There are many money lenders out there and then there are licensed moneylenders. A moneylender can be defined as a group or a person who is able to give small personal loan to people or groups with the financial need but at high-interest rates. The high risks involved in this kind of moneylending are the reason for the high-interest rates they charge. They lend to people who do not have a positive credit history, people who do not have access to banks, too impulsive shoppers who will often spend beyond their means or to gamblers as well. Often this type of money lender, we tend to categorise them under what you known them as “loan sharks”. You should understand the difference between loan sharks and licensed money lenders to avoid inconvenience. This is something we cannot stop reiterating because this is so important!
On the other hand, Licensed moneylender is different though. They almost work exactly the same way as banks. They typically give loans to people with very genuine financial needs. When repayment is delayed, they do not take harsh actions such as harassment or any extreme methods but instead, sending gentle notice of reminders and give calls. They operate legally and licensed moneylenders in Singapore are authorised and strictly verified by the Ministry of Law (MLAW).
10 Tips to consider before borrowing from Licensed Moneylenders
- First of all, before heading to a licensed money lender, do consider other options that might be available that will help you get the finances. Options such as friends and families, government agency schemes such as ComCare – They provide social assistance to low-come individuals and families.
- Check the terms of the contract when you decided to go with licensed moneylender because contract typically bind people. This contract is necessary as it is a legal requirement.
- Analyse whether you will be able to stick to the terms after considering your income and financial obligations as well
- Borrow only the much you need and do not get carried away by huge amounts that you might be unable to repay
- Make sure you fully understand the terms of the contract and especially how you will be required to repay the loan.
- Examples: Within what amount of time are you required to pay? What are the interest rates? This information should typically be communicated comprehensively by the money lender you are dealing with
- Consult a licensed moneylender with the best terms. Avoid rushing to get a loan before you are satisfied with the terms and conditions. Remember you are the one who will be repaying so it is important that the terms are favorable for you
- Think carefully before signing a contract that involves a caveat. A caveat refers to a notice that prevents certain actions from being taken before informing the person who issued that particular notice.
- Also be careful if the moneylender asks for your SingPass password or user IDs or if they retain important documents such as your national identity card, work permits driver’s license, ATM cards, etc.
- Ensure that the licensed moneylender will grant you the loan with due diligence. They should be able to follow due processes for lending.
Benefits of opting for a Licensed Moneylender
- There will be no harassment involved from that moment you start the whole process to the end. The licensed moneylenders in Singapore operate as per the guidelines stipulated by the government failure to which they risk legal consequences like revoking their licenses, fines, etc Because of this, their repayment scheme will be reasonable. With them, the entire experience will be stress-free and easy.
- They will always have reasonable interest rates. Unlike other moneylenders who will have you repay them with very high-interest rates, in Singapore, a licensed moneylender will have to adhere to government regulations. For example depending on your income, whenever you want to borrow from a licensed moneylender you can be sure to get a loan of up to a specific limit. The criteria for determining how much you are eligible for is standardised.
- With a licensed moneylender, the wait before the amount requested for and approved is given to you is notably shorter. It happens within a matter of just a few days. They will not focus much on your credit history The process of taking out the loan is very efficient.
- In Singapore, the Registry of Moneylenders has strictly set rules as to how moneylenders can go about advertising their services to the public. There is a given way in which they can communicate with their clients and the law requires that a physical office should be present for a possible borrower to visit in case of any queries. Furthermore in case you ever receive an advertisement text from any licensed moneylender you have the right to report that number to the Registry of Moneylenders.
- They have a valid license of operation, registered landline and also physical office whereby you can get substantial information or go to when verification or checks of personal information are required in order for you to be eligible for a loan. Therefore you will not have to give them access to your SingPass Login especially because it contains sensitive details about every citizen of Singapore.
- Some limitations that come with borrowing from licensed moneylenders include penalties in case you are unable to repay within the stipulated amount of time In Singapore.
There are two types of loans; Secured loans and Unsecured Loans
1.) Secured loans
It is important to note that in order for you to apply for a loan, the asset pledge-able should be worth more than the amount of money you are borrowing plus the amount of interest that you will be charged. Upon signing over of your rights to your pledged assets, the lender will hold on to its titles and transfer forms and keep them standby in case you do not act accordingly and end up defaulting on the amount you borrowed. The advantage of these secured loans is that chances of getting a bigger amount are higher although the banks in Singapore will not give more than four times your income unless there is some kind of collateral offered. In case the value of your asset declines below the outstanding amount left the lender will again demand a lump sum to cover the amount. The secured loans come with relatively lower interest rates.
2.) Unsecured Loans
Here you just borrow a given amount of money with only a pledge to protect the lender’s investment in the event of any defaults. Here no assets are involved and the lender can only take legal action involving court proceedings against the defaulter. The court will then compel the defaulter to pay the outstanding amount. If they do not have the given amount, an order could be placed for the sale of their property to repay the loan. This, however, does not guarantee the lender that he will get his full investment back. An example is a student loan. The advantage of an unsecured loan is that it will not pose a risk to the borrower’s assets and happens to be faster to process. The disadvantages are that the interest rates charged for these will be higher and there is a lower limit as to how much you can borrow. Usually four times more than your monthly income.
Please always remember that before you get a loan from a licensed moneylender, read as much as you can on the different laws and regulations governing moneylending. You can also read this Guide to Borrowing from Licensed Moneylenders. All such information can be obtained from the MinLAW website. That way, when you ask for the license from the moneylender, which you should always do, you will be able to compare the details on it with the information you got. As much as it is relatively safe to borrow from licensed moneylenders, everyone has their own responsibility and should observe extreme caution. Because at the end of the day, eventually you are the one who signed up for these and you will be the one to repay the borrowed amount. Be a responsible borrower.
Licensed moneylenders are disallowed to solicit for loans via text messages or phone calls. If you have received such a message from (SMS or WhatsApp) or phone call, it is likely that an unlicensed illegal moneylender (a.k.a AhLong or LoanShark) has approached you. If you ever see any Ads from social media such as FaceBook, please do not response to these ads. Licensed moneylenders are not allow to advertise on social media platforms.
DO NOT respond or reply to the message or call.
Report possible unlicensed moneylending activities to the Police hotline at 1800-255-000, or submit the information online at www.police.gov.sg/iwitness. Members of the public may also call the National Crime Prevention Council’s X-Ah Long hotline at 1800-924-5664.
To view the complete and updated list of licensed moneylenders in Singapore. Click here