The Moneylenders Credit Schemes Act in Singapore protects borrowers from being overcharged with high interest rates. The law imposes a ceiling of 6 per cent per annum on all loans, but banks would likely not allow you to borrow an amount that will put you above your monthly income.
A licensed moneylender should register for this act if they are providing loans up to S$20,000. Registration ensures that lenders have public liability coverage for their customers if something goes wrong when the borrower defaults on his payments. It includes insurance coverage for legal fees, debt collection, and claims from third parties affected by said default.
In short, moneylending laws in Singapore are a good thing. It keeps unscrupulous moneylenders from charging high interest rates and scamming customers while allowing responsible ones to operate legally.
How Do Licensed Moneylenders Operate?
Most licensed moneylenders offer personal loans to borrowers for solvency. They are an ideal choice when you require cash to pay for your expenses. Such moneylending schemes usually come with collateral (usually the property of the borrower), but not always.
There are also fixed-term loans that you can repay within three years or more. It may be an attractive option, as one does not need to fork out monthly payments to service their loan unless they have to.
Fixed-term loans are the best option as you do not need to make monthly payments to service your loan. Moneylenders provide different amounts of money for personal loan categories.
You can borrow between $3,000 and $35,000 from a licensed moneylender (and sometimes beyond that, too, if you’re a large company). The lenders often don’t worry much about your credit score.
How to Choose a Licensed Moneylender?
Picking a reputed and licensed moneylender is as essential as picking a good bank. The rates are lower at licensed moneylenders than unlicensed ones, but the former is significantly more trustworthy than the latter.
Unlicensed moneylenders may offer great interest rates, but they are always unregulated. While you may be able to negotiate low-interest rates on your loan, it is not advisable to take loans from such lenders.
They do not abide by specific rules like registered moneylenders. You might end up having your salary attached or even sued (and jailed) for defaulting on repayment.
It is necessary to note that not all registered moneylenders charge high-interest rates. You should also check out other options like banks or finance companies before borrowing from a private moneylender.
What Can Licensed Moneylenders Provide?
The best part about going to a registered, licensed moneylender is that you get various kinds of loans in a hassle-free manner.
Pre-approved Loan Offers
Registered moneylenders have agreements with banks and finance companies. They can pre-approve your loan from them without having to go through credit checks.
Loans of up to S$35,000
Licensed private financiers offer loans of very high amounts compared to unlicensed ones. Hence, if you need more than $3,000 for your solvency problem, approaching a licensed moneylender will be a viable solution.
No Collateral Required
Some licensed moneylenders don’t require you to pledge your property as a form of security for your loan, which means you won’t lose what you use as collateral if you default.
Moneylenders can give out loans with flexible repayment terms, making it easier for those blacklisted from banks and finance companies to access capital legally.
Why Are Licensed Moneylenders Better Than Banks?
You may now know how licensed moneylenders operate and what they can provide. You need to face the following question: Why take a personal loan from a moneylender when I have bank accounts?
Firstly, going to a registered moneylender is a more straightforward process because the borrower has already gone through pre-approval thanks to his flexible repayment schedule.
Secondly, those with a bad credit score might not get a loan from the bank, but it won’t be an issue for them when borrowing from licensed moneylenders.
Thirdly, you will not be paying through your nose in interest rates because the terms offered are far more competitive than what banks can provide. Finally (and most importantly), many people do not know that banks charge exorbitant NS fees when their loans go into default.
Licensed moneylenders are a recourse for those who cannot always depend on banks to provide capital. You can get higher amounts than what you would from unlicensed moneylenders while enjoying the security of knowing that your debt contract is protected by law if you pick a registered lender.