What Should You Know About Moneylender Rules?
You could turn to a licensed money lender if you’re short on funds and require quick cash to address a personal emergency.
Singapore’s Moneylenders Act governs licensed money lenders. According to the Act, legal money lenders must be licensed to render financial services to the public.
As a result, a Singapore licensed money lender must adhere to the moneylender rules, as well as the requirements and guidelines outlined in the Act. If this is broken, the money lender may face legal repercussions.
It is crucial to confirm that the money lender you select is licensed and following the law. Read this article to find out about all the crucial aspects of moneylending, including moneylender rules.
How To Know If A Money Lender Is Licensed
Before taking out a loan from a money lender, it’s crucial to distinguish between authorised and unlicensed lenders.
Here’s how to choose a licensed money lender in Singapore.
Verify If The Licensed Lender Is Listed On MinLaw’s Registry
Referring to the list of licensed money lenders in Singapore is the simplest way to determine whether a money lender is authorised.
The Registry of Moneylenders updates its list of authorised money lenders in Singapore each month. This list is available online.
So when applying for a personal loan in Singapore, you can avoid the money lenders found on the blacklist.
Take Note Of Advertisements Made By The Licensed Money Lender
If a money lender in Singapore offers you loans via phone calls or messages, you’re most likely dealing with an unauthorised money lender.
According to moneylender rules, authorised money lenders can only promote their services through the following methods, according to MinLaw’s website:
- Print or online directories for consumers or businesses
- Website owned by the authorised money lender
- Advertisements posted on the inside and outside of their business premises
If in doubt, contact the money lender directly for clarification rather than just relying on the advertisement.
Accredited Money Lenders Will Always Require You To Sign A Contract
Moneylender rules mandate that licensed money lenders provide contracts for their customers to sign. The contract should contain the following details:
- Costs for late payments
- Rate of interest
- Repayment time frame
Do not accept an offer if someone offers to lend you money without a contract or requests that you sign an unfinished or blank document.
How Much Can You Borrow?
Even with the best personal loan rates, it will be difficult for you to get a financial institution that will offer you an unsecured loan if your yearly income is less than $20,000. On the other hand, a licensed money lender is legally permitted to provide you with up to $3,000.
A licensed money lender may grant you a loan for up to six months’ pay if your annual income exceeds $20,000. Ultimately, it comes down to how much it believes in your ability to repay the loan.
That makes money lenders perfect for paying for last-minute, small costs such as going to the doctor, getting your car repaired, or buying a cheap flight.
Requirements And Considerations Before Taking A Loan From Money Lenders
Before you take out any loan, consider:
- How much you need
- How long do you have to pay it back
- How much money you make each month
Before applying for a loan, you must consider each aspect to make sure you can repay the loan comfortably. You must confirm the licensed money lender interest rate charged and whether it adheres to the moneylender rules.
More Than Just Solid Credit Is Required
When determining whether you are qualified for a loan, money lenders consider more factors than just your credit score. Other considerations include the following:
- The value of your collateral
- The length of time you’ve worked in Singapore
- The number of your dependants
- Your income and ability to repay the loan
With a very low income, obtaining loan approval could be challenging, even with good credit.
Take Other Options Into Account
Examine other options before going to a money lender, such as the financial aid programmes provided by different government agencies in Singapore. You can reach out to the organisations to learn more about their programmes.
Consider The Fees And Interest
Always borrow what you can afford to pay back, keeping interest and additional fees in mind. To achieve that, borrow just enough money to cover a month’s costs. Setting up a strategy will assist you in achieving your objective of avoiding debt.
Find A Reputable, Regulated Money Lender
Choose a qualified, licensed money lender that is aware of your financial condition and can offer reasonable loan options.
To begin, determine which approved financial institutions in Singapore grant moneylending licenses. Second, confirm that they are subject to Singapore’s regulations such as the moneylender rules.
Check whether a money lender is registered with the Registry of Moneylenders if you’re unsure whether it has a license.
Money Lender Interest Rates And Fees
In Singapore, legal money lenders are only permitted to impose a maximum interest rate of 4% per month for the principal amount borrowed, and for each month the payment is late.
The loan’s interest rate is calculated using the monthly outstanding amount of the principal that remains after all payments have been completed. On the other end, late interest is calculated depending on the amount owed.
The following charges and fees are acceptable for money lenders to impose:
- A fee of up to 10% of the loan’s principal when a loan is approved
- Each month when payments are late, there is a fee of no more than $60 dollars
These expenses, which could include late fees, advance administrative charges, arrears, and interest, are limited to the principal amount of the loan.
What Should Happen Before And After Loan Approval
Before Loan Approval
Begin gathering the documentation you’ll need to submit a loan application such as:
- Proof of employment and income
- Credit score
- CPF statements
- Proof of residence
Foreigners should prepare:
- A lease
- A letter of employment
- Work pass or permit
- Bank records
Licensed money lenders typically approve unsecured loans such as personal loans, based on your income rather than your credit history. They typically need payslips to assess your capacity to repay the loan.
An excellent legal money lender in Singapore would explain everything clearly and patiently. It should clarify the following with you:
- Interest charged late
- Interest rate
- Repayment sum
- Additional fees
After Loan Approval
Once your lender has approved your loan and given you the principal amount, double-check that the right amount has been deducted for the application fee.
Keep These Documents
In addition, have the following paperwork on hand for reference:
- A duplicate of the loan agreement
- An account statement and a list of all your debts
- Receipts for each loan payment that you have made
- Duplicates of all invoices, receipts, and other related documents
Make Sure You Pay Each Installment By The Deadline
Be on time with your payments. In addition to your interest accruing, paying after the due date will result in late fees and interest charges. A maximum of 4% late interest is charged on late repayments.
What If You Cannot Pay The Loan?
When you’re unable to pay a money lender in Singapore, take note of the following:
Ask For An Extension
The best course of action is to contact your money lender and request for an extension.
You might think about declaring bankruptcy if your debt grows significantly to more than $15,000 and you realise that, despite restructuring your loan payments, you cannot repay the loan.
When you declare bankruptcy, interest doesn’t continue to accrue. It also stops lenders from bringing any legal action against you. But it should be a last resort as it severely impacts your credit score.
Ensure You Are Not Mistreated
Accredited money lenders in Singapore typically employ debt collection companies to recover debts when borrowers fall behind on repayments.
Although debt collection is not governed by legislation in Singapore, authorised money lenders and debt collectors are urged to follow the Credit Collection Association of Singapore’s code of ethics.
To collect debts, collection agencies are prohibited from employing intimidation, assault, or harassment. If you find yourself in such a circumstance:
- Contact the police
- Make a formal complaint to the Credit Collection Association of Singapore
- File a formal complaint with the Registry of Money Lenders run by MinLaw
- Consult with social assistance organisations to determine the best course of action
Your Money Lender Must Adhere To The Moneylender Rules
A legal obligation is created when a loan is obtained. The moneylender rules in the Moneylenders Act in Singapore governs the duties and responsibilities of borrowers and lenders.
Given this, you must consider your options carefully before submitting a loan application.
Because you will be entering an important deal, you must select the most trustworthy money lender. The most crucial rule is that you should only work with licensed money lenders.
If you are ready to apply for a loan, BST Credit is a one-stop loan platform with a valid moneylending license in Singapore.