If you require loans from a moneylender, it is critical to understand the difference between legitimate lenders and loan sharks. This is the most effective defence you can have. The following guidelines will assist you in determining whether a money lender is licensed and which ones you should avoid.
While we wish loan sharks would freely disclose the true nature of their company, the truth is that many claim to be licensed moneylenders. As a result, if you want to get a loan from a lender, you must know how to discern the difference between a legal moneylender and a loan shark.
The Loan Terms Are Explained In An Easy-To-Understand Manner By Licensed Professionals.
All money lender Singapore are required by law to explain the loan in layman’s terms in a language that the borrower can understand. They are required by law to answer any questions you may have. A licensed lender must also inform the borrower about the rates charged, the payment method, and the loan period. The lender is responsible for ensuring that you understand all of these issues before signing the loan contract. If you come across a moneylender who offers you a deal but refuses to clarify the loan terms in clear English or in a way that you can understand, run! There’s a reasonable probability you’re dealing with a con artist.
A Licensee Charges An Interest Rate That Is Comparable To The Market Rate.
The law also lays out the rules that must be observed when it comes to interest rates. From October 1st, 2015, the government established a maximum interest rate of 4% per month. A legitimate money lender will not charge you more than 4% in interest. Loan sharks, on the other hand, frequently charge higher interest rates. There have been instances where debtors have been charged up to 40% every month. Be cautious while dealing with such a lender. If you receive an offer with an interest rate of more than 4%, do not accept it!
You Will Be Signing A Contract With A Licensed Money Lender.
Moneylenders in Singapore are required by law to have their clients sign a contract. The contract must be written by a layer, according to the legislation. The following items should be included in the contract: a) Interest rate, b) Payment schedule, and c) Fees, such as late fees or prepayment penalties.
If you receive a loan offer from a lender willing to give you money without signing a contract, reject it and look for alternative lenders. That is not the way regulated lenders operate. What happens if you refuse to sign the contract? You, on the other hand, would have made it easier to be duped. What if you sign a contract without fully comprehending the terms? The contract is legally binding after you sign it, according to the law. If the lender takes advantage of you, it will be challenging to get recourse.
Licensed Lenders Charge Only Three Fees.
Moneylenders in Singapore are only allowed to charge three sorts of fees, not counting the interest rate. These are the following:
If a borrower fails on a loan, they may be charged a late payment fee of up to $60 per month and interest of up to 4% per month on the outstanding loan amount.
It’s also worth noting that late fines aren’t meant to be compounded like common interest. They only accrue once a month and only on late balances.
The service fees are paid upfront. The fee should not exceed 10% of the total loan amount.
Expenses Incurred As A Result Of A Legal Dispute.
If you meet such a lender who charges costs in addition to those listed above, they are most certainly loan sharks. If a lender requests a $103 monthly late payment fee, for example, you will be incurring illegal fees. That is something that no licensed lender can do to you on purpose.
Licensed Lenders Are Required To Have A Physical Location.
If a lender makes you an offer but does not have a recognizable office, do not consider it normal. All licensed lenders in Singapore are required by law to have registered offices on the Ministry of Law’s website. In an ideal world, licensed lenders conduct the majority of their business from their offices.
