More and more Singaporeans are taking loans nowadays. Given the economic situations we are facing today, it is no surprise that loans are helpful now more than ever.
With this, it is important that borrowers are able to discern which financial institutions to trust. They have to know what certain policies, terms, and rules of these loan companies matter to them and their finances.
This article explains in detail everything borrowers must know about moneylenders. The information discussed here is useful for anyone thinking of borrowing money anytime soon.
Find ways and techniques on how to find the best licensed lending company in the country in this article.
What is Legal Moneylender?
Legal moneylenders are licensed financial institutions that lend money to individuals and groups. Moneylenders in Singapore are under the rules of the government, specifically the Ministry of Law.
Such an arrangement is beneficial to borrowers as the rules of moneylending ensure that they are not exploited by the lenders. It is best that borrowers choose to deal only with licensed money lenders to make sure that they are protected by the rules set by the government.
MinLaw has an official list of licensed money lenders, which you can find here. This list is updated regularly and only those that abide by the rules of the government get to be on this list. To ensure that you are in secured hands, you must only choose to deal with institutions included in this list. Lending money in Singapore without being registered to the MinLaw is illegal.
Note that loan sharks, also called ‘Ah Long,” do not work by the rules provided by the law. This would mean that these groups and individuals can pose a danger if you do not give them what they want.
There are cases where loan sharks have become aggressive and violent against borrowers who did not meet their payment deadlines. This is the reason why the Singapore police always remind everyone never to deal with loan sharks.
What Are the Differences Between a Loan Shark & a Legal Money Lender?
Aside from the fact that one is violating the law and the other is not, loan sharks and licensed money lenders are different in many ways. There are even tell-tale signs that could signal you whether you are dealing with a loan shark or not. Here are some of the most apparent differences between the two.
|Licensed moneylender||Loan shark|
|Loan amount||6 times your monthly income if earning an annual income of at least $20,000||More than what is legally allowed|
|Interest rate||Only up to 4%||More than 4%|
|Documentation||Present; in written form||Skipped or none at all|
|Type of fee charge||Late fee of not more than $60, Loan fee of not more than 10% of the principal loan||Exorbitant fees, unnecessary additional fees|
|Loan term||Indicate in the Note of contract||None; often only verbally|
|License information||Posted on their website; included in the list of money lenders||None|
Legal money lenders are only allowed to lend at most $3,000 for people with less than $20,000 annual income, while 6 times the monthly income of those earning more than $20,000 annually. On the other hand, loan sharks would offer a large sum of money, making it difficult for borrowers to pay back. They would then use this situation to ask for unreasonable late payment fees and other additional penalty charges.
A Singapore money lender is only allowed to charge a 4% interest rate. Meanwhile, loan sharks would charge extremely high rates. There is no one stopping them from charging exorbitant fees, mainly because the government does not regulate them. For the borrowers, this would mean that borrowing from illegal moneylenders could cost you a lot.
A licensed money lender will give you a contract to sign. This contract contains the loan terms and all the other details about the loan. They are required to explain to you what the contract contains. Meanwhile, loan sharks do not have a written contract, they just tell you the loan terms, and nothing is formally written down.
Type of fee charge
Legal moneylenders in Singapore are only allowed to charge certain fees. Late repayment fees must not exceed $60 for each month, while loan fees or service fees should not exceed 10% of the principal of the loan. In contrast, loan sharks would include unnecessary fees and charges, sometimes not known to the borrowers.
A licensed money lender is bound to have a physical office where it accommodates its borrowers. Also, they often have their website, thereby establishing their legitimacy. Loan sharks do not have a physical or an online site. They choose to do this so that it would be easy for them to hide from borrowers.
Moneylenders in Singapore have their own loan terms and deals. One common thing they do is that they write these terms into the Note of the contract. This written agreement is legally binding, and it is something that is agreed upon between the borrower and the lender. In the case of loan sharks, loan terms are vague and ambiguous in order to further confuse borrowers.
Legal moneylenders in Singapore are all included in the Registry of licensed lenders in the country. Their license information is included in the MinLaw list as well as on the website of each of the lenders. Meanwhile, loan sharks do not license information to show. If in case a lender showed you a license, you can always confirm it by checking the Registry.
What to Consider When Choosing a Legal Moneylender?
Now that you know the importance of trusting a licensed moneylender instead of a loan shark, you also have to realize that not all lenders are the same. Some are better than the other. Here are certain aspects you have to pay attention to when choosing which among these legal moneylenders to trust.
The Moneylender’s Reputation and Credibility
The first thing to check is the validity and legitimacy of the moneylender. Make sure that the license of the moneylender is legitimate by checking out the Registry from the Ministry of Law. The license number must match up with the one on the MinLaw website.
Aside from checking the license, you can also do a background check on the licensed moneylender in Singapore you are eyeing. You can check Google reviews and see the feedback of the clients who had previously availed the services of the business. There are websites dedicated to collating reviews and feedback on financial institutions. You can consult these to have a better understanding of what these companies are capable of.
As discussed above, one measurement of the reputation and credibility of a lender in Singapore is to check whether it has a physical office. Having an office indicates that the business is dedicated to its customers. It has a connotation of permanence and reliability. The physical address of a lending company is often indicated on the ‘contact us’ page of its website.
Reasonable Interest Rates
Licensed moneylenders in Singapore are restricted by law to have an interest rate of not more than 4%. There are some lenders who offer a low-interest rate. For example, some competitive licensed moneylenders would give 2% of interest rates. As a borrower, this 2% difference in the interest could mean saving several hundreds or thousands of money in the long run.
Surely, you can opt to submit a loan application to a lending company with a low-interest rate. Just remember that a lower interest rate does not necessarily mean being a better licensed money lender. Interest rates are just one of the many factors to consider in choosing a licensed money lender in Singapore.
Flexible Loan Repayment Plan
The best money lender Singapore provides leeway to its clients. Borrowers can negotiate on the repayment terms of the loan. In case the borrower does not have the means to pay back the loan, he is given other options to settle his obligation. Make sure that you are dealing with a lender with a flexible loan repayment plan. Such a plan will serve as your safety net in case you encounter financial difficulty along the way.
Also, a good money lender in Singapore explains to you all the options you have for repayment, the loan terms, interest rates, and all the other topics regarding your loan. As a borrower, it is important that you fully understand all the aspects of the loan agreement. It is the responsibility of the lending company to make sure that they are clear and transparent to their clients.
Hassle-free Loan Application Process
A money lender in Singapore must have an easy loan application process. Many lenders allow online loan applications now. Others even guarantee approval within 45 minutes or less than an hour. Choose a lending company that ensures the comfort and convenience of the clients. As a borrower, you should not undergo so much hassle when applying for a personal loan or any other loan type.
You must also remember that applying for personal loans and other types of loans is a personal journey. You have to feel comfortable in dealing with the representatives of the licensed moneylender you have chosen. If you feel that you are not valued as a customer, you can always find some other place to conduct your financial transactions.
What to Do if the Legal Money Lender is Breathing Down Your Neck?
The golden rule in money lending is never to trust illegal or unlicensed lending companies. If you happen to encounter one, below are the necessary steps you can take. Take note that even licensed companies can also violate the rules set by the Ministry of Law. If a licensed moneylender violates any of your rights as a borrower, do not hesitate to do legal actions against them as well.
Contact the Law Ministry
Do not hesitate to reach out to the Law Ministry. You can submit any queries, complaints, and suggestions here so they can respond to you accordingly. If your life or security is threatened by loan sharks, do not hesitate to contact the police. They are the first authority who could respond to you if you needed help.
Know your rights as a borrower
It is important that you know your rights as a borrower. Your knowledge and familiarity can serve as your best weapon to combat any possibility of abuse or exploitation. You can read rules and regulations set by the government to licensed lending companies here. Even before applying for personal loans and other types of loans in Singapore, it is important that you know your rights.
Get legal advice from a lawyer
If you know someone or have enough money to spend, you can always get legal advice from a lawyer. Get a lawyer who specializes in matters of loans and finances. Note that talking to a lawyer does not necessarily mean that you will have a case in court. You can also talk to one if you have questions and clarifications regarding loan contracts and agreements you sign.
Choosing a Licensed Money Loans Company
The first thing to remember if you plan to take a personal loan or other types of loan is only to trust moneylenders with a license. But, remember as well that not all licensed lending companies are the same and equal.
There are still a lot of considerations when choosing where to file your loans. Research on which of these companies can give you the more affordable loan, more flexible term, and more competitive deals.
If you find it difficult to compare loan companies, you can always consult Loan Advisor.
This loan comparison site is an expert in identifying the strengths and weaknesses of leading companies in Singapore.
We have a ton of resources you can use to choose which among the many financial institutions in Singapore have the best loan terms and deals.