The quickest and most straightforward solution to meeting an urgent financial need is to borrow from a moneylender. However, not all moneylenders are equal in their policies and practices, and loan shark harassment and unethical practices are common. This is why it is essential to be diligent when choosing a moneylender.
Many unscrupulous operators out there will take advantage of your situation. This article will discuss six things you need to check before borrowing from a moneylender in Singapore.
Table of Contents
1. Check the Moneylender’s License
As per the regulations of the country regarding money lending, it is imperative that the Ministry of Law licenses all moneylenders in Singapore. You can check if a moneylender is licensed on the Ministry of Law Moneylenders List website.
It is a criminal offense to lend money without a license in Singapore. According to the Moneylenders Act, if you borrow money from an unlicensed moneylender, the lender could face a maximum fine of SGD 40,000 and a jail sentence of up to four years.
This is why it is always important to make sure that the moneylender you are borrowing from is licensed.
2. Check the Moneylender’s Fees
All moneylenders must disclose their fee structure before they sign any documents. They cannot charge more than the legal maximum. Make sure you fully understand the fee structure before paying anything.
You can take legal actions against a moneylender if they attempt to charge you more than the legal maximum.
The current maximum fee that a moneylender can charge is four percent per month. All moneylenders charge a late payment fee, so make sure you pay your installments on time. The maximum fine for late payment is S$100. Ensure that you take a loan from licensed moneylenders to escape loan shark harassment.
3. Check the Moneylender’s Interest Rate
The maximum legal interest rate that a licensed moneylender in Singapore can charge is four percent per month.
Make sure you understand the interest rate before signing any documents. If you do not, ask the moneylender to explain it to you in detail.
Unlicensed moneylenders can charge any interest rate they want, so be very careful when borrowing from them.
4. Check the Moneylender’s Reputation
You live in a digital world, so information about anything is just one Google search away. Make sure you research the moneylender before you borrow from them.
Check review sites to see what people are saying about different lenders. If you have friends or family members who have borrowed from a moneylender, ask them for their recommendations.
Customer testimonials can be beneficial, but make sure you read them with a critical eye. Some moneylenders might post fake testimonials to improve their reputation, which is why it is important to do thorough research before settling for one particular money lender.
5. Check the Moneylender’s Contract
A moneylender’s contract will include the following information:
- The amount you are borrowing
- The interest rate and fees
- How long do you have to repay the loan
- What will happen if you miss a monthly payment
- What will happen if you want to pay off the loan early
You must read every word of any contract you sign. You should never be forced to sign a document without having time to read it first. If you want, ask the moneylender to explain any part of the contract that you do not understand.
6. Check the Moneylender’s Collection Practices
All licensed moneylenders must comply with the rules set by the Ministry of Law. Make sure you are aware of these rules before you borrow money. According to the Ministry of Law, a legal moneylender cannot:
- Call before 11 AM or after the evening
- Harass you, your family members, or friends for payment
- Use violence or force to collect the debt payments.
You must verify this with the lender before borrowing any money.
Final Thought
Moneylending in Singapore is a straightforward process. The Ministry of Law is responsible for issuing licenses and regulating moneylenders operating in the country. As per Singaporean laws, you might be entitled to compensation if a moneylender violates the regulations.
Therefore, you should have no problems as long as you borrow from a licensed moneylender.
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