A Borrowers Guide In Taking A Private Loan In Singapore

Due to worldwide inflation, the cost of living is always on the rise. But income doesn’t rise proportionately. With rising housing and education costs, Singaporeans are increasingly in need of borrowing money. Banks are an ideal source for acquiring loans, but it also has its drawbacks. For any bank loan to get approved there is a requirement to pass the credit background check. Banks also take a lot of time to sanction loans, which is a problem for people in need of instant cash.

Private Loans In Singapore

When people are unable to get a loan from a bank, they turn to private money lenders. These private money lenders are licensed by the Singapore Ministry of Law and don’t pose a threat like the “loan sharks.” The Singapore ministry of law provides a money-lenders license In Singapore for all those giving private loans. The main difference between private loans and bank loans is that while banks give a lot of importance to bad credit history, private money lenders don’t. Applying for private loans in Singapore by preparing proper identification documents. The process of getting a loan approved at a bank is tedious and time taking. But private money lenders in Singapore can get a loan approved within 2 hours. All private money lenders require proof of income or collateral items against the loan, without which loans are not approved.

Advantages Of Private Loans

1. Fixed interest rates – Banks have a fluctuating rate of interest, and they keep changing every 2 to 3 years. But while borrowing from private money lenders, the interest rates and fixed and negotiable.
2. Absence of termination fees – If you clear out a bank loan before the end of your specified period, the bank charges an early termination fee. Private loans do not charge any such fees making them less expensive and favorable for the people.
3. Loan limits are higher – Any legal private money lender in Singapore can approve loans for up to six times your monthly income. But for taking money against your income, you must provide the moneylender with proper proof of income.
4. Faster application process – for any loan to get approved at the bank, it has to pass through several people to find out if the loan proposal has been rejected or accepted. On the other hand, applying for a private loan is faster and hassle-free.

There are rules and regulations structured by the Registrar of Moneylenders in Singapore, which all money lenders must follow. Interest rates provided by Moneylenders are often subjected to bargaining, but the registrar has set a maximum level of interest. If the interest rate being offered to you is more than the maximum rate, you should avoid taking that loan. In case of failure of payment on time, the licensed money lenders have to follow previously set rules for debt collection.

Loan sharks will try to get as much information out of you as possible. They can use your Singpass login credentials to extract information. But on the other hand, private money lenders will only use your credentials in your presence to get the loan approved. They will also return your NRIC and other identification documents. The registrar of money lenders in Singapore is against advertising via text message. Any licensed money holder can be punishable by law if they do so. But unlicensed money lenders can advertise. So before taking a loan, verify if your money lender is licensed or not. Before sanctioning the loan, any licensed money lender is legally required to inform you about its terms and conditions. Before signing any contract, you must check out the interest rate, loan amount, repayment period, and options and penalties for late payment.

A contract without these details is a sign that you are dealing with a loan shark. To verify your money lender’s authenticity, check to see if they are on the list of licensed moneylenders on Singapore Minlaw’s website. The Singapore Ministry of Law has capped the interest rate for private money lenders at 4% (monthly). Any licensed money lender will charge a service fee, legal fee, and a fee for late payment. If you cannot pay the required amount within the stipulated time, lenders can charge a fee of up to Sixty dollars per month. The upfront fee should amount to at most 10% of the loaned amount. If there is any kind of dispute between the borrower and the lender that needs to be settled in court, all legal fees must be borne by the borrower.

In Singapore, private money lenders extend all kinds of loans. A few of them are:-

• Long-term loans – these loans have a repayment period of more than a year.
• Short-term loans – these loans have a repayment period of less than a year.
• Personal loans – these loans are given against your income. You can borrow up to six times your monthly income. These loans provide a fixed interest rate and early repayment options.

A few of the many other loans are weekly loans, business loans, wedding loans, and payday loans.

Once your loan is finalised, make sure you keep a copy of the documents, receipt, and statements of all payments made for the loan and other relevant documents. You must try to pay back all the loans on time. Late payment will mean accumulation of interest and an additional amount of late fees. In case you find that you are in a situation where you are unable to pay the fees, the best way to deal with it is to talk to your money lender. If you have a debt of more than $15000, then you can file for bankruptcy. This will stop the accumulation of interest and prevent the moneylender from taking any legal actions against you. If you are looking to take out a loan, make sure you are taking it from a licensed money lender and hire a lawyer to ensure your contract has all the crucial details. If you find yourself engaging with an unauthorised money lender, make sure to report them.