A Beginner's Guide To Borrowing From Money Lenders In Singapore
No matter how much we may dislike being called money-minded, it cannot be denied that money does make the world go round. Money is more than just a valuable resource. It is reward, power and authority. However, money is also a fickle object. When handled carelessly, it will slip through your fingers like sand without hesitation.
If you’re reading this article right now, the chances are that you’re in a sticky situation (money-wise), and are looking for a way to get out of it. You probably need urgent financial assistance, but the bank just isn’t approving your loan. You might even be tempted to seek out an illegal source of money, just for convenience’ sake. Don’t do it. Take a big step back and look at your situation objectively. Don’t make any decisions that you know you’re bound to regret. Getting involved with loan sharks is like making a deal with the devil; it seems worth it in the beginning, but will eventually ruin your life.
You might feel like you’re at the end of your rope, and seeking help from illegal money lenders is your only option justify. What if I tell you that there’s another way? You don’t have to turn to deal with ridiculously high-interest rates that make your debt impossible to pay off. You don’t have to resort to unlawful means with such high stakes. There’s another group of people whom you can seek out legally for financial aid. Before you look to loan sharks for help, turn to licensed money lenders.
Different types of loans you can apply for.
Money lenders offer a variety of loan types for their customers. It can be challenging to choose the right one for yourself if you do not know the unique benefits of each one of them. There are a total of 10 different loan types available for your choosing.
1. Personal Loan
A personal loan is the most commonly chosen loan among all the other loan types. It is a type of unsecured loan which is usually taken out to pay for one’s personal needs. People may apply for this loan if they require financial assistance in paying off their debts and bills.
The benefits of a personal loan are as follows:
- You can borrow up to 4 times of your monthly salary.
- The interest rates are fixed.
- You have the option to pay off your loan early.
- The amount you are expected to pay every month is fixed.
2. Payday Loan
A payday loan is a high-interest loan that allows you to borrow a sum of money that totals to less than your monthly salary. The loan has to be repaid when you receive your next pay or within the next 30 days. It is essentially a way to pull your income forward by a few weeks to settle any urgent financial needs you may have.
The benefits of a payday loan are as follows:
- The loan is very flexible.
- It is convenient due to the fast approval time.
- It is easy to qualify for it since there are not many requirements.
3. Foreigner Loan
A foreigner loan is meant for foreigners with valid work permits and employment passes. The required security is subsequently used as a form of collateral against your loan.
The benefits of a foreigner loan are as follows:
- An extensive credits check is not required.
- Your loan can be received fast.
- The interest rate is low.
- The amount of documents you need to submit to qualify for this loan is minimal.
4. Business Loan
Business loans are funds provided for all kinds of businesses. Its requirements, repayment date, interest rate and loan amount all vary based on the borrower.
The benefits of a business loan are as follows:
- It is accessible and convenient.
- It can solve any short-term cash flow issues faced by a business.
- Business loans are approved faster than bank loans.
- You have a variety of ways to pay off your loan.
5. Instant Cash Loan
Instant cash loans allow you to borrow a certain sum of money with a high-interest rate. The amount of money you can borrow is dependent on your monthly salary. This loan type is most commonly used by people facing financial emergencies and needs urgent financial aid.
The benefits of an instant cash loan are as follows:
- You have the option to loan up to 2 to 4 months of your monthly salary.
- As long as you can provide proof of your income, anyone can qualify for it.
- Your credit score is not taken into consideration.
6. Cash Advance Loan
Cash advance loans are somewhat similar to payday loans in the sense that it allows you to loan a certain sum from a money lender before you receive your monthly salary. Like with a payday loan, this loan type charges a rather high-interest rate.
The benefits of a cash advance loan are as follows:
- It is an unsecured loan, hence no collateral is required.
- You can acquire the cash fast.
- Most people can qualify for this loan.
- The application is fuss-free.
7. Education Loan
Education loans are targeted towards students who need help in affording education supplies, university tuition and living expenses. The student will begin repaying the loan once they graduate.
The benefits of an education loan are as follows:
- The interest rates are meager.
- Almost any student can qualify for it. Hence the approval rate is high.
8. Renovation Loan
Renovation loans are meant to help people handle the cost of renovating their apartment.
The benefits of a renovation loan are as follows:
- You can borrow large sums of money.
- The method of repayment is relatively flexible, you can choose to make payment either by weeks or months.
- You have the option of choosing between a fixed or variable interest rate.
9. Vacation Loan
Vacation loans are intended to cover the costs of a vacation.
The benefits of a vacation loan are as follows:
- You can obtain the cash immediately.
- There are no hidden fees involved.
- You can start paying off your loan once you return from your vacation.
10. Short Term Loan
Short-term loans are also known as caveat loans in Singapore, and they are targeted towards helping businesses with their short-term cash flow problems.
The benefits of a short-term loan are as follows:
- The application is free.
- Your loan could be approved in a matter of hours.
- It is flexible and accessible.
Things to look out for when choosing a licensed money lending company.
Though licensed money lending companies are a much safer alternative than illegal money lenders, there are still factors that can differentiate good money lending companies from subpar ones.
The first thing you should do when you approach a money lending company is to check if it is licensed. This step may seem redundant, but I assure you, it is crucial. Some criminal organisations do an outstanding job passing off as legitimate companies and baiting in unsuspecting customers. They send out mass texts periodically and even have legitimate-looking websites like actually licensed money lenders. Thankfully, there is a complete list of licensed money lending companies which is updated monthly on the Ministry of Law website, so all you need to do is take some time to look through it and check if the company’s name is listed there. If it’s not licensed, you will do well to find another company. After you’ve found yourself a company that is listed, you can then move on to checking the following points to help you choose a suitable licensed money lender for yourself.
1. Check their experience and reputation.
Before engaging in any kind of service from any company, it makes sense to check their reputation first. Visit their website and check the reviews justify by previous customers. If the reviews are bad, it goes without saying that you should avoid that company. However, if all their reviews on the website are good, you should be suspicious of them as well. Go one step further and check reviews of the company posted on other forums and sites. Not all reviews are credible, so be sure to check out testimonials from various sources before passing judgement. It would be wise to choose companies with substantial experience since their sustenance reflects on their performance over the years.
2. Check their attitude.
Ensure that the staff are professional in their work. All customers deserve equal respect and attention. Some money lending companies tend to treat their clients carelessly because they’ve already stereotyped them as needy people who have no choice but to seek help, and thus are in no position to complain. Choose a company with responsive employees who treat customers with basic courtesy and respect, regardless of their personal opinion.
3. Check their rates and charges.
Money lending is a somewhat competitive industry so not all companies will charge the same rates. Some companies may lower their rates in order to attract more business, while others may come up with attractive packages so that they can stand out from their competition. Double check for any additional costs (like processing charges) that will bring up the total cost of your loan. Compare the rates and fees of as many companies as possible so that you can pick the one that is most suitable for you.
4. Check their loan flexibility.
Even though licensed money lenders are relatively more flexible with approving loans compared to banks, they do not accept of every single loan application received. If you have a terrible credit rating, look for money lenders with less strict policies so that you stand a better chance of getting your loan approved. A flexible money lending company may allow the terms of your loan to be modified such that it suits your specific needs.
5. Check their terms and conditions.
Before deciding to take up any kind of loan, you must know what you’re signing up for. Know the contract like the back of your hand. Read through the terms and conditions carefully. Be aware of what is expected of you, and what is expected of your lender. Know the consequences you will face should you fail to meet those expectations.
No matter how urgently you might need the money, do not be impulsive in choosing your money lender. Finding a good company that can match your needs just right is worth all the extra effort and is bound to make your life easier in the long run.
What to expect when taking out a loan at a licensed money lending company?
Trying to engage a money lending company for the first time can be somewhat intimidating if you have no idea what to expect. However, the procedure is pretty straightforward, and it’s nothing you need to be afraid of.
Generally, the process of taking a loan from a money lending company is considerably speedy. You will be required to fill in some application forms and submit some personal documentation. Most companies will require you to provide a copy of your identification card, phone or utility bill along with a few months of your most recent payslips. Subsequently, you will need to choose the type of loan you wish to take out, whether it’s a personal loan, business loan or something else entirely. This whole process can be done online, in your own space and at your own time. It is important to note that your money lender should not ask you for passwords to any of your user accounts, such as your SingPass account, internet banking account, etcetera.
After your application is submitted, you should receive a response from the company (usually through a phone call) within a matter of days. The amount of time required to process your application is mostly dependent on the type of loan you are applying for. Loan types with fewer requirements may even be processed on the same day as your application. Money lenders will be able to view your unsecured loans and repayment records with other licensed money lenders through the Moneylenders Credit Bureau so that they can assess your creditworthiness. While legal money lenders are more flexible than banks regarding accepting clients with poor credit ratings, they reserve the right to reject your application should they feel that the risks incurred by loaning to you exceed their acceptable risk level.
Every company has their own policies, so you should ensure that you visit the official website of the company you have chosen for more specific details. If your loan application gets denied, you can either try to reapply or seek out other companies with less strict policies.
Know and protect your rights.
It is crucial that you understand what your rights are. You are entitled to filing a complaint to the Ministry of Law and bringing your money lender to court if they have exhibited unprofessional behaviour towards you.
According to the Ministry of Law, money lenders are not supposed to:
- Use abusive language, or behave in a threatening manner towards you.
- Ask for your SingPass user ID and/or password.
- Retain your NRIC card or any other personal ID documents (e.g. driver’s licence, passport,work permit, employment pass or ATM card).
- Ask you to sign on a blank or incomplete contract for the loan.
- Grant you a loan without giving you a copy of the contract for the loan and/or without adequately explaining to you all the terms and conditions.
- Grant you a loan without exercising due diligence (e.g. approving a loan over the phone, SMS or email before even receiving your loan application form and supporting documents, such as the income tax assessment and payslip).
- Withhold any part of your principal loan amount for any reason.
You play the most significant part in protecting your own rights. When you are granted your loan, it is your responsibility to ensure that your money lender has given you the right amount. Money lenders are only allowed to deduct a maximum of 10% off the principal amount as administrative fees, and can only charge a maximum interest rate of 4% per month. Make sure you get a dated and signed receipt every single time you make a payment, keeping your transaction records safe as proof of your payment. Check your credit record through the Credit Bureau Singapore at least twice a year and correct any errors as soon as you see them.
If you find that you are already bound to an unreasonable contract with no way out, you can contact the Registry of Moneylenders at 1800-2255-529 for help. Your personal details will not be revealed to the moneylender without your consent. An interview with the officers of the Registry may be required, along with all the relevant information and documents related to your loan transactions (hence the importance of keeping your transaction records secure) with your money lender. Under the Moneylenders Act, the Court has the authority to set aside overly excessive or unreasonable loan transactions, following which the money lender will be prosecuted accordingly.
Always remember that as a citizen of Singapore, you are protected by the law.
What are the advantages of borrowing from licensed moneylenders?
Licensed Moneylenders offer a variety of loan types.
Licensed money lenders in Singapore offer borrowers several types of loans: personal loans, business loans, cash loans, etcetera. Borrowers are able to pick which type of loan fits their needs best as each of them have differing requirements. For instance, you will have to offer collateral to the moneylender for a secured loan, but if you go for the unsecured loan you will be required to pay higher interest.
Licensed Moneylenders don’t waste any time in processing your application.
The average adult has to juggle with work, family and possibly even more. It can be difficult, at times maybe even impossible, to take time out of your schedule to apply for a loan. With licensed money lenders, there is the option of doing everything online. Of course, you will still be required to submit basic identification documents and payslips so that they can verify your financial status. But in general, money lenders tend to respond to applications fast, hence the procedure of applying for a loan is much more efficient and less of a hassle (which is a huge plus for all the busy people out there).
Licensed Moneylenders are transparent in their operations.
When you visit a licensed money lender, you will be presented with a contract with everything you need to know about your loan. You will be given a copy of the agreement for you to bring home as a personal reference, just in case you have any concerns about your repayment schedule or amount. They cannot and do not hide anything from you, but you need to do your part to ensure that you do not blindly sign the contract. Always make sure you know what you agree to. Licensed money lenders must abide by the law. Thus the entire procedure of borrowing money will comply with the Moneylenders Act. This means that you won’t have to worry about being scammed by a legal money lender.
Licensed Moneylenders have a physical office.
Admittedly, in this era of modern technology, having an office may not seem like a big deal since many choose to opt for doing things remotely through the internet. But having a physical office to go to provides a sense of security for borrowers because you will have somewhere to seek help whenever you are unsure about anything. They have working landlines that you can use to contact them, so you know that the company you are dealing is legitimate and not a scam.
Terms & Definitions
Licensed money lender
Back in the day, people facing financial difficulties used to turn to loan sharks when they needed a fast solution for their problems. Because loan sharks are illegal money lenders who do not operate according to the laws, they often hike up the interest rates to ridiculous amounts that are almost impossible to pay off. Within a matter of days, the debt of the borrower would snowball and leave them with an even bigger problem than before. When borrowers are unable to repay their debts, they are recruited to be a ‘runner’, someone who chases other borrowers to pay up. Ironic, isn’t it? This vicious cycle proved to be a growing problem with no hope of going away on its own if it was merely justify alone. As a result, the government eventually decided to set up a system for the regulation of a new industry: legal money lenders.
Many people today have the impression that licensed money lenders are just the glamorised versions of loan sharks. Some even periodically refer to them as ‘legal loan sharks’, and their fear and distrust keep them from seeking out licensed money lenders for financial assistance. Licensed money lenders are not the same as loan sharks. Frankly, the only similarity they share is the fact that they both lend money to people. There are apparent differences that set them apart, but those differences are not widely known or accepted due to the prejudice that people have against legal money lenders.
Through television dramas, news, or maybe even real life, most Singaporeans have a general idea of what loan sharks do when a borrower fails to repay their debt. If you are one of the rare few who doesn’t know, let me tell you; it’s not pretty. The classic ‘O$P$’ spray painted in bright red against white walls, a pig’s head being hung on the door… Recently, it’s even been reported that loan sharks are turning to online media, posting pictures of their debtors online to shame them into paying up. With such vicious debt collection methods, it’s no wonder that people are so wary of loan sharks. Do licensed money lenders do the same? No, they do not. Their method of debt collection is one of the leading factors that set aside legal money lenders from loan sharks. Legal money lending is a professional service. They are bound by the regulations set by the Singapore government and will not resort to illegal harassment if you fail to pay your loans for whatever reason. At a licensed money lending company, you should be treated with basic respect and courtesy, like you would expect of all other professional companies.
Another concern that many people have is with regards to the interest incurred by their loans. Loan sharks operate based on their own rules. Thus they do not have a cap on the interest they charge. They have no qualms about taking advantage of their clients’ desperation and charging interest rates of up to 100%, perhaps even more. People who resort to making loans from loan sharks often fail to return the money they borrowed, and find themselves on the receiving end of illegal harassment as a result. Such a situation will not arise when dealing with a licensed money lender. The maximum legal interest rate is 4% per month (as implemented by the government) so you will not have to worry about ending up with a snowballing interest you have no hope of paying off.
While it cannot be denied that licensed money lenders charge interest rates that are higher than those of a bank, there is a good reason behind it. Think about it. Why do you have to resort to money lenders in the first place? Because the banks aren’t willing to loan to you. And what’s the reason banks won’t approve your loan? Because of your poor credit rating. Money lenders are essentially lending money to you even though you have a history of not being able to pay your debts. If you choose to take an unsecured loan, they risk never receiving their money back should you declare bankruptcy. Their higher interest rates are justifiable because of the risks they face by allowing you to take out a loan.
The last fundamental difference you need to know about loan sharks versus licensed money lenders is their credibility. With loan sharks, you do not have a written contract. Because there is only a verbal agreement between the lender and borrower, loan sharks have the freedom to raise the interest rate as and when they please. Your interest rate could be 100% today, and 200% tomorrow. Contrarily, everything is stated in black and white when you take a loan from a legal money lender. With licensed money lenders, you are not at risk of being scammed. Everything you need to know is written on the contract for you to go through carefully before signing. As long as you take care to scan the contract thoroughly for any hidden clauses and are sure you can agree and comply with all the terms stated before signing, you are in safe hands.
Do licensed money lenders look into your credit rating?
Many borrowers are concerned with whether or not their poor credit rating will cause their application for a loan to be rejected. Long story short, yes; licensed money lenders do look into your credit rating. However, having a bad credit score does not automatically disqualify you from borrowing money. Think of your credit rating as a report card; whatever is written cannot be erased. But you can hope to make the flaws less prominent by piling on the achievements so that the less-than-perfect areas will be overlooked more easily. Diligently and consistently trying to pay off your debts will slowly help your credit score to go up, which will, in turn, increase the likelihood of your application being approved.
Do licensed money lenders charge incredibly high-interest rates?
Licensed money lenders do charge interest, much like banks do. However, most of them charge competitive interest rates that can be paid off at some time. The law decrees that the maximum interest rate that a money lender can charge is 4% per month. Licensed money lenders are bound by the law, meaning they would risk having their license revoked if they were to cost more than the above-stated value.