high amount . They in most cases offersmall loans to borrowers (well below the legal limit). As with allbusinesses, licensed money lenders compete on efficiency, with all theright documentation available, it is even possible for a moneylender to supply the cashloan within 1 hour.
What happens if you can not repay 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. Similar to banks, be preparedto get letters, SMSes and telephone calls if you can not repay your loans. Unlike loansharks, they can not harass you or threaten you. However in many cases, if you can not repay your loan, they do have the right to send out 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 exterior 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 guidelinesabove, for instance in the form ofSMS, email or other form except thestated above, please report to the Singapore Police Force or Ministry of Law.