There is a big misunderstanding when it comes to licensed moneylenders within Singapore. Many Singaporeans have even called them “legal loan sharks”. However, there are fundamental differences between loan sharks and licensed moneylenders in Singapore.
In particular, when it concern debt collection, then loan processing, and its approval. Earlier, some Singaporeans, particularly those from low-income earning families got quick cash from loan sharks. This eventually ended up causing these borrowers major social issues. This is because the interests charged seemed to sky-rocketed within days. This left the borrowers with a much bigger problem than they had before taking the loan.
This led to the Singaporean government setting up a body that was to regulate and control the new moneylender’s industry. This has made it possible for the Singaporean government to control how this industry will work. And also it has enabled the government have an overview of the industry’s dealings and at the same time ensuring it protects the borrower’s interests.
This way the Singaporean government is able to decrease the social problems. These problems come up from illegal borrowing that people may engage in.
Even Then, Some Of The Key Differences Between Unlicensed And Licensed Money Lenders Consist Of:
The Loan Process
Most people turn to loan sharks first when they are not able to get loans from the legal institutions such as banks. The reasons for them not getting loans vary. From the amount needed to issues with their credit rating. Such problems are a major cause of weaknesses that most loan sharks often exploit.
Loan sharks know these individuals desperately need money. And they are certain the individuals have no one to turn to. As a result, they often charge very high interests on their loans. Many times there are no paper trails and written agreements. This means that the borrowers are often at their creditors’ mercy. More so when it comes to calculating the repayment amounts and the interests charged.
Nevertheless, this is not always the case when you are dealing with the accredited money lenders. The licensed moneylenders always use a rating system that allows them to check a borrower’s credit score.
In general, the moneylenders often tolerate more of the borrower’s credit rating. This is because the loans they can issue are often in smaller amounts. The accredited money lenders instead focus on other factors such as a borrower’s salary when deciding whether to grant a loan. Most times the licensed moneylender will protect your own interests by making sure you sign a written agreement.
The written agreement will clearly show all the rates of interests charged and the loan amount given to you. On the other hand, this does not always mean that the loan amount you apply for will 100% be approved. Given that you have other existing debts with other accredited money lenders and a large amount of credit card debt. The loan you have applied for may end up being rejected. This is, however, often very different for the different cases and varies from one individual to the next. Therefore, be sure to check with your loan specialist for guidance and advice with regards to your loan approval.
The Interest Rates Charged
When there are no contracts signed and paper trails, a loan shark will often times charge a borrower an interest rate between 100 to 200%. This can also go beyond this percentage and sadly there is nothing you as a borrower will be able to do to avoid these rates. Everything is done solely by word of mouth agreement. This on many occasions is not binding and does not protect the borrower. This way there is no proof that you negotiated a different interest rate with the loan shark.
In contrast, a licensed moneylender is bound by the interest rates set by the Singaporean government. These regulated rates are regularly adjusted to help protect the potential borrower. An example of such is the interest rate capped at 4%. This rate is to be put into regulation by the Singaporean government.
Even with the government regulated interest rates, a licensed moneylender will always have you sign a contract. This is first explained to you to ensure you are clear about the terms. Then you are to put your signature. This agreement always states the interests charged on the loan amount you have received. The loan amount given to you is also clearly written as well as the repayment instalments you will be paying and the frequency. The frequency will either be monthly, weekly or one time, depending on the loan type you have taken.
No Illegal Harassment Allowed
Since there are no paper trails and written terms of the agreement, you are more likely to be at the loan shark’s mercy. This is will be evident once you fail to meet the agreed upon repayments. In the past, there have been numerous reports in the news concerning debtors who have turned into running. This is because they failed to meet the repayments agreed on.
Do not let your financial issues snowball and get worse by dealing with a loan shark. As an alternative, talk to a loan specialist from licensed moneylender available in Singapore. They will be able to guide and advise you. As a result, helping you find the most suitable loan for meeting your financial problem.
When you find yourself in need of urgent and quick cash it is always advisable to accredited institutions. These institutions include licensed moneylenders and banking institutions. When you are not able to get a loan from these institutions, you can also consider getting help from other sources. Such sources may be voluntary organizations and even from your MP.
Regardless of the financial situation, you find yourself. Avoid seeking financial assistance from the illegal parties. When you do so, it can lead to your financial situation spinning out of your control. Also, ensure you receive a written agreement from the institution you deal with. This should clearly state the loan amount you have received and the interest rate charged.