Borrowing From Licensed Money Lenders – How Much Can I Borrow?
Most people borrow from licensed money lenders because of the availability of fast loans and quick repayment terms.
But if you are wondering “how much can I borrow from a money lender?”, you need to know more about your eligibility.
This blog post will answer that question and also offer tips on choosing the right money lender in Singapore for your needs.
What To Consider Before Taking Up A Loan
Licensed money lenders can be a good resource for those who need quick access to cash.
However, before you take out a loan from a licensed money lender, it’s essential to understand the associated costs and terms.
Here are some things to consider before taking out a loan:
Examine The Loan You’re Planning To Get
It’s important to do your research and understand the terms of the loan.
Otherwise, you may find yourself in a difficult financial situation. There are a couple of things you should keep in mind when researching a loan:
- The interest rate is the amount of money you will pay in addition to the amount you borrow. Compare interest rates from different lenders to get the best deal.
- The repayment schedule is the schedule of payments you will make to repay the loan. Knowing how much you will need to pay each month and when the payments are due is crucial. Some loans have flexible repayment schedules, while others have fixed schedules.
- Fees: Some loans come with fees, such as origination fees or prepayment penalties. Be sure to ask about any fees before you agree to take out a loan.
By researching and understanding the loan terms, you can avoid costly mistakes and ensure you get the best deal possible.
Prepare The Necessary Documents
When applying for a loan, you must prepare some documents before visiting a licensed money lender’s office. Some of the documents include:
- Proof of employment and income
- Proof of residency
- Past CPF statements
- Current credit score
- Foreigners may be required to provide bank statements
- Tenancy agreement, employment pass, and letter
Check If The Money Lender You Are Dealing With Is Licensed
You can check if a money lender is licensed by looking for its license number on its website or its premises and checking it against the Registry of Moneylenders or the Moneylenders Credit Bureau.
Licensed money lenders must also display their rates clearly, so take note of these before signing on the dotted line.
Your Credit Score
Another critical factor to consider is your credit score.
Licensed money lenders will look at your credit score to determine whether or not you’re eligible for a loan.
Your Annual Income
Compared to banks however, money lenders are generally less concerned about your credit score than your yearly income.
The amount you earn also dictates how much you can borrow – we will cover this later.
Purpose Of The Loan
Before taking up a loan from a licensed money lender in Singapore, it is vital to consider the purpose of the loan.
Are you taking out the loan to consolidate debt or for a large purchase?
The loan terms will differ depending on the purpose, so selecting a loan that meets your needs is crucial.
For example, if you are consolidating debt, you may opt for a licensed money lender in Singapore with a low interest rate to save money over time.
On the other hand, if you intend to make a large purchase, you may be more concerned with getting a loan with flexible repayment terms.
By determining the purpose of the loan, you can narrow down your choices and select a loan that is right for you.
Differences Between Licensed And Unlicensed Money Lenders
The government regulates licensed money lenders, which must follow specific rules and guidelines.
On the other hand, unlicensed money lenders are not regulated by the government and can charge sky-high interest rates, plus even resort to harassing borrowers.
There are other critical differences between licensed and unlicensed money lenders in Singapore. They include:
- Licensed money lenders must be registered with the Registry of Moneylenders and hold a valid license, unlike unlicensed money lenders who do not have to meet these requirements.
- Legal money lenders are subject to strict rules and regulations imposed by the Ministry of Law (MinLaw), while unlicensed money lenders are not subject to such rules and regulations. As such, they are able to behave lawlessly.
- Licensed money lenders must display their license prominently at their place of business, while unlicensed money lenders are not required to do this. In fact, illegal lenders or loan sharks will not have an office address.
- If you cannot repay your loan, but get harassed by a licensed money lender, you can file a complaint with the Registry of Moneylenders as this is not allowed.
In contrast, if you borrow from an unlicensed money lender and cannot repay your loan, you have no recourse but to make a police report if you are stalked, harassed or threatened.
As you can see, there are several critical differences between licensed and unlicensed money lenders in Singapore. If you need to borrow money, it is best to choose a licensed lender.
Moneylenders Act and Rules Singapore
Licensed money lenders are regulated by the Moneylenders Act (Cap 188) and rules that protect borrowers against unfair practices.
Under the Moneylenders Act, all licensed money lenders must prominently display the interest rates chargeable for different kinds of loans on their premises.
The Moneylenders Act and Rules also stipulate other important aspects of the moneylending business, such as:
- The maximum amount that can be charged as late fees
- The maximum number of times that a borrower can defer repayment
- The maximum amount of interest and late fees chargeable on a loan
- How borrowers should repay loans
Licensed money lenders must comply with the following money lenders’ rules:
- Not allowed to give loans to borrowers below 21 years of age
- Limited in lending more than $3,000 to a borrower
- Cannot use or threaten violence against borrowers
- Unable to take advantage of a borrower’s desperation for financial assistance
Differences Between Borrowing From A Licensed Money Lender And Bank
When it comes to borrowing money, there are different options available in Singapore.
Two popular choices are borrowing from a licensed money lender or a bank.
Licensed money lenders are regulated by the Ministry of Law (MinLaw), while banks are regulated by the Monetary Authority of Singapore (MAS).
Licensed money lenders are required to report borrower information to the Moneylenders Credit Bureau, which banks are not.
However, if you default on your loan from a licensed money lender, this will be reflected in your credit report and may make it difficult for you to obtain loans from banks in the future.
Banks can give loans to Singapore residents with an annual income of $20,000 and foreigners employed in Singapore with a yearly income of $45,000 and beyond.
Therefore, the bank may reject your loan application if your annual income is below the requirements.
On the other hand, licensed money lenders are more flexible on how much you can borrow based on your annual income.
For example, you can borrow up to $3,000 even if your yearly pay is less than $20,000.
Note that licensed money lenders in Singapore usually have shorter payment terms than banks. Therefore, borrowers can repay their loans within a shorter time frame, saving on interest costs.
Licensed money lenders also tend to offer more flexible repayment options than banks.
For example, borrowers may be able to make early repayments without penalty or extend their loan tenure if they cannot make their scheduled repayments.
How To Tell If A Money Lender Is Licensed
There are various ways you can tell whether your money lender is licensed or not. Here are some tips:
Confirm That The Money Lender Is On MinLaw’s List
You can confirm if the lender is on MinLaw’s Registry of Moneylenders by referring to the list of licensed money lenders in Singapore, which can be found online.
The Registry of Moneylenders provides a list of all licensed money lenders in Singapore, as well as those that have had their licenses suspended or revoked.
Examine Their Advertisement Techniques
According to MinLaw’s Registry, licensed money lenders can advertise via business directories, their official websites, or by placing an advert on their front door or gate.
Therefore, you should ignore any money lender offering to provide you with a loan via calls, email or SMS.
Be sure to seek clarification and not depend on the lender’s advertisements entirely. Be very clear about the loan terms and conditions of a loan from a licensed money lender before you commit to it.
Check The Fees And Interest Rates Offered
Confirming the fees and interest rates offered by a licensed money lender in Singapore is vital because some money lenders may charge high rates to earn more.
Therefore, you should ignore a money lender if you come across the following:
- Its interest rates per month are more than 4%
- It charges late interest rate of over 4% for every repayment made late
- It charges a late fee that exceeds $60
- Its administrative fee is beyond 10% of the principal borrowed
- It does not clarify its fees and interest rates
Confirm That The Money Lender Has An Actual Address
A legitimate money lender has a physical office that you can visit to ensure that it operates legally. With an address, it can be held accountable if something goes wrong.
This is why unlicensed lenders never have offices.
So it would help if you avoided a money lender who plans to meet you anywhere unknown to approve your loan.
Can You Borrow From Multiple Money Lenders?
Some do this to consolidate their debt or to get a lower interest rate.
However, you should keep some things in mind before you borrow from multiple money lenders.
Firstly, make sure you can afford the payments on all your loans.
If you miss a payment, it could affect your credit score and make it harder for you to get approved for future loans.
Failure to make the payments on time could result in debt or bankruptcy.
Secondly, be aware of the fees associated with each loan.
Some money lenders may charge higher fees for borrowers with multiple loans, so it is essential to compare the total cost of each loan before making a decision.
Thinking carefully before taking out loans from various money lenders in Singapore is vital.
What Is The Maximum Loan You Can Take?
The maximum amount you can borrow in Singapore from a licensed money lender depends on your annual income.
Licensed money lenders are legally allowed to lend up to $3,000, but if your annual income is more than $20,000, you can get a loan of up to six times of your monthly salary.
What To Do Once Your Loan Is Approved
Once your loan is approved, you should do a few things to ensure you are using your loan in the best way possible. They include:
- Make sure you understand the terms of your loan and are confident that you can make the monthly payments before moving forward with it.
- Ensure the money lender offers you the accurate principal of your loan amount.
- Keep a duplicate of the loan contract and receipts every time you make payments on your loan.
- Pay your loan installments on time to improve your credit score.
- Keep track of your spending and don’t overspend.
What Happens If You Can’t Pay Back The Loan?
In the event that you cannot repay your loan, contact the licensed money lender immediately before your next loan installment is due. The lender may be able to work a repayment plan with you.
If you have at least $15,000 of debts and have no hope of repaying it, filing for bankruptcy may be an option worth exploring.
Doing so will stop lenders from piling on even more interest charges onto existing balances each month or taking legal action against you.
Frequently Asked Questions
What Is The Late Payment Fee?
The late payment fee is capped at $60. In addition, money lenders can only legally charge an administrative fee of a maximum of 10% of the loan principal.
What Is The Minimum And Maximum Loan Tenure?
The minimum housing loan tenure is usually two years, while the maximum loan tenure is 30 years for HDB flats and 35 years for non-HDB properties.
What Is The Grace Period?
A grace period is between the end of the loan tenure and the date the borrower is required to repay the loan amount. The grace period is typically six months, especially for student loans.
Make Sure You Can Repay What You Borrow
Licensed money lenders in Singapore are subject to strict regulations by the government to protect borrowers.
Before taking out a loan, borrowers should know the rules and regulations governing licensed money lenders before they start asking themselves the question “how much can I borrow from a licensed money lender?”
In case you cannot repay your loan, you should contact your licensed money lender immediately.
If you are struggling to get a loan from a money lender or need some quick cash, contact Horison Credit today for fast cash loans with low interest rates.