It is unusual to hear about people who haven’t borrowed money from others because there will be times you will find yourself in a financial bind. Even if you are rich, you need to take care of your money because it may run out in one go if you use it for business. You may also need to borrow money for extra capital.
Considering the importance of having money, you need to use a licensed moneylender to ensure you do not get a headache when you need to borrow funds. In Singapore, loan sharks are common and hide in the guise of being licensed moneylenders to fool unsuspecting borrowers.
Licensed moneylenders are licensed by the government and indicate everything borrowers need to know about their personal loans. Loan sharks, on the other hand, operate without rules and they will change their rules as much as they like.
If you are considering to apply for a personal loan, how can you determine which ones are licensed and which ones are loan sharks?
Here are some tips we can recommend to ensure you can sign with a licensed moneylender for your money needs:
No 1 – Do your research about the moneylender’s background
The first thing that you must do to ensure that a moneylender is worth your attention is by checking their background or history. With the help of the internet, you can easily search for the moneylender’s background and their website. Licensed moneylenders tend to have up-to-date information about their loan offerings and indicate their contact details. You can also check up on individual websites that review moneylenders.
No 2 – Check the site of the Ministry of Law
When you have narrowed down a small list of moneylenders you would like to inquire from for their personal loans, you should then check if they are licensed by the Singaporean Ministry of Law.
The Ministry of Law has the registry of all licensed moneylenders in the country, which makes it easier for the government to monitor these moneylenders. If these moneylenders somehow violate the government’s policies, their licenses will be revoked easily. The list is regularly updated to ensure that prospective borrowers do not get tricked by loan sharks.
If you do not see the moneylender you listed in the registry, it means you are looking at a loan shark.
No 3 – Licensed Moneylenders Should Have an Office
A licensed moneylender should not just have an updated website where you can inquire about the personal loans they offer and apply, they must also have a physical office you can visit. Loan sharks often have fake addresses or conduct all their businesses online.
When you visit a licensed moneylender’s office, you would see that the office is run by a large number of staffs. Once you get the details you need from their website, you should be able to make a follow-up call directly from the moneylender through their hotline and visit the office. At the office, make sure you sign your contract there and not anywhere else because that may mean you are signing for a loan with a loan shark.
No 4 – The Interest Rate Should Not Be High and Beyond Government Standards
Licensed moneylenders must abide by the interest rates set by the market and the government. Having a set interest rate ensures borrowers that it will not change at any time, even if the market rates change. If your moneylender of choice is in the registry of licensed moneylenders, you can be assured that the interest rate they use is approved by the government.
Loan sharks, on the other hand, would often change their interest rates without warning.
No 5 – Licensed moneylenders only charge certain fees for their personal loan offerings
Licensed moneylenders are only allowed to charge three types of fees aside from the usual interest rates to their clients. When you pay these three fees, no more charges will be asked from the borrower.
Here are the three charges that licensed moneylenders include in their loan offerings:
- Initial service fee – This fee is used to process the loan and it must not be worth more than 10% of the total loan amount.
- Legal fees – If there is a chance the moneylender has to go to court to get you to pay your loans, this is the fee they will charge you.
- Late payment fees – If you end up defaulting your loan, this is the fee that will be applied.
The contract you sign with the lender is the only document that would connect you with the lender. Before you sign the contract, make sure everything you need to know about your personal loan is there – from the loan amount, fees, interest rate to duration- and it must be prepared by a lawyer. Do not sign blank or incomplete documents because it may be used against you.
Review the contract and ensure that you are satisfied with it before you sign it with your signature. Your lender should also sign the contract.
Loan sharks will not insist on the contract since it will give them a disadvantage. You must also not let the lender keep your personal documents since it may be used against you.
Here are some other things you should remember when determining if you are dealing with a licensed moneylender or a loan shark:
- Licensed moneylenders do not send you SMS or call you to offer new loans and other stuff. Licensed moneylenders are forbidden from sending SMS advertising messages or calls.
- Licensed moneylenders also take into account your financial capacity before they let you borrow money. They would do their best to ensure you can pay them and adjust their loan terms when your need is great. Loan sharks do not care if you are capable of paying the loan.
When you are in need of quick funds for emergencies and other crucial things, you need to ensure that you are signing with a distinguished and trusted lender. Do not immediately agree to a loan offer that appeals to your capacity because they may not be licensed by the government. If you accidentally sign up with a loan shark, it will be difficult to break free from them and the government may find it difficult to assist you.
A licensed moneylender would consider everything before they lend you funds. Once they lend you money, they will ensure you understand everything about the loan and not threaten you should you be late in any way. You will also be protected by the law should the moneylender make a mistake.
So, before you go rush to a loan, research!
We wish you luck!