When searching for a personal cash loan, the majority of people go to banks before all else, have you ever puzzled when a bank willloan you money?
Banks will willingly offer youa personal loan when you have NO demand for it. Banks also extend creditsonly to credit worthy individuals. Financial institutions and banks have a bunch of criteria and restrictions when the yoffer personal loans.Banks do not grant personal loans to Singaporean citizens and PRs who bring home less than $20,000 yearly. In case that youare a foreigner in Singapore, the requirements are indeed harder. What turns out if you have bad credit and you are in need of an urgent personal cash loan?
Aside from relatives and friends , your primarily legal way is to engage the helpof a money lender.
Borrowing from relatives and/or friends can possibly be problematic and awkward. There are fairly a lotof people (who wants to 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 pretty much every industry) themoney lending industry is seriouslyregulated 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 revoked. It ishighly advised that you recognize and identify your right as a borrower if you are wishing to take out a personal cashloan from a licensed money lender.
It is very well worth noting that a licensedmoney lender in Singapore is really similar to any otherbusinessman. They wish to keep up their good reputable name, offer a friendly service, tailor 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 even more reminder letters.
What should you do before meeting a licensedmoney lender?
Keep in mind 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 repay.In Singapore, all licensed money lenders are required by law to spell out theterms of loans to you clearly and in a language that you comprehend. You areprotected by law to get a copy of the contract. Always be certainthat you understand all the terms of the contract which includes 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 bases on yourannual income:
You can borrow up to $3,000, if your yearly paycheck is less than $20,000;
You can borrow as much as 2 months’ salary, if your yearlyincome is $20,000 or more but below $30,000;
You can borrow as much as 4 months’ salary, if your yearly salary is $30,000 or more but under $120,000; and
You can borrow up any amount, if your annual earnings 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 work out anddisclose to you the Effective Interest Rate of the loan, beforethe loan is given. If your annual income 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 consideration 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 discover more about how the Effective Interest Rate is calculated from 1 June 2012.
If your yearly paycheck is $30,000 or higher , the caps 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 no matter what the borrower’s income and whether the loan is an unsecured or secured one.If a borrower fails to 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 reducing from the initial principal the total 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 taken into consideration 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 unsettled 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 supply a smaller loan amountcompared to banks
Licensed money lenders provide 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 rapid 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 offer such a big amount . They commonly providesmall loans to borrowers (well below the legal restriction). As with allbusinesses, licensed money lenders battle on efficiency, with all theright formalities available, it is even a possibility 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 abide by the guidelines, their money lending license can 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 intimidate you. However in some cases, if you can not repay your loan, they do have the right to send a debt collector to your house.
Be careful 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 example in the form ofSMS, email or all other form other than thestated above, please report to the Singapore Police Force or Ministry of Law.