Wouldn’t it be great to have enough money to pay all your expenses at any given time? Unfortunately, this isn’t reality for many people. You not only have to manage your day-to-day expenses and monthly bills, but also deal with unexpected expenses that life throws at you. Add to this the costs of major life changes like marriage or the arrival of a baby and you’re bound to find that your finances are overstretched.
When you’re faced with a financial emergency, you may feel like your back is against the wall. Many people seek personal loans from banks to help them improve their cash flow. However, if you’re faced with restrictions such as time or the lack of collateral, you may find that a personal loan from a licensed moneylender is your best option.
What is a licensed moneylender?
Licensed moneylenders are those that meet the requirements of the Ministry of Law and are therefore included in the Registry of Moneylenders. The full list of licensed moneylenders can be found on the Ministry of Law’s website and here. This list is updated frequently. It is therefore important to refer to the list before approaching a moneylender to ensure that their license is still valid.
What is an illegal moneylender?
Illegal moneylenders are often referred to as loan sharks. These are moneylenders that are not licensed and do not appear in the Registry of Moneylenders. They do not adhere to the requirements of the Moneylenders Act and Rules Singapore. They therefore do not care about breaking the law in how they carry out their business. They may charge exorbitant interest rates on their loans and use harassment tactics to recover their debts.
The dos and don’ts of a legal licensed moneylender
If you’re thinking of seeking a loan from a licensed moneylender, it’s important to know how to differentiate between a licensed moneylender and an unlicensed one. Many unlicensed moneylenders use approaches that seem genuine at first. However, with some observation, you can identify a genuine moneylender and avoid a scam.
1. Licensed moneylenders must have physical addresses as well as a landline. The moneylender will invite you to sign the loan agreement at their physical premises when they approve your loan application. This is a requirement for before the money is remitted. Avoid dealings with any moneylender that is willing to send you money before you visit their physical address.
Check the moneylender’s website for a physical address. You should also check for a landline. Mobile numbers are not acceptable. You should avoid dealing with any moneylender that does not provide a physical address or a landline.
2. Licensed moneylenders aren’t allowed to advertise their services. They are not allowed to solicit for loans via SMS, phone calls, email or WhatsApp. They can only advertise their services on their own property or websites. They can also list their services on relevant online directories.
If you receive a text or other type of message from a moneylender inviting you to take a loan from them at a low interest rate, you should avoid them completely. They are breaking the law. They are most likely an unlicensed moneylender. Obtaining a moneylending license is no easy task. Licensed moneylenders wouldn’t act recklessly and risk losing their license.
3. Look out for misleading messages from the moneylender. A licensed moneylender is not allowed to use misleading language such as ‘get immediate loan approval’ of ‘get instant cash.’ Borrowers are required to complete the loan application process in order to get the money. While this process may take a shorter time with certain moneylenders, it doesn’t result in instant cash. The borrower must still complete the loan application form and sign it at the premises of the moneylender before receiving the money.
4. There is a maximum amount that you can take as a loan. This amount is determined by your income as well as your residency in Singapore. These limits are set to protect the borrower from overstretching themselves. They ensure that you only take a loan that you can afford to repay. A licensed moneylender will limit your loan to the maximum amount you are allowed to borrow under the law. Unlicensed moneylenders may try to persuade or even force you into taking a loan that is beyond your means. You may therefore take a loan that is too large and find yourself sinking in debt.
5. Licensed moneylenders are not allowed to use violence or other forms of coercion to recover their money. They will refrain from using illegal methods to get you to pay the loan.
Unlicensed moneylenders are not afraid of breaking the law. They will use any means necessary to get their money back. This may include threatening, abusing or committing acts that may cause you or your family harm.
6. The interest rates that licensed moneylenders can charge are capped by the government at 4% per month. Licensed moneylenders cannot charge an interest higher than 4% on any loan they give. Unlicensed moneylenders don’t adhere to the law. They are therefore likely to charge you an interest rate that is much higher than 4%. Their aim is to make as much profit from the loan as possible. They are known for charging very high interest rates.
7. Licensed moneylenders can only charge up to 10% of the principal loan amount in fees. They are also not allowed to charge more than $60 as a late fee. Unlicensed moneylenders charge as much as they like as fees. They may charge higher fees and may even change the terms of loan mid-tenure.
Consequences of borrowing from illegal moneylenders
When people are desperate for money, they are likely to make bad decisions. If you’re thinking of taking a loan from a moneylender, it’s important to stop and ensure that they are a licensed moneylender. You will otherwise have to deal with the consequences of borrowing from illegal moneylenders.
1. They will harass you to repay the loan
Loan sharks will use any means necessary to get their money. Many borrowers face harassment from these illegal lenders. This may take various forms including property damage, physical harm to the borrower or their family, shaming of the borrower on social media and much more. If you borrow from an unlicensed moneylender, you’re putting both yourself and your loved ones at risk.
2. You may never be able to pay your loan back
Loan sharks often put high interest rates on their loans. The total amount you will have to repay may end up being multiple times more than the original amount you borrowed. This means that you may never be able to repay your loan. You may spend the rest of your life indebted to the loan shark. You will essentially be selling your soul.
3. They may change the terms of the loan at any moment
Many borrowers gain access to loans from loan sharks without signing written contracts. There is therefore no written agreement outlining the terms and conditions of the loan. The loan shark is therefore at liberty to change the terms and conditions of the contract at any moment. They can do this without notifying you. You’re therefore at their mercy.
If you need to improve your cash flow and require money urgently, be sure you take a loan from a licensed moneylender. While an unlicensed moneylender may seem like a quick and easy solution, the consequences of borrowing money from these moneylenders may haunt you for the rest of your life.