The first step to getting a loan from a licensed money lender is to know if you should go for an unsecured or secured loan.
Unsecured loans are limited by how much money the borrower earns every month. But secured loans have no such restriction.
This means that if you have the necessary collateral, you can borrow up to the maximum amount the lending institution is ready to provide.
But no matter whether you choose a secured or unsecured loan, you must know how to settle a licensed money lender in the event you run into difficulty when repaying your loan.
What Are Licensed Money Lenders?
Licensed money lenders are businesses that are legally allowed to give loans to individuals and companies.
They observe the rules and regulations of the Moneylenders Act and are registered with the Registry of Moneylenders.
Most legal money lenders can only give smaller loans.
Typically, they are small enterprises that do not have the financial resources to withstand a loss of millions of dollars in the event that a borrower fails to repay a loan.
Income-based repayment terms limit the loan amounts a licensed money lender can give. Banks often provide the best rates and terms for large personal loans that are above $10,000.
What Types Of Loans Can You Borrow From A Licensed Money Lender?
Licensed money lenders offer the following types of unsecured loans:
- Personal loans
- Business loans
- Renovation loans
- Medical loans
- Wedding loans
- Debt consolidation loans
For a secured loan, a lender places a lien on the borrower’s property in the case of non-payment.
It is essential to remember that the quantity of money you may borrow from authorised lenders in Singapore is directly proportional to the amount of money you bring in each month.
Loans of up to $3,000 are available to Singapore residents whose yearly income is $10,000 or less. If you make more than $20,000 a year, you may be able to get a loan for up to six times what you usually get paid.
Check with the lender of your choice and see how much money you can potentially borrow before making any decisions.
Pros Of Borrowing From A Licensed Money Lender
Here are some benefits of obtaining financial assistance from a legal money lender in Singapore.
After signing the loan contract and completing the necessary verification procedures, most licensed money lenders will immediately transfer the funds you need.
Sometimes, the loan is obtainable as quickly as half an hour.
Quick Application Process
You can submit an application for a loan at the location of your chosen lender’s office or on the lender’s website.
The application process is often fairly quick and simple.
Most legitimate loan providers make the process fairly straightforward without the need for much paperwork.
However, before you sign a loan contract, a licensed money lender is required by law to ensure that you fully understand the terms and circumstances of the loan.
The lender must give an explanation of the terms and conditions in a language you can understand.
Loan Amount That Is Determined By Your Paycheck
Based on your monthly income, licensed money lenders will provide you with the loan you need. Thanks to this safeguard, you are unlikely to rack up excessive debt.
Cons Of Borrowing From A Licensed Money Lender
Here are some disadvantages of getting a loan from a licensed money lender.
High Interest Rates
There is a cap of 4% per month on the interest rate that licensed lenders are permitted to charge borrowers.
This works out to more than 40% on an annual basis. Banks and other large financial institutions charge you 15% to 20% annually in interest.
Less Time Required for Repayment
The loan tenure that a licensed lender gives is typically between one and three months, to a year.
This implies that the monthly payment will be more than it would be for a loan with a more extended payback period.
Fees And Penalties In Case Of Overdue Payment
If you do not make your payments on time, the lender has the right to charge you a 4% fee on top of any outstanding balances.
It can also charge you an additional $100 legal fee, in addition to a maximum monthly penalty of $60 for each month you are late in making payment.
Plus, they can also legally charge a 4% interest rate on all late payments.
Your Credit Score May Suffer
Your credit score will be impacted if you are late in making payments on the loan that you took out.
Even if most licensed lenders do not do rigorous credit checks, they would be unlikely to provide credit to a borrower with a poor credit history.
The Amount That You Can Borrow Is Limited
Your monthly income will determine the maximum loan amount that regulated lenders may provide. If your salary is modest, you won’t be able to get much funds.
Danger Of Being Dependent On Debt
Constant financial stress may make it difficult to establish the self-control necessary to pay off the debt over time, leading to a cycle of increasing debt and decreasing self-sufficiency.
How Are You Protected By The Law When Borrowing From A Licensed Money Lender?
When you borrow money from a licensed money lender, the law provides certain protections you should be aware of:
- The borrower’s monthly income is a major consideration in the loan amount that a licensed money lender can offer.
- A lender can only loan you $3,000 if you earn less than $10,000 annually. This is to prevent excessive debt.
- Licensed loan service providers are legally obligated to detail the loan’s terms and conditions to the borrower.
- It is the responsibility of a licensed money lender to inform the borrower of the loan’s terms and conditions before issuing the loan.
- A licensed money lender should inform its borrowers of important details about their loans, such as interest rates, repayment schedules, and deadlines.
- It is against the law for the lender to charge an interest rate higher than 4% per month.
- The lender can impose a 4% penalty on any outstanding balances if the borrower does not pay back the money. It is unacceptable for late costs to exceed $60.
Take note of the following so you know how to settle a licensed money lender if you can’t repay your debt on time:
- It is against the law for licensed money lenders to constantly harass a borrower with phone calls, emails, or text messages about the loans they offer. The only advertising venues available to the lender are consumer directories, its website, and the physical location of the lender’s office.
- While recovering its money, the lender may not humiliate, threaten, or harass the borrower in any way.
What If You Are Unable To Pay Back The Loan?
If you cannot make your monthly loan payments, talk to your lender immediately. Here are some options.
Consider A Debt Consolidation Plan
This will allow you to restructure your budget and pay off the money lender in a more manageable manner.
If you feel that the additional time will not be sufficient, you should renegotiate the terms of the debt with the creditor.
By restructuring the debt, you can pay back the loan in more manageable amounts spaced out over a more extended period.
If you have many debts, you might want to consider consolidating them into one. By doing this, you’ll only have to keep track of one payment schedule, making paying off your debts much simpler.
Apply For A Debt Repayment Programme
The government will assist you in combining all your debts into a single payment via the Debt Repayment Programme, which it will manage.
You may take as long as five years to pay off the loan. The amount you pay back every month is proportionate to your monthly income.
You will be required to verify your eligibility before you may participate in the programme.
Seek Out Credit Counselling Services
Participating in credit counselling might help you better understand how to handle your financial obligations.
Credit counselling educates debtors on how to manage debt and may assist in consolidating existing debt.
File For Bankruptcy
You may file for bankruptcy if you have more than $15,000 in debt and cannot repay it.
When you file for bankruptcy, any interest on the debt will immediately cease. The creditor will not initiate legal action to collect the loan.
Even if it’s not the most acceptable choice, it will let you start afresh. However, this will severely impact your credit score and should only be considered as a last resort.
What Happens If You Default On The Loan?
Defaulting on the loan will negatively impact your credit score.
Because you agreed to the loan’s terms and signed the contract, the lender has the right to pursue legal action or use debt collectors to get their money back.
In the case of a secured loan, you stand to lose whatever asset was put up as collateral.
So always make sure you can afford to repay the loan according to the terms you agreed upon with the lender.
How Credit Counselling Singapore Can Help
Credit Counselling Singapore (CCS), a non-governmental organisation, assists borrowers in understanding their current financial situation and selecting the appropriate course of action.
You can reorganise your loan repayments with the assistance of a CCS counsellor, who will work with you on this process.
What’s more, you can solve the issue of your excessive debt by seeking counselling and making it easier for you to repay your obligations.
Because of this, you may get to spread out your loan payments over a longer time frame.
There Are Many Ways To Settle A Licensed Money Lender
Here are some more options that might assist you in paying off your debt.
- You may ask close friends and family members for a no-interest loan to help you pay off your debt. By taking these steps, you may prevent the accumulation of interest on the loan.
- You can also sell any properties or assets to pay off the outstanding debt.
- The best course of action is to get in touch with your certified money lender as soon as you realise you won’t be able to pay back your loan.
- Describe your current financial predicament and work together to establish a mutually agreeable payment schedule.
- Don’t be shy about reaching out and asking for assistance – it’s to the lender’s advantage to cooperate with you so you can repay your debt.
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