When hunting for a personal cash loan, lot ofpeople look to banks before all else, have you ever asked when a bank will lend you money?
Banks will gladly offer youa personal loan when you have NO need for it. Banks also extend creditsonly to credit worthy people. Financial institutions and banks have a ton of criteria and limitations when the yoffer personal loans.Banks do not approve personal loans to Singaporean citizens and PRs who draw no more than $20,000 peryear. In case that youare a foreigner in Singapore, the criteria are indeed tougher. What comes about if you have bad credit and you need to have an emergency personal cash loan?
Other than relatives and friends , your best legitimate solution is to have a go at the helpof a money lender.
Borrowing from relatives and/or friends can be problematic and shameful. There are significantly a lotof individuals (who wants to preserve one’s honor) 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 essentially every industry) themoney lending industry is seriouslyregulated and moneylenders are licensed by the Registrar of Money Lenders. There are straightforward 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 revoked. It ishighly encouraged that you understand and identify your right as a borrower if you are wishing to obtain a personal cashloan from a licensed money lender.
It is worth noting that a licensedmoney lender in Singapore is really much like any otherbusinessman. They wish to take care of their good reputation, offer a wonderful service, alter their loans in accordance 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 approaching a licensedmoney lender?
Bear in mind that you are legally obligated to fulfil 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 make clear 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 consists of crucial terms forexample, 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 depends on yourannual income:
You can borrow as much as $3,000, if your yearly income is lower than $20,000;
You can borrow up to 2 months’ income, if your yearly salary is $20,000 or more but no more than $30,000;
You can borrow up to 4 months’ income, if your annualincome 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 are demanded to calculate anddisclose to you the Effective Interest Rate of the loan, prior tothe loan is given. If your annual salary is less 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 means that Effective Interest Rate betterreflects the actual cost of borrowing over a one-year period. Visit https://www.mlaw.gov.sg/content/rom to find out more about how the Effective Interest Rate is calculated from 1 June 2012.
Assuming that your annual take-home pay is $30,000 or even more , 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% monthly. 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 promptly, 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 reducing from the initial principal the full payments made by or on behalf of theborrower which are appropriated to principal. [To explain, 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 unsettled 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 rapid 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 offer such a big amount . They usually providesmall loans to borrowers (well below the legal restriction). As with allbusinesses, licensed money lenders fight 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 pay off the loans toyour money lender?
Licensed money lenders are regulated by the law. If they do not respect the guidelines, their money lending license could be revoked. 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 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 governed 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 receive or see an advertisement that does not fall in any of the guidelines aforementioned, for example in the form ofSMS, email or any other form other than thestated above, please report to the Singapore Police Force or Ministry of Law.