The process of selecting a licensed moneylender in Singapore is essential to avoid any regrets in the future. The business of money lending is controlled by the rules and regulations of the Ministry of Law in Singapore. Licensed moneylenders are legal and safe, giving individuals an opportunity to borrow money for their needs. Most people prefer using these lenders since their operations are transparent and trustworthy. It is critical to understand how these lenders function in order to make informed judgements.
Types of Loans Offered by Licensed Money Lenders
Personal loans
Personal loans can be used for a variety of purposes, including paying medical bills, for college, and for taking a vacation. They provide immediate financial assistance. They are frequently arranged as unsecured loans, which means you do not have to put up any assets as collateral. This makes them easily accessible for many borrowers.
Business loans
Presently, business loans have become crucial for SMEs. They help businesses grow, run more efficiently, and solve financial challenges. A business loan may be the solution, regardless of whether the business is new or if the owner desires to expand the existing one.
Payday loans
Payday loans are designed for short-term use. They assist with meeting expenses till the next salary day. Most families find these loans useful for paying bills, car payments, and other essential expenditures. Payday loans are usually small and must be repaid within a month, typically on salary day.
Renovation loans
Renovating a home can be the most demanding project that any homeowner will ever have to face. Renovation loans offer individuals with the finances they need to improve their living conditions. These loans include charges for improvements, such as material, craftsmanship, and interior design.
Differences Between Secured and Unsecured Loans
Secured loans
Secured loans require a collateral. This can be a house, a car or other property. In worst case where you have to default a payment, the lender gains the right to sell the property to recover the amount borrowed. Secured loans have comparatively lower interest rates since they are less risky for the financier. They are suitable for people who can offer security and desire for low interest rates.
Unsecured loans
Unsecured loans do not require the pledging of an asset in case the borrower defaults on payment. Since they have a relatively higher risk profile than secured loans, they attract higher interest rates. These loans are easier to secure if you do not own any assets you can mortgage. They are suited for persons who are required to get money instantly without using property as collateral. However, with high interest rates, the general cost of reimbursement would be high as well.
Comparison of Borrowing from Banks versus Licensed Money Lenders
When deciding whether to borrow from a bank or a licenced money lender, there are various factors to consider. This thorough study will help you find the best personal loan in Singapore for your needs:
| Comparison point | Banks | Licensed money lenders |
| Internal policy | Strict credit requirements | Flexible, no credit discrimination |
| Maximum loan amount | Up to 10 times monthly income | Up to 6 times of your monthly income |
| Repayment period | Up to 7 years | Up to 24 months (typically 12 months) |
| Loan approval time | Several weeks | Instant |
| Interest rates | 3.5% to 6.5% yearly | 1% to 4% monthly |
| Admin fees | 6.5% to 20% of principal | Up to 10% of principal |
Loan Amounts and Interest Rates
Understanding the maximum loan amounts and interest rates can help you plan your finances better. Licensed money lenders in Singapore offer different loan amounts based on your income and nationality.
Loan limits based on income and nationality
Your income level and nationality influence the maximum amount you can borrow. Here’s a quick breakdown:
- Annual income below $10,000: Up to $3,000 for Singaporeans/PRs and up to $500 for foreigners.
- Annual income between $10,000 and $20,000: Up to $3,000 regardless of nationality.
- Annual income above $20,000: Up to six times your monthly income.
Interest rates
Licensed money lenders in Singapore can charge up to 4% interest per month. They use the reducing balance method to calculate interest. This means your interest is based on the outstanding principal amount each month. For example, if you borrow $5,000 with a 2% monthly interest rate for six months, your total interest would be $355.7, not $600 as it would be with a flat rate.
Processing fees and additional charges
Processing fees for loans are capped at 10% of the principal amount. If you miss payments, you could face a late repayment fee of up to $60 per month and a maximum of 4% monthly late interest on the overdue amount. It’s crucial to understand these charges to avoid unexpected costs.
Guide to Applying for a Loan
Applying for a loan with a licensed moneylender Singapore is straightforward. Here’s a step-by-step guide to help you through the process:
Step 1: Gather necessary documents
- For Singaporeans and PRs: NRIC, latest payslip for the last 3 months, CPF statements, IRAS notice of assessment, and evidence of income.
- For foreigners: Work pass, passport, proof of residential address, and the latest three months of bank statements showing salary credits.
Step 2: Submit your application
Use Singpass Myinfo for fast processing. It only takes about three minutes to submit your application.
Step 3: Schedule an appointment
After submitting your application, a loan officer will contact you to schedule an appointment. During this meeting, they will verify your documents and conduct a short review.
Step 4: Receive your funds
Once your loan is approved, you will receive the funds either in cash or through bank transfer. This usually happens immediately after signing the loan contract.
Recognising Legitimate Money Lenders and Avoiding Scams
It’s essential to verify the legitimacy of a money lender to protect yourself from scams. The following advice will assist you in identifying authorised money lenders:
Verify licenses
Verify whether the money lender has a Ministry of Law licence. You can visit their website or call their office to confirm. Licensed money lenders must display their licenses prominently in their offices.
Face-to-Face verification
Legitimate money lenders require face-to-face verification. You can meet them in person at their office. If a lender does not invite you to their office, you should exercise caution.
Read reviews
Look for reviews and feedback from other borrowers. You can find these on Google, forums, and social media. Reviews can provide insights into the lender’s practices and reliability.
Avoid loan sharks
Offers that look too good to be true should be avoided. Loan sharks often promise low interest rates but have hidden fees and harsh repayment terms. Report any suspicious lenders to the authorities.
