Before you take out a loan, you should be aware of the following factors to avoid any issues along the process:
1. Know your options.
Whether you are looking to take out unsecured loans or secured loans, it may be worth checking other alternatives to get extra funds you need. Government agencies offer a wide range of financial solutions that may cater to your specific situation. To learn more about the product offerings, it is best to contact these agencies and present your inquiries.
If you decide to consult a licensed moneylender in Singapore, be sure to read and understand the loan contract details carefully before you affix your signature. Review the moneylender fees, interest rates and repayment schedules. Be sure that you can abide by these terms stipulated in the contract. Otherwise, you are only getting yourself in a more difficult situation once you start accumulating late payment fees and penalties from the lender.
Explore your options before choosing a particular moneylender. There are different rates and repayment terms offered by each lender, so be sure to find the most practical option for you. Never rush into a loan until you are certain about the terms and conditions provided. Lastly, you should get a copy of the loan contract, and see to it that every detail in it is followed through during the entire duration of the loan.
2. Determine the maximum amount of money you can borrow.
You can loan any amount if you wish to take out a secured loan. However, there are specific conditions for unsecured loans such as the following:
- For less than $20,000 annual income, you can borrow up to $3,000.
- For $20,000 – $29,999 annual income, you can borrow up to 2 months’ worth of your income.
- For $30,000 – 119,999, you can borrow up to 4 months’ worth of income.
- For $120,000 (or higher) annual income, you can borrow any amount you need.
3. Clarify the interest rates charged by moneylenders.
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% per month. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one. If a borrower fails to repay the loan on time, the maximum rate of late interest a moneylender can charge is 4% per month for each month the loan is repaid late.
4. Inquire about the moneylenders’ fees.
For loans contracted between 1 June 2012 and 30 September 2015. There are 6 different types of fees that moneylenders can charge legally:
- For the late payment of the interest or principal
- For dishonoured or invalid cheque issued by the borrower
- For the changes made in the loan contract terms, as requested by the borrower
- For the early termination of the loan contract or premature redemption of the loan
- Incurred legal costs for the loan recovery
- For every failed GIRO deduction from a bank account made by the borrower
- Other fees that are not permitted or enforceable by the lender
Any other fees are not permitted, and are hence not enforceable by the moneylender.
With effect from 1 October 2015, all moneylenders are only permitted to impose the following charges and expenses:
- a fee not exceeding $60 for each month of late repayment;
- a fee not exceeding 10% of the principal of the loan when a loan is granted; and
- legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan.
5. Be sure the moneylender is licensed.
You should steer clear of unlicensed moneylenders. The best way to determine if the moneylender is licensed is by checking www.mlaw.gov.sg website for a updated list of approved and licensed Singapore moneylenders.
Moreover, you should never trust a moneylender who requires you to submit your SingPass login details or holds your personal ID documents. Other illegal practices include granting a loan without due diligence, using abusive language to potential clients and withholding a portion of the principal loan amount. You should also be given a copy of the loan’s Note of Contract, and every detail of the agreement must be discussed thoroughly with you.
In case you come across moneylenders with such unacceptable behaviours, be sure to report them to the Registry of Moneylenders. Provide relevant information along with your official report including the business name, contact details and license number of the moneylender. You may lodge a complaint against moneylenders by contacting the Registry of Moneylenders at at telephone number: 1800-2255-529 or at e-mail address: OneMinLaw@mlaw.gov.sg.
You also have the right to pursue the issue through the Court or the Small Claims Tribunal under the Consumer Protection Act. Loan transactions may be set aside by the Court if these are substantially unjust or exorbitant.
To find out more about unlicensed moneylenders, you may click on this link: http://www.spf.gov.sg/ahlong/