A Beginner’s Guide On How To Borrow From Moneylenders In Singapore
No one is immune to financial troubles. During situations like these, it can be confusing where to turn to. If you are wondering where to borrow money in Singapore, you can rely on licensed moneylenders for immediate financial relief (in a legal way, of course!).
Moneylenders may not be the most well-known financial institutions in the country, but they’re one of your best choices for thousands of people. To help you make the best choice possible, here’s our beginner’s guide to the best licensed moneylenders in the country.
Here At OMY, You Will Discover The Following:
What Are Licensed Moneylenders In Singapore?
Moneylenders are institutions that offer short-term loans. They are reputable organisations that have been approved by the government to lend money to the public. Their loan amounts, interest, and terms are restricted by the Moneylenders Act and Rules Singapore mandated by the Singapore government.
Licensed moneylenders have come to the aid of many borrowers who were unable to secure a loan from a conventional bank. The best money lender in Singapore charges interest rates that are fair. Borrowers also have the option to pay in monthly instalments.
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These private legal money lenders Singapore institutions also have a duty to borrowers which includes maintaining confidentiality, unlike “ah longs.”
Loan Sharks Vs. Licensed Moneylenders Singapore
Unlike what many people think, licensed moneylenders are different from “ah longs” or loan sharks who are unlicensed lenders. Loan sharks often charge exorbitant interest rates and are infamous for harassing their borrowers.
Keep in mind that if you borrow from an unlicensed moneylender, you’re also breaking the law and you may face heavy consequences because of this. For example, work pass holders who go to an unlicensed money lender will not be permitted to work in Singapore.
Keep in mind that work pass holders who are caught borrowing from unlicensed lenders will not be permitted to work in Singapore. If you want to protect yourself from being barred, don’t respond to illegitimate moneylender ads on social media or text messages.
How Can You Differentiate an Ah Long From A Licensed Moneylender?
Here’s how you can tell a licensed moneylender apart from an unlicensed one.
- Business or consumer directories (in print and online media)
- Placing advertisements inside/ exterior of business premises
- Application form
- Work permit/ SPass/ E Pass
- Proof of residence (utility bill or tenancy agreement)
- Proof of employment
- 3 months’ payslip
- SingPass to log into CPF, HDB, or IRAS website
- Not more than S$60 for late repayment fees
- Not more than 10% of principal loan amount for processing fee
- More charges, some will be taken from the principal amount before receiving your money
- Must follow the code of ethics by the Credit Collection Association of Singapore. This means no harassment, violence, and threats.
- Damaging property
Who Can Turn To A Licensed Moneylender?
For those whose income is less than S$20,000 per year, it’s so hard to find a traditional bank that is willing to extend an unsecured personal loan. Banks or financial institutions want to know your salary, and they also need to see the pay slips to ensure that you have the money to pay what you owe them.
This is exactly the reason why a lot of people turn to moneylenders. A licensed moneylender can loan you up to S$3,000 which you can use for your immediate needs. It is a convenient way to get a loan without the headache of getting approval from the bank. It is also the only way that you can get an urgent cash loan.
For those who earn more than S$20,000 annually, you can loan up to 6 months’ worth of your salary. However, this doesn’t mean you should always max out your loan amount. The key here is to be wise in how you spend money. These lenders are only advisable for small and urgent fees that you didn’t account for. It’s not recommended to seek the help of moneylenders for major financial obligations like buying a home or a new car.
So, What’s The Difference Between Borrowing From A Bank And A Licensed Moneylender?
A lot of Singaporeans immediately think of banks whenever they need to borrow money. However, many people who are unable to access bank loans turn to moneylenders. Unlike banks, moneylenders do not operate within the banking system. This means that they offer different services compared to banks.
Keep in mind that moneylenders take on more risk compared to banks because they are mostly lending to people who are less likely to pay back the loan. This is why they charge higher interest rates.
Licensed moneylenders usually do not require collateral so if you are unable to repay the loan, your assets will not be seized. Although they are still regulated by the government, it’s not the same regulation upheld by banks.
Benefits And Downsides Of Borrowing From A Licensed Moneylender
In most instances, borrowing money from a bank is better. However, many situations call for a moneylender, such as when you need money immediately. Banks usually have minimum loan amounts they will loan out to consumers so if you only need a small amount of money, this can be a problem. Moneylenders are also able to process your application quickly, usually within 24 to 48 hours.
Another benefit of moneylenders is that you don’t need to have a good credit score when borrowing money. Moneylenders are also more flexible when giving out loans. If you are unable to repay the loan, they are usually willing to give you a longer repayment term with a higher interest rate.
Of course, borrowing from a moneylender isn’t always rainbows and butterflies. There are also downsides to it. For example, you can expect the interest rates to be higher compared to banks. The high-interest rates mean that you will be paying more money.
This is why it’s important to take the time to find the best licensed moneylender with a good reputation and interest rates.
How To Know If You’re Getting A Good Deal From A Licensed Moneylender
The best way to know if you’re getting the best deal from a licensed moneylender is by computing the APR or Annual Percentage Rate. This is a measure of the total amount you will be paying for borrowing money. This is calculated by adding the interest rate and other fees to the original principal.
As a general rule of thumb, you can assume that a loan is considered as good if it has a low APR.
Tips To Remember When Taking Out A Loan
Make sure to remember these things if you plan on taking out a loan from a legal money lender.
Read The Fine Print
Know what you’re getting yourself into before you sign any binding contract. Always read through the terms and conditions of the loan to make sure that you fully understand them. Do not be afraid to clarify anything you don’t understand. Keep in mind that licensed moneylenders are required to explain the loan to you.
Only Borrow If You Are Unable To Meet Bank Requirements
If you are unable to meet bank requirements, taking a loan from an SG money lender can be a good alternative. But remember that you should only borrow money if you know that you will be able to repay it.
Don’t Be Afraid To Shop Around
There are many legal money lender Singapore options out there so be sure to compare their interest rates and terms before you sign with them. You can simply look up a licensed money lender near me to find out the ones located in your area.
Consider The Interest Rate
Moneylenders usually charge a high interest rate compared to banks. This is because they are taking on a higher risk.
Since 1 October 2015, the maximum licensed money lender Singapore interest rate is 4%, regardless of the borrower’s income. For each month your loan is repaid late, the maximum interest rate is still 4%.
The computation of the best money lender in Singapore must be based on the amount of principal that remains after deducting from the original principal the payments made by or on behalf of the borrowing which is appropriated to the principal. For example, if you take out a S$1,000 loan, and you have repaid S$400, only the remaining S$600 can be charged interest.
The same is true for amounts that are repaid late. These private money lenders cannot charge the amount that is outstanding but not due to be repaid. To illustrate, if you take out S$1,000 from quick money lenders and fail to pay the first instalment of S$200, the moneylender can only charge a late interest fee on the S$200, but not the remaining S$800 that is not due yet.
Assess The Repayment Terms
Moneylenders usually offer flexible repayment terms. This is because they are aware that their customers will not be able to pay back the loan immediately. However, you always want to consider the total amount you will need to pay in the long term.
Do Not Ignore Red Flags
Pay attention to warning signs. For example, if a licensed money lender Singapore does not want to put anything in writing and asks for an upfront payment, then this is a red flag and you should not work with them.
Think About Your Ability To Pay The Loan
Always think about whether you have the ability to pay back the loan. For example, is your monthly income enough to cover the interest rate? If not, you may end up drowning in debt.
Knowing Your Rights As A Moneylender’s Customer
Moneylenders need to follow certain rules when processing loans. If you believe that a moneylender has violated your rights, you can always file a report.
Credibility Of The Lender
Always consider the credibility of the lender before finalising your loan. Do not be afraid to ask about their money lender licence. Also ask your peers if they have tried borrowing from the same lender in the past. This way, you can have a better picture of what to expect.
What Happens If You Can’t Pay Your Loan Back?
Unlike “ah longs” which are bound to harass you and your family for defaulting on a loan, a licensed money lender may only send debt collectors your way if you are unable to pay your loan back in time. These professionals will pressure you to pay back your loan, and this is entirely legal.
For example, your phone may be bombarded with texts, they may contact your family members, employer, and peers.
If you can’t pay back your money lender Singapore loan, the best thing to do is to negotiate with them and ask them for advice on how you can pay them back at a lower interest rate.
If this isn’t an option, you can declare bankruptcy. Keep in mind that turning to the best licensed money lender Singapore every time you are short on money is not recommended. If this is the case, the best thing to do is to seek more sources of income.
List Of Licensed Moneylenders In Singapore
Looking for money lenders near me? As of 01 November 2023, here’s the list of licensed moneylenders in Singapore you can borrow from.
A Word From OMY
Banks are an amazing option whenever you need to borrow money thanks to their low-interest rates and flexible payment terms. But if you need money urgently or if you do not have access to a bank, licensed moneylenders are a good option.
However, make sure that you understand the terms of your loan before finalising it.