New Money Lending Guidelines: Will It Cost You More On Loans?

The moneylending scene in Singapore has been fraught with cases of fraud and cheating, with moneylenders charging unsuspecting customers heavy fees and interest rates on late loan repayments, or due to some obscure clause in the loan contract that the borrower was unaware of.
The Ministry of Law has made several rules and regulations to monitor the activities of Singapore’s moneylenders, but these always needed to enforced hard in some way or the other before they could be effective. As such, the Ministry creates new guidelines to stop exorbitant interest rates and fees charged on loans by moneylenders.

As of October 2015, these rules have been applicable to all licensed moneylenders in Singapore, but it would seem that many people still aren’t aware of this.

 

Who Are the Guidelines Applicable to?

  1. These guidelines are made to help you if you take unsecured personal loans
  2. Individuals who were granted loan before the guidelines came into effect are not covered by these guidelines. However, they can get revised interest rates on their loans (for those who borrowed between June and September of 2015)
  3. Businesses that were registered two years (or more) before the new guidelines came into effect (and have been granted loans, secured and unsecured), are not covered by the new guidelines.

 

What Are The New Guidelines?

  • For those of you borrowing money who earn an annual income of less than S$30,000, your interest rate is calculated using the Normal Interest Rate, which charges you a maximum 4% interest rate per month. Before the guiltless were enforced, you would have been charged anywhere between 20% – 40% interest, using the Effective Interest Rate to calculate your interest.
  • Before the guidelines were put in place, interest was calculated on a compound basis. Now, licensed moneylenders are required to calculate interest on a reducing balance basis: moneylenders are to calculate an interest of 4% or less on the remaining balance of every monthly repayment.
  • After the loan has been granted, the moneylender can only charge you a fee of not more than 10% of the principal loan amount as an administrative fee.
  • Moneylenders cannot charge you more than S$60 per month every time you make late repayments on your loan.
  • The interest rate on late repayments is capped at 4% per month, whether it is a secured or unsecured loan. This interest can only be charged to the amount that wasn’t paid, or was paid late: it cannot be charged to payments that you have made.
  • The total cost of borrowing, which includes administrative fees, interest rate charges, and late repayment fees, are not to exceed your total principal loan amount.

 

Will These Guidelines Cost You More On Loans?

No, they will not. These new guidelines are actually in place to make sure you are charged less on taking loans from moneylenders. By curbing the high interest rates and fees that moneylenders would normally charge, taking loans from them now costs you much less than it did before.

What To Do If You Meet An Errant Licensed Money Lender?

Did you know that the government has provision for you to file a case against an errant licensed moneylender? The Registrar of Moneylenders, a section of the Singapore’s Ministry of Justice, regulates the business of moneylending in our country.

The registry of money lenders published some regulations under which you can file a case against a moneylender. The law allows you to report a complaint in case a moneylender does any of the following:

  • Unreasonable lending practices
  • Unlawful money collection practices
  • Unjust lending contracts
  • If he breaks any of the terms and conditions that regulate money lending
  • Gives you false information e.g. that you can only be given a weekly loan
  • If the money lender offers you a short-term loan of less than a month

You can report any of these incidents to the police who upon receiving your complaint will lounge an investigation against the licensed moneylender that you have reported.

If you want to file a complaint against a licensed moneylender, you can do so via any of the following platforms:

  • *Report to the National Crime Prevention Council’s hotline (NCPC)
  • *File a report with the small claims tribunal of Singapore
  • If your complaint is of a civil nature, you can report directly to the court’s consumer protection act (fair trading) section.
  • *You can reach the Singaporean registrar moneylenders via phone on +65 6325 1416 or 1800 225 5529. You can also reach them an email at ipto-romp@ipto.gov.sg or ipto-enquiry@ipes.mlaw.gov.sg or OneMinLaw@mlaw.gov.sg.

In Case Of A Complaint

The registrar of moneylenders is endowed with powers to handle any complaint that is registered by any money borrower.

When you file a case, your case will be treated with high confidentiality to ensure that your personal information is not shared with the moneylender that you have reported without your consent.

CASE

There is a non-governmental organization that is committed to ensuring that your rights as a money borrower are not violated. One such organization is the Consumer Association of Singapore (CASE).

If you have any complaint, you can contact CASE, and you can get the assistance that you get from any of the government’s department.

Terms And Conditions Of The Loan

According to the registrar of moneylenders Singapore under the moneylenders Act and rules, it is your right for the moneylender to inform you accordingly about the terms and conditions of the loan you are applying for. The information that he gives you should include information about how he will calculate the interest that you are to pay and when you are to pay back the loan.

Conclusion

Before you approach any moneylender all over the country, ensure that you have read and understood this helpful info as a borrower and what you should do in case you fall into the hands of an errant moneylender. Make sure that you only approach the legitimate moneylenders and do your comparisons before making your choice. Watch out for our articles for more tips on moneylending.

What Should I Do After Being Granted A Loan?

after getting loan

Getting a loan in Singapore is a pretty straightforward process, if you go through the right channels. Lending institutions include banks and moneylenders, amongst others. Moneylenders make up a small percentage of the official institutions authorized to grant loans, but moneylending is a thriving business, and you can go and borrow money from them. First, you have to find out if they are licensed from the list of licensed Singapore moneylenders.
Next, you have to ensure that their business is transparent and above board, because even the licensed moneylenders can be a bit shady. They should explain the terms of the loan contract clearly to you, and even give you a copy of the contract. They are to your contact details and follow up on them by calling you or sending you email as to confirm that you are who you say you are, and confirm your request for a loan. If they try anything unethical, like keeping hold of your ID card or giving you a blank form to fill in place of the contract, report them immediately to the authorities.

 

Before you are granted a loan, however, you need to make sure that you are aware of all the interest rates and fees that you will be charged when you borrow from moneylenders.

 

After you have been granted the loan, you still have to take steps to ensure that you de not cheated on you loan.

  1. As you collect your loan amount, make sure that the moneylender gives you the right amount if principal for that loan. By law, moneylenders are expected to charge a fee of not more than 10% of the principle loan when the loan has been granted. Make sure that they have deducted exactly 10%, and nothing more.
  2. Make sure that you pay back the monthly loan installments on time. Doing this will steer you away from late payment fees and interests charged on late payments. By law, moneylenders are allowed to charge you a fee of S$60 (and nothing more) for each month that your payments are late, and a 4% interest rate on each month that your payments are late.
  3. Every time you pay back a loan, your moneylender has to issue you a receipt, duly dated and signed. This applies to all fees that you pay in cash to the moneylender. When you get the receipt, make sure that everything is in order, such as the names, amount, date, and signature.
  4. At least once every six months that you have taken this loan and are repaying it, you should receive a statement of account for all your loans. These too you should check for any irregularities and make sure that everything is correct.
  5. Keep all receipts and statements of account as evidence of payment.

Loans in Singapore are very flexible, meaning that you can use them to do any number of things. You can pay for your tuition, get a car title, make a payment on a house/apartment, or even use it to take a vacation with your family.