Foreigners’ Guide to Money Lenders in Singapore
According to a study by the Economist Intelligence Unit (EIU), Singapore is the most expensive place in the world to live in. More and more Singaporeans are being driven to take loans so that they can afford houses, cars and even education. As a foreigner in Singapore, it is even harder for you to get by without some financial aid. Depending on where you are from, you may find that living in Singapore is more expensive that what you’re used to, which may lead you to encounter some difficulty with the management of your finances. With no friends or family in your vicinity, there is no one for you to turn to when you need a loan. Or is there?
In Singapore, foreigners have the option of getting a foreigner loan from various financial institutions. You can approach a bank or a licensed money lender to apply for a legal loan to help with any immediate financial difficulties you may be facing. Often, you’ll be offered flexible loans with reasonable interest rates that can be paid off relatively easily over some time. Whatever you do, do not seek help from illegal money lenders (more commonly known as loan sharks).
Dangers of approaching illegal money lenders.
Foreigner loans in banks often have stringent requirements as there is a high risk associated with loaning to foreigners due to their lack of collateral. They urgently need financial assistance, but their loan applications just keep getting rejected again and again. Out of desperation, some foreigners end up choosing to turn to loan sharks for ‘easy’ money. That will eventually prove to be the worst decision they’ve ever made. These are the reasons why:
Loan sharks don’t hold back on harassment.
Most Singaporeans have an idea of what loan sharks do when a borrower fails to repay their debt. In television dramas, the debt collection methods of loan sharks are generally depicted as the classic spray painting of the characters ‘O$P$’ in bright red and or hanging a pig’s head on the debtor’s door. Just recently in August 2017, a loan shark was arrested and charged with setting fire to the door of an apartment. Loan sharks will resort to any means to force you into paying. They are illegal money lenders, which means they will not hold back out of fear of breaking the law. Getting involved with them could end up causing you to lose your job and life in Singapore.
In January this year, a Filipino maid borrowed $300 from a loan shark online. As collateral for the loan, the maid had to send pictures of her bank statement and work permit to the loan shark. She also sent pictures of her employer’s utility bill, flat and family members to prove that she was staying in that apartment. When she was unable to pay off her debt, it grew from $300 to $800 in just two months, almost tripling the original amount. She ended up changing her number in an attempt to ward off any harassment. This backfired when the loan shark contacted her employer instead, with pictures of her flat and family members. Needless to say, the maid ultimately lost her hard-earned job and was sent back to the Philippines.
You will have a hard time paying off your loan.
Loan sharks have no qualms about taking advantage of their clients’ desperation. Unlike licensed money lenders, they do not have a cap on the interest rates they charge. You could be taking on a loan with an interest rate of 100%, 200% or perhaps even more. Furthermore, there is no written contract when you loan money from loan sharks, as everything is settled based on verbal agreement. This means that your interest could change from 100% to 200% tomorrow, based on your creditor’s mood. As a result, people who take loans from loan sharks often fail to pay off their debt, finding themselves in a downward spiral with no way of heading up again.
Foreigner loans: Bank VS licensed money lenders.
So what exactly is a foreigner loan? As you may have deduced from its name, a foreigner loan refers to a type of loan that is offered to foreigners living in Singapore. It is also known as a work permit loan or a personal loan for work permit holders. There are requirement that you will have to meet in order to get your loan approved, with some financial institutions being stricter and some being more flexible than others. The two main financial institutions that we will be discussing are banks versus licensed money lenders. Getting to know more about their differences will aid you in deciding which one is most suitable for you.
Bank requirements for a foreigner loan
In order to qualify for a foreigner loan from a bank, you will need:
- An annual income of at least S$42,000.
- A copy of your passport (front and back).
- A copy of your Singapore Work Pass (front and back).
- A recent copy of your Income Tax Notice of Assessment.
- A copy of your most recent original and computerized pay slip.
- To be within the age range of 21 to 55.
- A full-time employment.
- A Tenancy Agreement for where your place of residence, along with a letter that has been mailed to you at that address.
- A bank statement of the account in which you receive your salary. The statement should be not more than 3 months old.
- A letter of employment from your workplace.
Borrowing money from the bank involves an extensive background check because foreigners do not have any collateral. Fence from the banks’ perspective, this means that there is a greater risk incurred when loaning to them. Banks offset that risk by having more stringent requirements (that get more demanding the bigger the loan) and charging high interest rates of at least 10%. Needless to say, not all foreigners will be able to qualify for bank loans, nor can they afford the high interest it incurs. In such cases, they can turn to licensed money lenders instead.
Licensed money lender requirements for a foreigner loan.
The requirements and interest rates of licensed money lenders vary from company to company, but generally, in order to qualify for a foreigner loan from a licensed money lender, you will need:
- Proof of your annual income.
- A copy of your passport.
- Your letter of employment.
- A copy of a recent pay slip, not more than 3 months old.
- Your work permit
- Your Tenancy Agreement/Proof of Residency, or a letter addressed to you at that address
- A bank statement of the account in which you receive your salary. The statement should be not more than 3 months old.
Licensed money lenders typically offer more flexible loans than banks with lower interests of up to 4%. The amount that you can borrow from them is dependent on your annual income. If your annual income falls between S$20,000 and S$30,000, you can loan up to S$3000. If it falls between S$30,000 and S$120,000, you can borrow up to S$30,000 (or up to 4 months’ salary). Loan applications submitted to a licensed money lending company tend to be processed within a matter of days, while bank loan applications can take weeks because of the amount of background checking that needs to be done.
Things to look out for when choosing a licensed money lending company.
If licensed money lenders are as good as they seem, why are people still wary about engaging in their services? Because at times, it can be difficult to tell the difference between a licensed and unlicensed money lender. Some loan sharks do a very good job passing off as legitimate money lending companies. They send out mass texts to attract unsuspecting customers, and even have professional-looking websites that help them keep up appearances. On the Ministry of Law website, there is a complete list of licensed money lending companies in Singapore, so be sure to check if a company’s name is listed before engaging in any form of contact with them.
Also, although there are numerous money lending companies around, not all of them provide good services. Some are disrespectful towards their clients, while other may include hidden clauses in their contract to cheat customers of their money. Hence, it is imperative that you check the following before signing a contract binding you to the company.
Check their reputation.
Licensed money lenders usually have a website of their own. Visit their website and check the reviews justify by previous customers. If their website does not offer customer reviews, or if all the reviews are suspiciously positive, go one step further and search for reviews of the company on other forums or websites. Be sure to cross reference your findings, since not all reviews can be trusted.
Check their attitude.
Some money lending companies have bad service and do not treat their customers with the amount of respect they deserve. There is a stereotype of people who seek loans, painting them as weak and needy. Letting the employees show prejudice through their words and actions without repercussions is unprofessional of the company. Find a company that treats their customers with respect. Personal opinion should not come into play at the workplace.
Check their rates and charges.
Not all money lending companies will charge the same rates. Some companies may have lower rates, while others may have attractive loan packages you can consider applying for. Always double check if there are any additional costs that bring up the total cost of your loan. Some companies may charge more processing fees or administrative fees while lowering their interest rates, leading their customers into believing that they’re offered a good deal when in reality, they end up getting charged with an even larger amount.
Check their loan flexibility.
Some money lenders are stricter than others in terms of the requirements needed for their loan. Look for money lenders with less strict policies so that you stand a better chance of getting your loan approved. If you’re having trouble with stable finance, find a money lender with a flexible repayment policy so you won’t have to helplessly watch your debt snowball because of late fees.
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 cautious of hidden clauses that can hold you to something you never agreed to.
No matter how urgently you might need the money, do not be impulsive in choosing your money lender. Make sure you find a good company that can match your needs just right, otherwise you’ll be in for a huge headache when problems start to arise.
Applying for a loan at a licensed money lending company.
The entire process of applying for a loan at a money lending company can be done online. You will be required to fill in some application forms and submit some personal identification documents. Different companies have different requirements, so be sure to double check what you need to submit if you’re applying to more than one company. Take note that your money lender should not ask you for passwords to any of your user accounts (like your bank account) .After your application is submitted, you should receive a response from the company within a matter of days.
Know and protect your rights.
- 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 properly 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 payslips).
- Withhold any part of your principal loan amount for any reason.
Whatever happens, remember that you are protected by the law. Do not hesitate to file a complaint to the Ministry of Law if your money lender exhibits any of the above behaviour towards you. When your loan is approved, it is your responsibility to ensure that you have received 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. Ensure that you are given a dated and signed receipt every single time you make a payment, and keep your transaction records safely as proof in case anything happens. You play the biggest part in protecting your own rights.
It can be rather disorienting to be plunged into a new environment. While Singapore is ranked as the second safest city in the world, danger still lurks in dark alleys. Mistakes might be made simply because you didn’t know any better. When you’re in need of financial aid, stick to the legal methods of obtaining it. Don’t ruin your life for a temporary solution.