It is common for people to be in a financial jam and need cash help. These financial jams could be anything, including cash and medical emergencies. If savings aren’t enough, the next best option is to apply for a loan.
But it is not that only critical situations need loans. You might also need to get a loan to break through the barriers in your life, such as setting up a new company, house renovation, having a fantastic vacation, or ticking off a bucket list item.
As you explore, you typically have two viable choices to get a loan: a bank or a legal money lender. For most people, legal money lenders in Singapore are a much more feasible option.
In this blog, let us know the things you should keep in mind before borrowing from a money lender in Singapore.
Good Practices Before Borrowing from a Legal Money Lender
Shop for Low-Interest Rates and Fees
You should seek lenders with reasonable interest rates on loans when evaluating options.
Do not choose the first money lender you speak of. Instead, look around carefully enough, and you may find a lender with lower fees and interest rates. Also, always check to see if they are not overcharging. The easiest method to do this is to approach as many money lenders as you can.
It is crucial to keep in mind that not every borrower will benefit from reduced interest rates. You need to pay a larger monthly repayment amount if you opt for loans with low-interest rates and short loan tenure. Some borrowers may not find this appropriate because of their lower financial capacity.
In Singapore, legal money lenders may charge interest rates of up to 4% per month. This rate is fixed regardless of your salary or the sort of loan you are receiving (secured or unsecured). The Ministry of Law governs this cap.
The highest amount of late interest money lenders may assess on a loan is 4% per month for each delayed loan repayment month, too. Remember that –
- Only the due principal is subject to the loan interest.
- The late interest is charged only on the loan amount that is past due.
As of October 1, 2015, licensed money lenders in Singapore are limited to charging the following fees:
- A maximum penalty of S$60 per month of late payment
- A fee that isn’t more than 10% of the loan’s total principal at the time of approval
- When the loan provider files a lawsuit to recover the loan, the court may also order the borrower to pay further legal fees.
It’s crucial to remember that the sum of the applied fees and the interest added to your loan should not be greater than the principal.
For example, on a loan of S$10,000, the sum of the loan interest, late interest, 10% managerial fee, and monthly S$60 late fees should not be more than S$10,000.
Evaluate Your Loan Repayment Ability
You must be able to make on-time repayments on your debt. For that, you should prepare yourself for repayment before borrowing a loan. You don’t want a bad credit history because of missed repayments or personal loan default.
One way of it is directing income to EMI payments instead of investment. But your income must be enough to pay for the EMIs. You can ask for the estimated amount of your monthly EMI from the lender or calculate it yourself using a personal loan calculator. It makes your planning for repayment easy. Also, consider clearing the previous debts and other financial obligations to avoid too much financial burden.
Look for a Reliable Money Lender
Next, confirm that the lender you are considering borrowing from is licensed.
You can quickly determine this by looking at the list posted on the Ministry of Law website. It has the names of all the licensed money lenders active in Singapore as of the updated date.
Even if a money lender in Singapore has a license, you should keep an eye out for any indications of violating the law.
The following are some indications:
- Illegal promotion
Illegal service promotion through media channels, including leaflets, texts, and emails is unpermitted by advertising regulations. Only three media types—business or consumer directories, the licensed money lender’s websites, and advertisements posted inside or on the outside of the licensed money lender’s commercial property—are permitted in Singapore for licensed money lenders to market.
- No mention of loan agreement terms with the client
All Singaporean licensed money lenders are required to thoroughly explain the terms and conditions to any borrower before providing their loan. They must disclose the loan terms up front, and discuss them with clients. Additionally, they must be reachable and provide concise solutions based on available public information. Bear these in mind before you sign the loan deal.
- Lack of transparency on their interest rates and other charges
They must give you clear information on the payback length, available payment methods, interest rates, and other specifics. Your contract must include these details precisely and upfront.
Beware of Gimmicky Offers and Plans
Many money lenders in the market try to attract borrowers with lower interest rates and gimmicky offers. However, when you dig deep, you will find these loan offers are more expensive than others. Also, they are mostly based on floating interest rates. Initially, the interest rates appear low, but with time they start increasing.
Some lenders also hide various charges during the paperwork. Ensure you read all the terms and conditions carefully, and do not sign on anything unmentioned.
The Final Words
Most of us face emergencies at some point in our lives where we have to take loans. The best option is to obtain a loan from a licensed money lender. They have a quick approval process and lower rejection rates as compared to banks and other financial institutions.
Get in touch with Avis Money Lender if you want to work with a trustworthy licensed money lender in Singapore. We are a registered lender with all the loan options you require. Apply for a loan with us right away!
