We examined the workings of loansharks and why you should never borrow from them in Part 1 of this post.
Unfortunately, just because licensed moneylenders aren’t loansharks doesn’t imply they’re all excellent. There are good, law-abiding moneylenders and errant moneylenders globally, just as there are good, law-abiding moneylenders. The key is being able to distinguish between them.
Know what to expect when borrowing from a certified moneylender to protect yourself (and your sanity).
What is the maximum amount you can borrow from a licensed moneylender?
Singaporean and legal immigrants earning less than $10,000 a year are eligible for a government loan of up to $3,000 each year. Foreigners with the same annual income as Americans can borrow $500.
Singaporeans, permanent residents, and foreigners with an annual salary of at least $10,000 but less than $20,000 are eligible to borrow $3,000 from the government.
Anyone in one of the three classes who earn at least $20,000 per year can borrow six times their monthly salary.
What about the interest rate?
Whether the borrower’s income or whether the loan is secured or unsecured, licensed moneylenders can no longer charge more than 4% interest each month.
After a portion of the loan has been paid off, this interest should only be charged on the principal amount remaining. If you borrow $3,000 and repay $1,000, interest should only be levied on the remaining $2,000, not the entire amount.
Unpaid but due payments can’t be charged interest; only payments due but late can be assessed interest. This means that the moneylender can only impose a late claim on the first instalment ($500) of a $3,000 loan and not on the remaining $2,500 because it hasn’t been paid yet.
Licensed moneylenders can only charge the following charges as of October 1, 2015.
• An upfront fee of no more than 10% of the loan’s principal;
• Interest rates of no more than 4% per month;
• Interest rate of not more than 4% per month for late payments;
•For each month of late payment, no more than $60 will be charged; and
• When a moneylender successfully recovers a loan, the court orders legal fees.
An additional requirement is that a moneylender’s total costs – which include all of the above – must not exceed the loan principal.
The total cost of borrowing $3,000, including interest, late interest, a one-time administrative fee of 10%, and monthly late fees of $60, cannot exceed $3,000, as an illustration.
Other points to note
Before obtaining a loan from a licensed moneylender, make the following preparations:
• Make certain you’ve looked into all possibilities (e.g. government assistance schemes, social aid, etc.).
• Make certain you can repay the money you borrowed. Late repayments will incur penalties.
• Before making a decision, take your time to research several registered moneylenders. Some companies may provide more excellent rates than others.
When signing the loan agreement:
•Please do not hesitate to contact us if you have any questions. you must answer all of your questions in a language that you understand by the licensed moneylender.
• Make that you are aware of all of the terms and conditions before proceeding. especially the ones concerning the interest rate, payback plan, and fees.
• Read the fine print carefully.
•Obtain a copy of the loan agreement signed by the licensed moneylender.
• The licensed moneylender should provide you with a second warning message in writing.
After signing the loan agreement:
• Make sure the moneylender gives you the exact principal amount.
• Late interest and late payment costs will be incurred if you don’t pay your loan instalments on time.
• Every payment made toward the loan must be accompanied by a receipt. Make sure the information (your name, the amount, and the date) is correct.
• A statement of accounts should be sent to you every six months, in July or January. Verify that all of the information is valid.
• As proof of paperwork, keep all of your bank statements and payment receipts.
Help is at hand
If you believe the moneylender has mistreated you, you can seek relief under the Consumer Protection (Fair Trading) Act; you can take your case to the Small Claims Tribunal or the Court.
However, because the loan contract is a contract between you and the moneylender, the Registry of Moneylenders cannot interfere if you cannot pay your loan instalments.
However, you can seek assistance from the following social service institutions for help with debt repayment:
• Adullam Life Counselling
Address: 151 Chin Swee Road #08-04 Manhattan House Singapore 169876
Tel no: 9423 8832
• Association of Muslim Professionals (AMP)
Address: 1 Pasir Ris Drive 4 #05-11 Singapore 519457
Tel no: 6416 3960
• Arise2Care Community Services
Address: No. 5 Harper Road #02-01A Singapore 369673
Tel no: 6909 0628
• Blessed Grace Social Services
Address: 18 Arumugam Road, #05-01 Antioch@MacPherson Singapore 409962
Tel no: 8428 6377
• One Hope Centre
Address: 8 New Industrial Road #04-04B LHK 3 Building Singapore 536200
Tel no.: 6547 1011
• Silver Lining Community Services
Address: (East) 11 Playfair Road Singapore, (West) Jurong Spring CC, 8 Jurong West St 52 Singapore 649296
Tel no: 6749 0400