What Are The Interest Rates Moneylenders Can Charge?

When you have a pressing financial need, and you have no immediate way to address that need, you can always take a loan. Taking loans in Singapore is usually viewed as very easy or very difficult, but it all depends on what factors have forced you to take a loan, the lending institution you decide to borrow from, the terms of the contract of that loan, and the interests rates.

Moneylending is a legitimate part of Singapore’s consumer credit market, and licensed money lenders can provide loans to you if you need them. Rules have been put in place to monitor the activity of moneylenders, ensuring that they do not over charge customers on interest rates or applicable fees on loans.  Though moneylenders make up a small percentage of the credit market in Singapore, they have been known to bind customers in unfair contracts and charge high interest rates on loans.

The Singapore government has cracked down hard on moneylenders, and though the rules are less strict than they were some years ago, they are still in place to ensure that money lenders conduct fair business with their customers, and you, the person taking the loan, don’t get over charged on it.

Interest Rates of Moneylenders

First of all, you need to understand that there are two types of loans: secured loans and unsecured loans.

  • Secured loans are those which you get after putting up collateral, such as your car title, your house title, etc.
  • Unsecured loans are those that you get without putting up collateral but on the basis of your credit score. A good credit score will vouch for your ability to pay back the loan, while a bad credit score will discourage the moneylenders from approving your loan request.

Moneylenders in Singapore, as of 2015, have been mandated to calculate and share with you, the customer, the Effective Interest Rate of the loan you want to take before they give it to you. Effective Interest Rate (EIR) is computed by considering the total effect of frequent loan payments in a period of one year. The EIR is an interest system that best reflects the true cost of taking a loan in a one-year period.
With this in mind, for loans that had been contracted between June 2012 and September 2015,

  1. If you earn an annual salary of less than S$30,000, you can be charged a 13% EIR for secured loans
  2. If you earn an annual salary of less than S$30,000, you can be charged a 20% EIR for unsecured loans.
  3. As of October 2015, however, moneylenders are required to cap their interest rates at 4% a month, irrespective of the customers’ annual income, and irrespective of whether the loan is secured or unsecured.
  4. If you default in repaying your loan, the maximum interest rate that moneylenders can charge you is 4% a month.

The Interest you incur on late repayments is only applicable to the amount you haven’t paid. If you skipped paying for a month, the interest for late payments is charged on the month you skipped.

How Can I Tell Whether An Advertisement Is From A Licensed Moneylender Or An Unlicensed Moneylender?

Advertisements are a medium we use to let people know that we can fulfill certain needs and demands for them. With advertisements, you can tell what a particular company or organization can offer you and at what price. What you might not be able to tell from an advertisement is whether that company is legitimate.
Moneylending is a booming business in Singapore, and many people want to get in on the action. It can be difficult to separate the licensed moneylenders from the unlicensed money lenders, especially since even the licensed moneylenders tend to contravene the law as well. Before you can tell if you are seeing a licensed or an unlicensed advertisement, you need to be able to tell the difference between the two types of moneylenders.

 

What Is The Difference Between A Licensed And An Unlicensed Moneylender?

The easiest way to differentiate between the two types of moneylenders is to check the list of moneylenders at https://www.mlaw.gov.sg/content/rom. All licensed can be found on that site. However, it would be a good idea to avoid and report any moneylenders who:

  1. Exhibits threatening behavior towards you.
  2. Very rude and abusive
  3. Gives you a loan without following due processes, such as calling you on your cellphone and sending you an SMS to confirm your numbers and your loan application.
  4. Gives you a loan without collecting all the required documents from you, such as your income tax assessment documents.
  5. Keeps any of your personal identification documents such as your driver’s license, passport, etc.
  6. Gives you a loan without fully or clearly explaining the terms of the loan contract.
  7. Whether they are licensed or not, this is unprofessional and unlawful behavior and needs to be reported.

Moneylending Advertisements

No matter what advertisement you receive, you need to verify the information by contacting the persons behind that ad before doing business with them. Anyone can advertise one thing and do or say another.
As of 2011, advertising laws expressly state that licensed moneylenders can only advertise through three mediums:

  • Business or consumer directories – these can be print or online media
  • Websites owned by the licensed moneylender
  • Advertisements placed in, on, or around the moneylender’s place of business.

All other forms of advertisements are prohibited, including flyers, emails, messages, radio or TV ads, etc.
As such, if someone were to approach you as a moneylender with a flyer advertising their loan interest rates, they are either unlicensed or are shady licensed moneylenders. Do not respond to such advertisements, but do try to report them to the Registry, or report possible loan sharks to the police.

You should also know that it is not advisable to rely solely on the content of an advertisement from a moneylender. The advertisement is meant to make them look good, to draw you in and do business with them by taking a loan.

Once you see an ad from a moneylender, do your research. Ask around to find out more about them, get more clarification on their contract terms, and ensure that everything they do is above board before signing up with a moneylender.

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!