Licensed Money Lender Interest Rate: How Much Can They Charge

Singapore is a country with abundant services in lending money to suffice one’s financial needs. Due to this, the government wanted to protect the borrowers. These moneylending companies grant loans to debtors who fail to meet the minimum annual income requirement of banks. Hence, licensed lenders lend money with high-interest rates.

To control this, Government wants to ensure safety and security for both borrowers and lenders, new bill implemented in July 2015, with changes in the interest rates which moneylenders can enforce from the previous 20 percent to 4 percent per month regardless of the annual income and whether the type of loan is secured or unsecured.

Amidst objections by some of the 160 registered moneylending industries in Singapore, this new interest rate capped from loans has taken effect to protect the interest of the general public.

Capped For Less Than $30,000 Annual Income

Intended for Contracted Loans between 1st of June 2012 and the 30th of September 2015 where proper Disclosure should be observed. Thus, lenders are mandated by law to calculate and explain the effective interest rate of your credit, before the approval of the loan. The interest rate as what mentioned above depends on your annual income and whether it is a secured or unsecured loan.

For secured loans with not more than $30, 000 annual income, actual interest rates are 13 percent.

For unsecured loans with no more than $30, 000 annual income, actual interest rates are 20 percent.

These operative interest amounts are basically based on the regularity of installments in a one-year duration, which means that its effectiveness only reflects the actual cost of using the money for a year.

Capped For $30, 000 And More Annual Income

Intended for effective interest rate calculated from 1st of June 2012. For an annual income of $30, 000 and above, cap and interest rate should be agreed by the both parties which are the borrower and the lender. They need to agree and disregard the caps mentioned above.

Latest 4% Monthly Interest Rate Cap

Borrowers need to be aware of the up-to-date implementation of the 4 percent cap with effect from 1st of October 2015. Wherein, money lenders are restricted to a 4 percent maximum amount of interest rate per month. It is applicable regardless of how big or small a borrower’s income is, and of whether the loan is secured or unsecured. If it happened that a borrower missed repaying the loan after the due date, the highest rate a moneylender can charge is still 4% per month for each month that the borrower failed to pay.

Interest Charged Computation

The interest does not occur based on rough estimation but based on computation. The basis used in calculating is not the original principal amount upon loan approval, but the principal remaining amount deducting all the payments made.

Take for example, if a borrower loaned for $20, 000 and has paid $12, 000, only the remaining $8,000 is accounted for computation of interest. Thus, the interests lessen as the borrower pays his monthly dues.

Late Payment Interest Charge

Late monthly dues are subject to an interest charge but not based on the entire principal amount. For example, if a borrower loaned for $20, 000 and fails to pay $4,000 as the first installment fee, the lender should only compute the interest of the $4,000 as the late payment interest and not the remaining $16,000 as the remaining amount is not yet due.

What Does This Means To You As A Borrower?
Finding a licensed moneylender will protect you from crazy skyrocket interest rates that might be imposed on you by illegal moneylenders if you fail to pay promptly. Having a 4% cap means a safer and much clearer way of knowing how the interest rates work against you.

 

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