Average Interest Rates At Licensed Money Lenders In Singapore

Money lending services by no means run short in Singapore. Many financial institutions are available that are very willing to offer you loan money. On one side, banking institutions have made it very easy for an individual to get a personal loan. The approval processes at times last some hours to one day and at most two days. Credit card loan is also easily accessible although at rather high-interest rates.

Furthermore, there are the financial entities known as “accredited money lenders”. The licensed moneylenders are ready to offer loan money to almost anyone. It is, however, good to know who the licensed moneylenders are and whether it is worth it taking a loan from them.

The Ministry of Law’s records shows that there are around 160 accredited money lenders available in the country. Accredited Moneylenders often target individuals who have a hard time getting loans. This can especially be from the conventional lenders like the banks.

Since most banks, in general, need you to have a minimum yearly income and a good credit record. They often have a tendency to reject the applications from individuals who do not meet these requirements. These individuals earn a low monthly income and are in desperate need of quick cash to take care of an emergency. For that reason, accredited moneylenders give loans to such groups of people at a high rate of interest than it normally is. However, for the same reason, moneylenders might only be the only option available.

Interest Rates Charged By Accredited Money Lenders

Most of the money lenders often offer loans such as the payday loan. This loan type has a very high-interest rate. Even with the government’s interest rate cap of 4% on each month’s payment, moneylenders get to charge 2x more. This is even higher than it is charged on credit card debt. And also about 4 to 5 times higher than the interest rate charged on personal loans offered by banks. For that reason, we totally do not advice on going to the moneylending services unless you have completely run out of options to get quick cash.

Below are some outlines and comparisons of the key characteristics of certified money lenders compared to those of banking institutions. When you have a loan of S$500, making a repayment of S$20 interest in a single month may not seem like it’s very high. However, when you don’t repay this loan at once, it may possibly cost you a lot more money in interests and fees. This may potentially be almost equal to the principal amount of S$500 loan you had initially borrowed.

Banks vs. Certified Money Lenders

Certified money lenders often target customers that have been rejected by banks. They, however, do have a differentiating characteristic that only seeks to serve the wishes of a different group of customers. And the major difference is in the risk profile of most of their borrowers.

As banks have their attention on individuals with reliable credit history and that is supported by having a steady income. They have become inaccessible to those people who earn below $20,000. These individuals also lack a trustworthy credit history. In comparison, approved money lenders concentrate on loaning to the second category of individuals. On the other hand, there are assured consequences owing to this main difference between licensed money lenders and banking institutions.

For example, certified money lenders are likely to only offer small loans totalling $1,500. In particular for the payday loans offered to people who earn below $20,000 a year. The lenders will possibly lend you 24 percent less than the monthly salary. Limiting the loan amount you are able to borrow by around $1,200.

Since licensed money lenders are a lot smaller as organizations compared to banks, they are not able to shoulder the big risk of offering huge loans to someone who has a very risky creditworthy profile. On the contrary, the banks are able to lend you about 2-6x of your monthly earnings of a total of $200,000. Despite the fact that they only offer their loans to borrowers who prove to have a stable source of income.

Not just that, the smaller size of accredited money lenders makes it possible for them to offer loans very quickly. Sometimes this can be given in less than an hour, when not sooner. Though personal loans found in Singaporean banks are by now rather competitive and very efficient since they are accessible to borrowers in a day after you have made your application. However, sometimes a day delayed in getting emergency cash is a day too late.

Last of all in the major difference, is the rates charged by moneylenders. Whereas bank rates run between the ranges of 5% – 7% (and up to 25 percent for the credit card loans) for each year, accredited moneylenders may charge a rate of between 30-40% a month.

 

Conclusion

While there are better alternative solutions when comes to get your hands on fast cash, legal moneylenders provide a fast way out especially when nothing else works out, definitely accredited money lenders may not be bad as an option to consider. Provided you repay the money as quickly as you can and not allow your financial situation worsen.

Since moneylenders are regulated and approved by the Singaporean government. You do not have to be concerned about other complications and the aggression that result from getting a loan from a loan shark. When you get yourself thinking of receiving a loan from a certified moneylender, it would be the time you re-evaluate where you may be headed in life. And then take measures to effect significant changes to ensure you don’t find yourself landing in debts.

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