When hunting for a personal cash loan, most people go to banks first, have you ever pondered when a bank will lend you money?
Banks will willingly provide youa personal loan when you have NO demand for it. Banks also stretch creditsonly to credit worthy individuals. Financial institutions and banks have a great deal of criteria and limitations when the yoffer personal loans.Banks do not approve personal loans to Singaporean citizens and PRs who make lower than $20,000 annually. In case youare a foreigner in Singapore, the requirements are even harder. What comes about if you have bad credit and youneed an emergency personal cash loan?

Aside from family members and friends , your one and only lawful method is to engage the helpof a money lender.

Loaning from relatives and/or friends are daunting and awkward. There are fairly a lotof people (who prefers save face) who more willinglyborrow from a licensed money lender and pay the interests on the loan than seek a favour from someone close .

Licensed Money Lenders in Singapore
In Singapore (as with nearly every industry) themoney lending industry is highlyregulated and moneylenders are licensed by the Registrar of Money Lenders. There areclear guidelines and restrictions on the amount ofloans they can offer, the fees they can charge and even the interest rates areheavily regulated.

Any licensed moneylender found to be flouting the Money Lenders Act in Singapore will havetheir money lending licensed recalled. It ishighly encouraged that you areaware and identify your right as a borrower if you areintending to take out a personal cashloan from a licensed money lender.

It is worthy of noting that a licensedmoney lender in Singapore is really much like any otherbusinessman. They wish to take care of their good credibility andreputation, provide a friendly service, tailor their loans in conformance to the laws and generate profits. When licensed money lenders inSingapore “chase” their debtors, they are no different to a bank– it’s letters andletters and even more reminder letters.

What should you do before visiting a licensedmoney lender?
Remember that you are legally obligated to fulfil any loan contracts you enter with a licensed money lender. It is well-advised to borrow only what you can repay.In Singapore, all licensed money lenders are required by law to give an explanation of theterms of loans to you clearly and in a language that you comprehend. You are safeguarded by law to get a copy of the contract. Always be certainthat you understand all the terms of the contract which involves very important terms including the interest rates, applicable fees involved and the repayment terms.

Just how much can you borrow?
For secured loans, there is no limit to the loan you can secure. For unsecured loans, theamount you can borrow depends upon yourannual income:

You can borrow up to $3,000, if your annual income is below $20,000;

You can borrow as much as 2 months’ salary, if your yearly net income is $20,000 or more but below $30,000;

You can borrow up to 4 months’ salary, if your annual earnings is $30,000 or more but lowerthan $120,000; and

You can borrow up any amount, if your yearly income is $120,000 or more.

Interest Rates That Moneylenders can charge
For loans contracted between 1 June 2012 and 30 September 2015, moneylenders are demanded to compute anddisclose to you the Effective Interest Rate of the loan, prior tothe loan is granted. If your yearly salary is less than $30,000, theinterest rate which moneylenders can charge, for both secured and unsecured loans, iscapped at:
13 per cent Effective Interest Rate for secured loans; and
20 per cent Effective Interest Rate for unsecured loans.

The Effective Interest Rate considers thecompounding effect of the frequency of instalments over a one-yearperiod. This indicates that Effective Interest Rate better shows the factual cost of borrowing over a one-year period. Visit https://www.mlaw.gov.sg/content/rom to find out more about how the Effective Interest Rate is calculated from 1 June 2012.

In case that your annual paycheck is $30,000 or even more , the caps above are not applicable and interest rate is to be concededupon between the moneylender and the borrower.

With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4%per month. This cap applies irrespective the borrower’s income and whether the loan is an unsecured or secured one.If a borrower cannot repay the loan timely, the maximum rate of late interest a moneylender can chargeis 4% per month for each month the loan is repaid late.

The computation of interest charged on the loan must be depended onthe amount of principal remaining after reducing from theoriginal principal the overall payments made by or on behalf of theborrower which are appropriated to principal. [To explain, if X takesa loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be considered for the calculation ofinterest.]
The late interest can only be billed on an amount that is repaid late. Themoneylender can not bill on amounts that are unresolved but not yet due to be repaid. [To explain, if X takes aloan of $10,000, and fails to pay for the first instalment of $2,000, themoneylender may charge the late interest on $2,000 but not on the remaining $8,000 as itis not due yet.]
Banks VS Licensed Money Lenders
Key distinctions between banks and money lenders include:

Licensed money lenders provide a smaller sized loan amount as compared to banks
Licensed money lenders offer loans at a higher interest rate than banks(to price in the credit risk involved).
Licensed money lenders offer loans to individuals with bad credit rating.
Licensed money lenders offer prompt personal loans turn-around time (can be as fast as a few hours).
Although the legal restriction is 2– 4 times the borrower’s monthly income, most licensedmoney lenders do not provide such a high amount . They quite often providesmall loans to borrowers (well below the legal restriction). As with allbusinesses, licensed money lenders fight on efficiency, with all theright formalities available, it is even possible for a moneylender to supply the cashloan within 1 hour.

What occurs if you can not pay back the loans toyour money lender?

Licensed money lenders are regulated by the law. If they do not abide by the guidelines, their money lending license could be withdrawed. Similar to banks, be preparedto get letters, SMSes and telephone calls if you can not repay your loans. Unlike loansharks, they can not harass you or threaten you. However in some cases, if you can not repay your loan, they do have the right to send a debt collector to your house.

Be mindful of Advertisements From Unlicensed or IllegalMoney Lenders.
Legal and Licensed Money Lenders in Singapore are regulated by law and onlyallowed to advertise through the following channels:.

The licensed moneylender’s own website.
Advertisements (offline) placed physically within the business premises of themoneylender’s location or exterior of the money lender’s business premises.
Consumers or Business Directories in online or print (offline) format.
If you receive or see an advertisement that does not fall in any of the guidelines aforementioned, for example in the form ofSMS, email or any other form apart from thestated above, please report to the Singapore Police Force or Ministry of Law.