We’ve all been there, moments in our lives where the amount in our pockets versus our need for cash don’t see eye-to-eye. Whether it’s a dire emergency or a financial opportunity with a small window, sometimes our finances aren’t quite liquid, or our savings just fall a little too short.
Luckily you have a few options at your fingertips for getting the money you need quickly, like selling one of your possessions or borrowing money from friends and/or family.
But if all your stuff is just too important to sell, and you aren’t into the idea of getting a loan from someone you know, you have the option to go for a licensed moneylender. But before you entertain the idea of borrowing from licensed moneylenders, there’s a particular law you have to keep in mind.
The Moneylenders Act is a law that regulates licensed moneylenders. In a nutshell, it says that the only people who can pursue the business of moneylending are those that are:
- Authorized by a licence
- An excluded moneylender
- An exempted moneylender.
An excluded moneylender is permitted to, or not prohibited from, lending money under any other written law. For example, a pawnbroker is licensed under the Pawnbrokers Act.
An exempted moneylender has specifically been granted exemption from holding a moneylender’s licence based on the government’s discretion and subject to the approval of the exemption application, as provided under the law.
Being aware of this law helps as it was written to protect the borrower should problems arise that pertains to the loan and let a borrower be aware of the possibility of fraudulence.
To save you the trouble of deciding whether a particular moneylender fits within the aforementioned law, the Ministry of Law has compiled a list of licensed moneylenders in Singapore, allowing you to easily verify licensed moneylenders.
The registry of moneylenders can be found here.
Also, licensed moneylenders are not allowed to solicit loans through mobile communication such as text messages or phone calls. Keep in mind that moneylenders that approach you in this manner are likely unlicensed.
All licensed moneylenders are allowed to advertise their services only through:
- Business or consumer directories in print and online media;
- Internet websites belonging to the licensee; and
- Advertisements placed within or on the exterior (e.g., side of the wall, door shutter, gate, or window) of the approved place of business.
You’ll be happy to know that there is no loan amount limit for secured loans. A secured loan is a loan in which the borrower must issue something as collateral, which shall be ceased should the borrower be unable to repay the loan.
Unsecured loans are a different story. When applying for a loan, there is a maximum loan cap that must be kept in mind. The figures are as follows:
|Borrower Annual Income||For permanent residents and Singapore citizens||For foreigners residing in Singapore|
|< $10,000||$3,000 Max||$500 Max|
|$10,000 – $19,999||$3,000 Max|
|20,000 & above||Up to 6 times the borrower’s monthly income|
How much should the interest rate, fees, and charges be when borrowing money?
Licensed moneylenders will give you all this information before granting any loan, in the simplest terms possible. A moneylender is required by law to give written notice to the loan applicant with the terms of the loan, as well as:
- The nominal interest rate
- Late interest fees
- Other permitted fees to be charged
- Installment payment details in the case of a term loan, wherein debt is to be repaid after a particular period of time.
Aside from that, all moneylenders are also required to give a loan applicant a cautionary statement regarding the abuse by some moneylenders and where to go to file a complaint should the said abuse occur on the part of the lender.
The maximum interest rate moneylenders can charge is 4% per month for the value of the borrowed money, also known as nominal interest, as well as for each month the loan is paid late or late interest.
The way to compute the interest is based on the principal’s remaining monthly outstanding balance after deducting payments. Meaning if you have managed to repay $15,000 from your $30,000 loan, then your interest will be $600 from the 4% of the remaining $15,000.
Meanwhile, late interest is computed differently and is based on the overdue amount according to your payment terms. Meaning that if you are repaying your loan in monthly installments of $4,000, your late interest charge will amount to $160 in the case that you were unable to pay $4,000 in time. The amount comes from 4% of the overdue amount of $4,000.
Other fees that may be charged are:
- Loan approval fees which amount up to 10% of the loan amount
- Late payment fees of up to $60 per month, whether for repayment of the loan principal or interest
- Other legal costs incurred by the moneylender for successful recovery of the loan
However, it’s important to note that the total amount charged by a moneylender on any personal loan, which includes interest, late interest, and upfront administrative and late fees, cannot be more than the loan principal’s amount.
This means that licensed moneylenders cannot impose $20,000 interest, late interest, and administrative and monthly late fees on a $20,000 loan.
A borrower must submit a complete application form to the moneylender. The information required includes:
- Full name;
- Date of birth;
- Personal identification number;
- Residential address;
- Email address (if any);
- Contact number; and
- Loan amount the borrower is applying for.
Some moneylenders and loan contracts call for the borrower to have a surety. A surety is a person or more who can shoulder the loan, appropriate charges, and interests. If the loan has a surety, their particulars must also be submitted.
A loan application usually requires supporting documents to be submitted to the licensed moneylender before a loan contract. These may include:
- A document that serves as proof of the borrower’s total income for the 3 months before their loan application
- Income tax statements
- Copy of utility bills
Foreigners that are staying in the country are allowed to get a loan from Singaporean moneylenders. They, however, will be required to submit additional supporting documents in addition to the aforementioned documents. These can include:
- Their passport
- Original valid employment pass from employment in Singapore
- Bank statements
- A copy of their tenancy agreement
- Appointment letters from the borrower’s employer in Singapore
Moneylenders are expected to treat your personal information with discretion and with compliance with data privacy laws.
Besides securing required documents, another important thing to consider before a loan application is your financial situation. You must always determine your ability to comply with your contractual obligations before applying for loans from licensed moneylenders.
You must fulfill the terms and conditions of the loan agreement, so always read the fine print of the contract for the loan–getting a loan from a moneylender is legally binding.
Part of this agreement includes the loan repayment and other interest charges or fees that apply to the loan.
That you should always take into account your income, expenses, and other financial obligations to make sure that you are well within the means to safely repay the loan and comply with its terms.
Borrow only what you know you can repay; otherwise, you may find yourself in a worse financial situation than before approaching a moneylender.
Depending on the terms of the contract, failure to abide by the loan terms may result in late interest charges. This includes being unable to pay the loan at the given time or overdue on your monthly installments.
Suppose late interest charges are imposed as a penalty for not being able to abide by contractual terms. In that case, your debt will likely grow and keep growing the longer you are unable to repay your loan from a moneylender.
Negotiate with the lender
However, there are ways to handle a situation where you are unable to come up with the money to repay your loan at the decided time. Licensed moneylenders can sometimes be open to negotiation, and in some cases, you can ask the moneylender for an extension or refinancing plans. This may, however, come with additional fees.
Remember that the best time to confer with your moneylender about this is before your application or before the next installment payment of a loan to avoid incurring late payment charges.
File for bankruptcy
Moneylenders are also well within their legal right to sue the borrower if the borrower is persistently unable to make make a loan repayment, especially when the loan has been secured by an asset.
However, a person who cannot pay off debts that total up to at least $15,000 can declare bankruptcy. This halts the growth of debt by freezing the accumulation of interest charges and keeps moneylenders from continuing with a lawsuit until the borrower has been discharged from bankruptcy.
The Debt Repayment Scheme (DRS) is also a viable alternative to bankruptcy if your total debt does not exceed $100,000, in which case moneylenders of unsecured loans are prevented from taking any legal action against the borrower unless given leave by the court.
With the DRS, you will be assisted by an official assignee from the Ministry of Law’s Insolvency Office to formulate a manageable schedule for repaying your accrued debts.
If you’ve ever seen films with loan sharks, you might have an idea of what is considered malpractices on the side of a moneylender.
Making threats and harassing a borrower to collect debts are considered unfair practices and will be subject to regulation by the Registry of Moneylenders, in which case, you can contact the Registry to lodge a formal complaint at 1800-2255-529.
You may also take to the internet when expressing your concerns and submit a complaint online through a feedback form found here. Simply (select “Registry of Moneylenders” and “Feedback & Complaints” as the main and sub-categories, respectively).
Your complaint should include information about the moneylender, such as the business name, license details, and contact numbers. To facilitate the investigation, you may be asked for an interview with the handling officers so that you can provide the necessary details of the loan transaction.
You may also make a police report as the police force takes harassment matters seriously.
We believe that moneylenders should follow a strict set of values to provide exemplary service to you, the client.
A trustworthy moneylender should have the following qualities:
A moneylender must be with honesty and integrity, without compromise of the truth. They must strive to provide a service that is without fraudulence and abuse.
Moneylenders must recognize the importance of their work and how it can influence their clientele and staff’s lives; as such should always function with a recognition of their accountability.
Moneylenders must always strive to provide world-class service and maintaining an efficient approach to the solutions they provide.
Moneylending isn’t as bad as movies make it out to be, but some businesses resort to unlawful methods. It’s important to be mindful of laws that can affect and directly protect you from these malpractices to save you and your assets from being in less than ideal situations.
It’s also important to hire a tried, tested, and trusted moneylending business so you can be sure you’re getting treated the right way while getting the best service possible. We at A1 Credit strive to provide the best solutions to your financial situation.
So if you’re looking for the right loan from a service you can trust, reach out to us at A1 Credit SG Pte. Ltd.