Not any moneylender Singapore has is legit. We’ve all read stories about their cut pig heads, death threats, and extreme extortion.
However, those are Ah Longs, aka loan sharks.
Licensed moneylenders aren’t the same. They run legal businesses and follow the rules set by MinLaw to the T.
Of course, some agents have less experience than others or personalities that wouldn’t click with yours. Therefore, although you can expect legally fair treatment from these loan officers, you should always double-check various licensed moneylenders before making your choice.
Besides, you should understand how loans from licensed moneylenders in Singapore work. That’s what this article is about, so keep reading below.
Licensed moneylenders have authorisations from the Monetary Authority of Singapore, so their work is perfectly legal. By comparison, loan sharks don’t have these licenses, so they can’t legally grant loans in this country.
Here’s why that’s important:
MAS writes the laws that licensed moneylenders are supposed to obey and imposes them – meaning regular checks, following up with complaints, etc.
This process ensures that your loan will work seamlessly according to those rules. Thus:
Warning: Licensed moneylenders’ loans are more expensive than bank loans. However, your agent won’t call you in the middle of the night, threatening to triple your loan because you were late with one payment.
In principle, everyone’s eligible for getting a personal loan in Singapore. In practice, foreigners have a more challenging time finding a suitable option compared to citizens and Permanent Residents because:
That said, let’s see how much you can borrow:
|Borrower’s annual income||Singapore Citizens and Permanent Residents||Foreigners residing in Singapore|
|Less than $10,000||$3,000||$500|
|At least $10,000|
and less than $20,000
|At least $20,000||6 times monthly income||6 times monthly income|
Note: These maximum sums refer to loans without collateral, aka unsecured loans. If you opt for a secured loan such as a home loan or car loan, you can obtain more money.
So how do you get those funds?
The application is seamless for most licensed moneylenders. All you have to do is upload the needed documents on their website. If you’re a citizen/PR, you can usually sign into your SingPass from licensed moneylenders’ websites to instantly upload your financial information.
As a rule of thumb, you’ll need to provide proof of:
Pro tip: Before applying for a personal loan, check different options. Most licensed moneylenders craft specific packages for different needs and backgrounds, such as foreigner loans, emergency loans, wedding loans, and so forth.
The law in Singapore states that licensed moneylenders can only impose the following charges:
|Admin fee||· Up to 10%|
· If you’re borrowing more money, some licensed moneylenders can waiver this fee altogether
· Licensed moneylenders don’t ask for this sum before loan approval
|Interest rate||· Maximum of 4%/month|
· If your moneylender charges reducing interest, your rate remains the same at 4%, but the interest rate is calculated from the outstanding balance.
|Late payment interest rate||· Maximum 4% from the instalment you’ve missed|
|The late payment penalty fee||· Maximum $60|
|Legal charges||· Only if a judge imposes them.|
Let’s see an example:
You take a $10,000 loan that you agree to repay within 12 months. The monthly interest rate is 3%, and you have a 2% admin fee. As such:
A licensed moneylender in Singapore will usually agree to the following methods of loan repayment:
Pro tip: Licensed moneylenders in Singapore don’t impose early penalty fees. That means you can close your loan faster if you repay larger instalments than the ones you initially agreed to.
Also, some agencies have deals and discounts if you stick to your reimbursement schedule. One example is refunding you a portion of the initial admin fee.
What if you can’t repay your loan?
The first thing you have to do is remain calm and make any rash decisions. Contact your loan officer as soon as you find out that you can’t repay the upcoming instalment and explain the reason (e.g., an accident, layoff, sudden emergency in the family).
Your licensed moneylender will find a compromise solution, such as allowing you to pay just the loan’s interest for a few months or freezing your payments altogether.
How can you guarantee the success of your negotiations?
That brings us to the following topic:
Let’s say that you’re the breadwinner in your family. You own a business, and it’s not going that great, so you decide to take a loan for personal expenses.
However, you get in a car accident.
This accident is severe enough to require a few weeks in the hospital. This situation puts a halt on your business. Although you have some savings, your family needs that money for food and utility bills.
What happens to your loan instalments in this case?
Some licensed moneylenders in Singapore offer loan protection insurance for these precise horror scenarios. Although these agencies may be more expensive, they guarantee to freeze your loan temporarily until you recover from an accident or permanently in the event of death.
Any licensed moneylender Singapore will start with this advantage:
Taking a loan from the bank is a much slower and tedious process. Although some banks in Singapore have smoothened their application & approval processes for smaller loans, you still have more hoops to pass if you want a more considerable amount. Banks also make it hard for people with lower incomes and lower credit scores.
By comparison, licensed moneylenders:
*Warning: Don’t confuse this fast response with the actual loan approval. Licensed moneylenders in Singapore are obligated by law to conduct personal verifications at their headquarters. If your loan agent skips due diligence, you should be wary – they can be loan sharks or law-breaking lenders.
That said, bank loans have particular advantages, especially for people with perfect credit scores and higher incomes:
As you can see, taking a loan from a moneylender in Singapore is a safe and straightforward process. Most loan agents work hard to hone their skills because they want to have as many successful contracts as possible. As such, you’re guaranteed to get a personalised loan that suits your needs and your income.
Thus, even if licensed moneylenders in Singapore impose higher interest rates than banks do, you’re likely not going to feel that difference too much in terms of your monthly instalments. Remember that your agent’s purpose is to get its loan back without incidents.
Here lies the problem:
If you don’t repay your instalments diligently, your debt can snowball fast. Licensed moneylenders in Singapore show leniency to people who can’t reimburse loans because of serious issues but are strict with irresponsible customers.
Thus, strive to be a responsible customer.
Never miss an instalment if you can help it because that will lower your credit score and snowball your debt. Also, pick the right loan for your needs. If you need money for your wedding, choose a wedding loan, not an emergency loan.
Choosing wrongly increases your risk of loan default, so click here to get the best loan quotes on the market.
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