When hunting for a personal cash loan, the majority of people go to banks before all else, have you ever thought about when a bank willloan you money?
Banks will gladly 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 of criteria and restrictions when the yoffer personal loans.Banks do not provide personal loans to Singaporean citizens and PRs who draw under $20,000 yearly. In case youare a foreigner in Singapore, the criteria are much tougher. What happens if you have bad credit and youneed an urgent personal cash loan?
Other than family members 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 embarrassing. There are quite a lotof people (who intends to save face) who insteadborrow from a licensed money lender and pay off the interests on the loan than seek a favour from someone close .
Licensed Money Lenders in Singapore
In Singapore (as with essentially 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 grant, 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 comprehend and identify your right as a borrower if you are aiming to take out 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 want to keep up their good credibility andreputation, deliver a superb service, customize 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 contacting a licensedmoney lender?
Remember 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 expected by law to spell out theterms of loans to you clearly and in a language that you understand. 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 crucial terms including the interest rates, applicable fees involved and the repayment terms.
Just 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 accordings to yourannual income:
You can borrow as much as $3,000, if your yearly salary is below $20,000;
You can borrow as much as 2 months’ income, if your annualincome is $20,000 or more but no more than $30,000;
You can borrow up to 4 months’ salary, if your yearly salary is $30,000 or more but no more than $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 arerequired to compute anddisclose to you the Effective Interest Rate of the loan, prior tothe loan is given. If your yearly salary 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 takes into account thecompounding effect of the frequency of instalments over a one-yearperiod. This suggests that Effective Interest Rate betterreflects the real 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.
Assuming that your annual salary is $30,000 or even more , the limits above are not applied and interest rate is to be agreedupon between the moneylender and the borrower.
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% each 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 timely, 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 uponthe amount of principal remaining after subtracting from theoriginal principal the overall payments made by or on behalf of theborrower which are appropriated to principal. [To illustrate, if X takesa loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be considered for the calculation ofinterest.]
The late interest can only be charged on an amount that is repaid late. Themoneylender can not bill on amounts that are unresolved 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 distinctions between banks and money lenders include:
Licensed money lenders provide a smaller sized loan amount as compared to banks
Licensed money lenders supply 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 fast personal loans turnaround 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 frequently providesmall loans to borrowers (well below the legal cap). As with allbusinesses, licensed money lenders compete on efficiency, with all theright documentation available, it is even fairly easy for a moneylender to offer the cashloan within 1 hour.
What occurs if you can not settle the loans toyour money lender?
Licensed money lenders are regulated by the law. If they do not comply with the guidelines, their money lending license can be voided. 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 threaten you. However sometimes, if you can not repay your loan, they do have the right to send a debt collector to your house.
Be cautious 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 any other form apart from thestated above, please report to the Singapore Police Force or Ministry of Law.