What Is A Moneylender And What Should You Take Note Of?
When you need funds urgently, you may have to take out a loan. But where can you get a loan from?
When it comes to obtaining loans, you can get a loan from a bank or licensed money lender. In fact, a licensed money lender is a popular option when it comes to getting money quickly.
So what is a moneylender?
A money lender is a person or business entity that lends out loans to individuals or businesses that require cash for different purposes.
When looking for a money lender, you need to ensure that it is licensed so you can use your credit without stress.
If you’re planning on borrowing money from a licensed money lender, you’ll learn what is a moneylender and what to look out for in this article.
Factors That Affect Your Loan Amount
The following factors will determine the loan amount you can get from a money lender.
Type Of Loan
There are two types of loans – secured loans and unsecured loans.
Secured loans are tied to collateral, usually a property, car, or any other valuable asset. If you fail to repay the debt, your property is used to pay off the debt.
The proceeds from the property may or may not exceed the debt. If it does, you are entitled to the remainder. If it doesn’t exceed the debt, you still owe the shortfall.
According to the Ministry of Law, secured loans have no capped amount. This means you can be lent any amount – as long as a valuable asset that can be used as collateral.
On the other hand, unsecured loans are subject to caps, which we will explain in the point below.
Your Annual Income
Licensed money lenders offer secured and unsecured loans to Singapore citizens, permanent residents, and foreigners living in Singapore at a fee.
The amount that can be borrowed is dependent on two factors:
- Loan type
- Your annual income
For unsecured loans, loan caps apply.
The table below shows the capped amounts for different levels of annual income.
|Annual Income Of Borrower||Citizens And Permanent Residents Of Singapore||Foreigners Residing In Singapore|
|Not up to $10,000||$3,000||$500|
|At least $10,000, but not up to $20,000||$3,000||$3,000|
|At least $20,000||Up to 6x of borrower’s monthly income||Up to 6x of borrower’s monthly income|
Lenders will look at your credit score when deciding whether they want to lend money to you.
Your credit score indicates your risk of default as a borrower. The lower your score is, the higher your default risk and vice versa.
In other words, your credit score indicates whether you are likely to repay your debts on time and if there are any problems with your credit history, such as missed or defaulted payments.
A good credit score will improve your chances of getting approved by lenders for a loan. On the other hand, a poor credit score can make approval difficult even if you have enough money for repayment.
What To Consider Before Applying For A Loan
Take note of these points before approaching a licensed money lender.
Know Your Limit
A loan is not just any other financial product you can take up without thinking about it. You need to know how much you can afford to pay back and how long it will take you to do so.
This will help you decide whether borrowing money from a money lender is worth it. You should always borrow only what you need and can afford to repay.
Think About Why You Need The Money
You should also think about how you plan to use the money before applying for a loan from a money lender. If it’s for an emergency, you should look into personal loans first since they’re better suited for such situations due to their flexibility.
Personal loans have high interest rates but come with more flexibility in repayment terms and conditions.
Another thing that you should consider before taking up a loan is your collateral, if you intend to get a secured loan.
If there is a collateral attached to the loan, note that if you do not repay the loan on time due to unemployment or illness, then the money lender can use your asset to cover its losses incurred due to non-payment of dues.
Make Sure The Money Lender Is Licensed
Never work with an unlicensed lender or loan shark. It’s just not worth the trouble and risk.
Look up a money lender on the Ministry of Law’s list of licensed money lenders.
This list includes the names and contact details of all licensed businesses in Singapore. With this list, you can verify the legitimacy of the lender you’re working with and prevent yourself from getting scammed.
Use the list to check the lender’s business name, license number, contact details, and address against what is included in the list of licensed money lenders in Singapore.
Note that an illegal lender may impersonate a licensed money lender and use its business name or replicate its website.
Interest Rates And Fees
Under the Moneylenders Act, here are the fees a licensed money lender can charge:
- Administrative charges that amount to no more than 10% of your principal amount – deducted from the loan principal when the loan is disbursed
- Up to 4% nominal interest rate per month for loans – calculated in a reducing balance method for secured and unsecured loans
- A late interest rate of no more than 4% per month
- A late repayment fee of no more than $60 per month
- Monthly interest rate, late interest rate and administrative fee must not exceed the loan amount
The interest rates charged by a legal money lender in Singapore vary from one lender to another. Someone with a good credit record will generally be charged lower interest rates than someone with a poor credit record.
But most licensed money lenders place more importance on your income than credit score.
However, this does not mean you should borrow money from anyone who offers you a low interest rate.
For example, some money lenders may charge hidden fees that they do not disclose. That can take away some of the savings gained by having a lower interest rate.
How To Know If A Money Lender Is Licensed
The first thing you need to do when looking for a money lender is to ensure that they are licensed by the relevant authorities. There are many ways in which you can do this:
- Look up your money lender on the Ministry of Law’s list of licensed money lenders. Its details must all match what is stated on the list.
- Call the Registry of Moneylenders to check on the money lender.
- Visit the money lender’s office to be doubly sure. Loan sharks never have offices.
- Check online reviews. Make sure the money lender you are dealing with has a history of ethical behaviour and deals with its customers fairly.
Lodging A Complaint Against A Money Lender
If you have a complaint about licensed money lender harassment or any other issue, you can lodge a report with the Registry of Moneylenders.
It is considered licensed money lender harassment if your money lender:
- Keeps following you or your loved one
- Tries to or communicates with you or your loved ones by any means
- Stays nearby or visits where you live or work frequently
- Watches you or your family members and friends
- Vandalises your property or that of your loved one
You can call the Registry at 1800-255-000.
What To Do After The Loan Is Granted
There are many things you need to do after a money lender has granted you a loan. Here are some of them:
Pay Back The Loan
This is the most crucial step is how to settle licensed money lender. You may also opt for different repayment schemes, such as monthly or weekly payments.
The money lender will want regular payments from you to allow them to earn profits from interest rates charged on the amount borrowed.
If you fail to pay back on time, this could result in penalties imposed by the lender, adding extra charges for late payment or other fees. So make sure you are on time with your payments.
Track Your Spending Habits
You will manage your finances better if you track how much you spend daily and how much income you have each month.
If there is an imbalance between how much money comes in and how much goes out, then either your expenses are too high, or your income isn’t enough for the bills and other expenses that need to be paid off each month. This may make it hard for you to repay your loan.
Keep All Your Loan Documents Safely
Apart from paying your installments in full each month, it is crucial to have a folder that contains all your loan-related documents. Keep it in a safe place in case of payment disputes.
Make sure the lender gives you a receipt every time you make payment and check all the details are correct.
Choose The Right Money Lender
Now that you know what is a moneylender, it’s important to pick the right lender. Ensure that your lender abides by the moneylender rules.
Horison Credit is one of the most trusted licensed money lenders in Singapore, offering some of the most affordable interest rates and fees. Give us a call now or apply for a loan today.