When trying to find a personal cash loan, the majority of people turn to banks before all else, have you ever questioned when a bank willloan you money?
Banks will joyfully provide youa personal loan when you have NO need for it. Banks also stretch creditsonly to credit worthy individuals. Financial institutions and banks have a great deal ofrequirements and limitations when the yoffer personal loans.Banks do not provide personal loans to Singaporean citizens and PRs whoearn no more than $20,000 peryear. In case youare a foreigner in Singapore, the criteria are even harder. What comes about if you have bad credit and you need to have an urgent personal cash loan?
Aside from family members and friends , your best lawful solution is to have a go at the helpof a money lender.
Loaning from relatives and/or friends are problematic and awkward. There are quite a lotof individuals (who prefers preserve one’s honor) who ratherborrow from a licensed money lender and pay off the interests on the loan than askfor a favour from someone close .
Licensed Money Lenders in Singapore
In Singapore (as with nearly every industry) themoney lending industry is heavilyregulated and moneylenders are licensed by the Registrar of Money Lenders. There are straightforward guidelines and restrictions on the amount ofloans they can grant, the fees they can charge and even the interest rates areheavily regulated.
Any licensed moneylender found to be flouting the Money Lenders Act in Singapore will havetheir money lending licensed withdrawed. It ishighly encouraged that you understand and identify your right as a borrower if you are aiming to obtain a personal cashloan from a licensed money lender.
It is definitely worth noting that a licensedmoney lender in Singapore is really just like any otherbusinessman. They wish to keep up their good track record, deliver a superb service, alter their loans in accordance to the laws and make money. When licensed money lenders inSingapore “chase” their debtors, they are no different to a bank– it’s letters andletters and even more reminder letters.
What should you do before approaching a licensedmoney lender?
Take note that you are legally obligated to fulfil any loan contracts you enter with a licensed money lender. It is recommended to borrow only what you can pay back.In Singapore, all licensed money lenders are expected by law to clarify theterms of loans to you clearly and in a language that you understand. You are safeguarded by law to get a copy of the contract. Always be surethat you understand all the terms of the contract which consists of very important terms including the interest rates, applicable fees involved and the repayment terms.
Just how much can you borrow?
For secured loans, there is no limit to the loan you can secure. For unsecured loans, theamount you can borrow depends upon yourannual income:
You can borrow up to $3,000, if your yearly paycheck is less than $20,000;
You can borrow up to 2 months’ income, if your annual salary is $20,000 or more but under $30,000;
You can borrow as much as 4 months’ income, if your annual paycheck is $30,000 or more but below $120,000; and
You can borrow up any amount, if your yearly salary is $120,000 or more.
Interest Rates That Moneylenders can charge
For loans contracted between 1 June 2012 and 30 September 2015, moneylenders are obligated to work out anddisclose to you the Effective Interest Rate of the loan, prior tothe loan is offered. If your yearly earnings is less than $30,000, theinterest rate which moneylenders can charge, for both secured and unsecured loans, iscapped at:
13 per cent Effective Interest Rate for secured loans; and
20 per cent Effective Interest Rate for unsecured loans.
The Effective Interest Rate takes into consideration thecompounding effect of the frequency of instalments over a one-yearperiod. This indicates that Effective Interest Rate betterreflects the factual cost of borrowing over a one-year period. Visit https://www.mlaw.gov.sg/content/rom to discover more about how the Effective Interest Rate is calculated from 1 June 2012.
In case that your annual net income is $30,000 or even more , the caps above are not applied and interest rate is to be concededupon between the moneylender and the borrower.
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% monthly. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one.If a borrower fails to repay the loan without delay, the maximum rate of late interest a moneylender can chargeis 4% each month for each month the loan is repaid late.
The computation of interest charged on the loan must be based uponthe amount of principal remaining after reducing from the initial principal the full payments made by or on behalf of theborrower which are appropriated to principal. [To explain, if X takesa loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken intoaccount for the computation ofinterest.]
The late interest can only be charged on an amount that is repaid late. Themoneylender can not bill on amounts that are remaining but not yet due to be repaid. [To illustrate, if X takes aloan of $10,000, and forgets to pay for the first instalment of $2,000, themoneylender may charge the late interest on $2,000 but not on the remaining $8,000 as itis not due yet.]
Banks VS Licensed Money Lenders
Key distinctions between banks and money lenders consist of:
Licensed money lenders offer a smaller loan amount compared with banks
Licensed money lenders supply loans at a higher interest rate than banks(to price in the credit risk involved).
Licensed money lenders offer loans to individuals with bad credit rating.
Licensed money lenders offer swift personal loans turnaround time (can be as fast as a few hours).
Although the legal restriction is 2– 4 times the borrower’s monthly income, most licensedmoney lenders do not offer such a high amount . They frequently offersmall loans to borrowers (well below the legal limit). As with allbusinesses, licensed money lenders battle on efficiency, with all theright documentation available, it is even achievable for a moneylender to supply the cashloan within 1 hour.
What happens if you can not pay back the loans toyour money lender?
Licensed money lenders are regulated by the law. If they do not comply with the guidelines, their money lending license can be revoked. Similar to banks, be preparedto get letters, SMSes and telephone calls if you can not repay your loans. Unlike loansharks, they can not harass you or threaten you. However in some cases, if you can not repay your loan, they do have the right to send a debt collector to your house.
Be careful of Advertisements From Unlicensed or IllegalMoney Lenders.
Legal and Licensed Money Lenders in Singapore are governed by law and onlyallowed to advertise through the following channels:.
The licensed moneylender’s own website.
Advertisements (offline) placed physically within the business premises of themoneylender’s location or outside of the money lender’s business premises.
Consumers or Business Directories in online or print (offline) format.
If you receive or see an advertisement that does not fall in any of the guidelines earlier, for example in the form ofSMS, email or other form except thestated above, please report to the Singapore Police Force or Ministry of Law.