What is A Moneylender And What You Should Take Note Of

 

A money lender is a financial institution, group, or individual that offers loans to individuals or companies with the expectation that the borrowers will repay the amount at a higher interest.

A lender earns interest at specific percentages depending on the loan amount given to the borrower.

Repayment may happen in installments such as monthly repayments or as a lump sum after a certain time.

You will use a money lender as an alternative if you need urgent loans due to unexpected situations. You may need help with emergency medical bills, car repairs, or you may need to boost your cashflow.

A money lender offers efficient and favourable lending services that can save you from emergencies.

This article will also provide more information about what to consider before seeking their services.

What To Consider Before Taking Up A Loan

If you are considering taking a loan but are confused about where to start, here’s what you need to keep in mind to make the right decisions before taking the loan.

Check whether you can stick to their contractual policies, considering your income and financial commitments.

Take what you need only and what you can afford to repay. If you cannot meet the contractual policies, late payment fees and interest payments will financially burden you and your family.

Before settling on one money lender, check others to see which one has favourable terms. Do not rush and take a loan until you know the terms and conditions will work for you.

Ensure you understand their contractual terms, such as interest rate, repayment period, and applicable fees. The law states that lenders should clarify the terms of the loan. They should also offer you a copy of the loan contract.

Check If You Fulfil The Legal Requirements To Take A Loan From A Licensed Lender

Check before you accept any contractual terms carefully, which enables a money lender to offer a caveat on what you get from the sale of your real estate property when you default on repayment of the loan.

When there is a caveat against your property, you won’t be allowed to sell it until you repay the lender’s full amount.

Before meeting a money lender, check for other options, for instance, the various money assistance programs given by distinct government bodies.

You may reach out to the agencies to find out what they have.

How To Settle Debt With A Licensed Money Lender

If you are unable to repay your loan, a legal money lender can have ways to help you in such tough times. Here’s how you can settle one:

  • Contact or visit them to negotiate for an extension or ways you can use to repay your debt.
  • Seek help from social service agencies if you have debts from banks and money lenders.
  • Apply for Debt Repayment Scheme; however, you won’t get another loan if you are under this scheme.

Legal Money Lenders In Singapore

You should be careful not to take loans from illegal moneylenders.

Ensure that the lender is licensed to operate since there have been increased reports of con people masquerading as licensed money lenders to deceive people into taking loans. They use tactics such as SMS or WhatsApp text messaging, websites, and social media accounts similar to licensed companies.

The scammers normally approach victims through SMS or WhatsApp messages and websites and ask them to transfer money as ‘processing fees’ before being disbursed the loans.

You should know that legal money lenders are prohibited from soliciting money in such ways.

They are required to meet the borrower in face-to-face conversation in an approved place to run a verification of their identity before awarding the loan.

How Much You Can Borrow

When you visit a money lender or bank, you either get a secured or unsecured loan.

Secured loans have no interest rate limit but will need you to offer collateral. Therefore, you can borrow any amount. Unsecured loans have distinct amounts you can borrow.

If you are a citizen of Singapore and earn less than $10,000, you will get a loan up to $3,000. But if you are a foreigner with valid permits, you will get up to $500.

Singapore citizens with a salary between $10,000 and less than $20,000 get up to $3,000, while foreign citizens receive up to $3,000.

If they earn more than $20,000 per year, the loan will be up to six times of borrower’s monthly salary.

Interest Rates Charged By Money Lenders

The standard amounts of interest on loans from a licensed lender may vary from one individual to another.

However, across banks and companies, they follow the same rule. Licensed money lenders offer loans at high-interest rates than banks or other financial institutions.

However, the Ministry of Law requires that money lenders should charge a monthly rate of up to 4%.

This rule applies to all regardless of their monthly income and whether it is unsecured or secured.

You should note that this is just the percentage cap and some lenders charge interests of as low as 1% or 2% of the total borrowed amount.

If one fails to repay the loan on time, the maximum rate of late interest should be 4% per every month the loan is repaid late.

The interest calculation should be based on the remaining principal amount after deducing from the original principal of the total payments made.

This late interest can only be charged on the amount repaid late. A money lender cannot charge any outstanding amounts that are not yet due to be repaid.

How To Know If A Money Lender Is Licensed

Getting a loan from a money lender in Singapore is easy, but how do you know they are licensed?

It is important to check about your moneylender so you don’t fall into scams or rogue lenders. Here’s how to know your lender is licensed:

Take Note Of Their Advertisements

If you find a money lender advertising their services through text messages or phone calls, they are likely to be unlicensed money lenders.

Or they might also be licensed but go against the policies of the Ministry of Law.

The ministry stipulates that licensed lenders should only advertise through business or consumer directories and the lender’s website.

They should put their advertisements in the exterior and interiors of their business place.

For their advertisements, you should seek clarifications from them and not depend on the advertisements. This will help you to understand their terms of service fully.

Check If The Ministry Of Law Lists Them

Checking the Ministry of Law’s website to check if the moneylender is registered with them is the easiest way to identify if you are dealing with a licensed lender or not.

Referring to the website will allow you to note blacklisted lenders and avoid them.

Check Their Interest Rates And Fees

As mentioned earlier, a licensed money lender follows the stipulations of the Ministry of Law.

Avoid lenders who don’t explain their interest rates and fees, have a higher interest rate than 4%, a higher late interest rate than 4%, and a late fee higher than $60.

Avoid if they have an administrative rate higher than 10% of the loan.

Ensure You Are Given All The Documents

All licensed money lenders must evaluate your NRIC and identity before they give you a loan agreement.

Before you sign the document, they will explain each term to make you easily understand and provide you with every detail like the repayment period and interest rate.

Check If They Have A Physical Address

A money lender should have a physical address where you got the verification process.

Therefore, if you find out that the verification process and approval of a loan occurs without a physical address, you are likely dealing with an unlicensed lender.

Check Whether They Require An In-person Meeting

These days, it is normal for money lenders to offer an online application process because of modern technology.

But it is still a must to visit their office for the verification process and loan approval. Avoid lenders who call or send emails or text messages to notify your loan approval.

Licensed Money Lender Harassment

If you owed money to a friend or a loan shark, they could do everything possible to get their money back.

But for licensed money lenders, there are some things they can’t do because this is their business; they have to maintain professionalism.

The Registry of Moneylenders regulates licensed lenders; therefore, they won’t indulge in unfair practices.

If they harass you, you can reach the Registry through their online contacts and launch your complaint.

Lodging A Complaint Against A Money Lender

Licensed money lenders are preferred by most because they offer easy access to financial services and have less stringent rules.

However, sometimes you may receive threats that you may consider unfair. However, the Registry of Moneylenders regulates licensed lenders to avoid unethical practices.

But if you need to make a complaint, you can lodge one by reaching them through their online provided contacts or visit the Ministry of Laws website to lodge a complaint.

You may need to provide their contact information, business name, and license details.

You may also be required to visit the investigation officers to clarify the matter. You don’t have to worry because they will not disclose any of your information to the lender without your permission.

You can file the matter at Small Case Tribunal or the Court under the Consumer Protection Act if you feel mistreated.

More on this topic:

List Of Licensed Money Lenders In Singapore

Check out the list of licensed money lenders in Singapore to get information about lenders operating within the law.

There has been an increase of unlicensed money lenders recently, therefore, you must be careful when getting a loan.

It is important to check the Registry of Moneylenders’ website to know you are applying through the right means and from the right lender.

Before you look for any lender, research by finding the list of licensed money lenders to avoid falling into scams and make informed decisions.

What To Do After The Loan Is Granted

Obtaining a loan in Singapore is easy when you follow the right procedure.

As mentioned above, you should know if the lender is on the Registry’s list and be aware of the fees they charge and their interests.

After being approved for the loan, take the following steps to ensure you do not get cheated:

  • Ensure you pay the loan installments on time to avoid late payment fees. The law requires money lenders to charge you a fee of $60 every month you are late on a payment and a 4% interest rate for the particular months.
  • Take a statement of account every six months after taking the loan while continuing with repayment. This allows you to identify any mistakes and ensure everything is right.
  • While collecting the amount, ensure your lender has given you the correct principal amount for the loan.
  • Store all receipts and statements of your account properly since they will offer evidence that you repaid your loan.
  • Ensure you get a receipt with the right dates and signed by the lender every time you repay the loan.

The Registry of Moneylenders seeks to protect individuals and companies from unscrupulous dealings in the business.

You don’t have to fear since your rights are protected as a borrower, and legal lenders must operate within the law. Conduct research to identify the right terms for you and to find the right borrower.

Since there are risks involved when borrowing money, you can consult experienced lenders at Katong Credit to identify the right options that will work better for you.

We are a licensed money lender that can help sort out your financial issues.

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