There might come a time when you might need to take up a quick loan in Singapore. With the options of obtaining one through financial institutions or licensed moneylenders, it might be challenging to narrow your choice between the two. However, since bank loans follow a long and tedious process, obtaining a private loan from a licensed moneylender might seem like a better alternative.
Especially for a first-time borrower, the line between a licensed and unlicensed moneylender can easily be blurred. To avoid engaging with an unauthorised moneylender, here is a guide for you to ascertain the credibility and reliability of a moneylender in Singapore.
Transparency when explaining the terms of a loan
According to the Ministry of Law, moneylenders are expected to explain the terms of acquiring a cash loan in Singapore thoroughly. It also has to be conveyed to you comprehensively in a language that you understand. This includes answering any questions raised about the loan and being explicit about the terms of the contract, in particular, the repayment plan, interest rate, payment method options and fees applicable.
If your moneylender seems to be dodging your questions or deliberately leaving out information, then there’s a high possibility that they’re a loan shark.
Details of the loan contract
Based on the law, licensed moneylenders are expected to have their borrowers append their signature on a contract prepared by a lawyer. Be sure to scrutinise the contract, or hire a lawyer to have a look at it. Keep an eye out for the following details:
- Loan amount
- Interest rate
- Repayment period
- Repayment options
- Late payment penalties
Based on your income, know the limits of borrowing
For secured loans, a loan of any amount can be taken. For unsecured loans, your income and citizenship will determine how much you can borrow. For Singaporean citizens and permanent residents (PR) with an annual income of less $20,000, $3,000 can be acquired. Additionally, a yearly income of at least $20,000 allows the borrower to borrow up to six times their monthly income.
Interest rate charged
Taking effect from 1 October 2015, the maximum interest rate moneylenders can charge is up to 4 per cent each month – regardless of the borrower’s income and whether or not the loan is secured or unsecured.
If the borrower fails to repay the loan on time, the maximum late interest rate is still 4 per cent for each month the loan is repaid late. Take note that this can only be charged on the condition that an amount is repaid late.
The three types of fees that can be charged
As of 1 October 2015, moneylenders can only impose the following charges and expenses in addition to the interest rate charged:
- Upfront service fee – should not exceed 10 per cent of the loan’s actual value.
- Late payment fee – cannot be charged over $60 per month.
- Legal fee – in case of dispute, the borrower has to cover all legal costs, including that of the lender.
If the moneylender is asking for extra, they could be dealing with a loan shark instead. However, if a licensed moneylender exceeds the fee limits, then they’re liable for prosecution.
Discern their credibility
Verify that a moneylender is licensed through the Ministry of Law’s detailed list of licensed moneylenders. Even after checking the boxes based on the tips listed above, visit the website or their offices to ensure that the moneylender is recognised by the government.
Conclusion
It is highly recommended that you look around the different moneylenders to pick the one offering the most favourable terms. Do not feel pressured or obligated to rush and commit yourself to a loan until you are fully satisfied with the terms and conditions. For any of our loan enquiries like taking up a debt consolidation loan, or if you’re facing any doubts regarding licensed moneylenders in Singapore, feel free to approach us at Easyloan! Upon creating an account with us, you’ll gain access to all resources on our website that’ll be of great help for you.