6 Things To Consider Before Getting Your First Personal Loan

Taking a loan in Singapore is a normal occurrence, depending on your reason for taking that loan. There are any number of reasons you might want to take a loan, such as for a wedding, for tuition, for a house, or for a vacation, but this loan also depends on some other factors that you have to take note of.
Should you take a loan from a bank? Should you take a loan from HDB? Should you go to the moneylenders? What are their interest rates?
These days it seems taking a loan in Singapore has more cons than it has pros, so it is necessary to think of the following before going to take a personal loan.

 

6 Things to Consider before Taking Any Loan

  • Think of the alternatives. In Singapore, you can take a personal loan from money lenders, from banks, or from other lending institutions. There is several financial assistance schemes set up by different government agencies that could also be of benefit to you. Make sure you consider all alternatives before settling on one source of loan.

 

  • Any contract you enter with any lending company is binding and legal. So, if you decide to take a loan from a moneylender, read the fine print. Moneylenders are a legal lending institution in Singapore, and their contracts with you are binding on both parties involved.

 

  • Be careful to borrow only what you can pay back. This means that you have to consider your monthly/annual income, are your budget, and decide how much you can pay back at the end of every month. In the contract you enter with the lender, there could be a stipulated amount to be paid at a specific time every month. Failure to meet these payments as when due will incur high interest, and add to your financial woes.

 

  • Consider the flexibility of the contract. Will it allow you to make late payments due to some unforeseen circumstances? A good personal loan contract will have options in it that will allow you to renegotiate your contract with the lender. These terms could include increasing the amount of time needed for each payment, reducing the interest rate on your loan, or even increasing the amount of your loan.

 

  • Read and understand the loan contract you are getting into before agreeing to it. By law, moneylenders in Singapore are required to explain the terms of the contract to you in very clear terms, and they are also to give you a copy of the contract. Take your time to go over this contract, noting the interest rates, the repayment plans, and other terms like the applicable fees.

 

  • Do not agree to any contractual terms that may give the lender the opportunity to lodge a caveat on the proceeds the sale of your property when you have been unable to repay your loan. Think carefully about this before agreeing to it, because it is either you have to pay back your loan before you can sell the property, or the lender will take their repayment from the proceeds of the sale, leaving you with very little money to have.

Knowing what you are getting yourself into is the first step in finance responsibility. Only borrow from legit financial institute and never from illegal loan sharks to save yourself the hassle and the pain!

3 Simple Steps To Identify A Licensed Singapore Money Lender

How to determine whether the money lender you are about to approach for that much-needed cash and when to borrow is very crucial so that you can avoid making a costly mistake. In the current financial environment, one moment you can be on solid ground financially and the next you are in a financial crisis. In Singapore, numerous legal money lenders can quickly help you fix your financial needs. However, how can you verify that a money lender is licensed to lend money?

The following are the three simple tell signs that will help you to determine whether the money lender you are about to approach is legalized by the government of Singapore to lend money or not.

Abusive Language

If you go to a licensed moneylender and he resorts to the use of abusive language or starts to threaten you, take caution with such lenders. If they do not behave professionally, either blackmailing you or giving empty promises that sound too good to be true, please do not proceed.

A licensed moneylender does behave professionally and will invite you to visit their office premises in a registered office address instead of meeting you elsewhere. The company is legitimate and registered with ACRA.

Copy Of Contract

Any licensed money lender will not proceed with the loan without giving you a photocopy of the contract of the loan that you are taking. He is supposed to explain to you all the terms and conditions of the loan for which you are applying. The terms and conditions are clearly stated in the contract and there is no fine print to be wary of.

The right procedure for getting a loan from a legal moneylender is that he gives you two copies of the contract and let you read it and once you have understood what you are getting into or if you have any questions you get clarification from him. After that, you will sign two copies of the contract, one for you and the other for your lender.

Once you have signed the dotted line of the contract, you will have a copy for yourself, and he will retain the other. Be careful if he asks you to sign on a blank or incomplete contract note because by so doing, he might be deceiving you.

Retain Your Personal ID

When you go to a licensed moneylender, you will be asked for your NRIC. These documents are required so as to ensure that you are a Singapore citizen or a permanent resident of Singapore. As the banks or licensed moneylenders are to serve Singaporeans or someone who is permanently based here or currently holds employment here.

Therefore, if you visit a licensed moneylender and he asks for your proof of identity or NRIC, he should not retain them. There is no need for a licensed moneylender should retain either your NRIC once you have proven that you are a citizen of Singapore.

These are the dead giveaway signs that the moneylender that you approach might not be a legitimate one. If you have doubts, you can always seek assistance from the Registry at telephone number: 1800-2255-529 or at e-mail address: OneMinLaw@mlaw.gov.sg.

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.