Not many Singaporeans have access to loans. This could be loans issued by banks and key financial organizations in Singapore. It is for this reason that pawn shops and licensed moneylenders are very important. Pawn shops and authorized moneylenders serve borrowers who require small yet urgent loans. And this is without needing to wait long to get the loan approval.
Keep reading to find out more about them and you will know the differences between licensed moneylenders and pawn shops.
What pawn shops do: Pawn shops provide personal loans, which are secured. These require collateral which is something valuable. In general, borrowers hand over a valuable item to the owner of a pawn shop. This item could be something like expensive jewellery or watch. Using this you can access a personal loan in exchange. The pawnbroker or pawn shop owner then retains this item safely.
That is until your loan is fully repaid and with interest accrued. Pawn shops in Singapore are under the regulation of government agencies. This makes them very much reputable, yet this was not so in the past.
Accredited moneylenders are lenders authorized by Singapore’s regulatory agencies. One of these agencies is the Moneylender’s Registrar in Singapore. In order to receive a license, moneylenders are required to pass a moneylender test. The moneylenders in Singapore operate under some restrictions. Some of these are the set limit on the amount of money they should lend. The amount of the interests and fees that they can charge on loans they provide. But nothing is more crucial to any accredited moneylender than the reputation.
In Singapore, licensed moneylenders provide smaller loans types. That is when compared to the banks. These lenders make different loans available a lot faster than the banks. That is provided that you present to them all the necessary paperwork. You will also need to undergo some needed background checks from the past dealings.
Even then, it will take you under an hour for you to get your personal loan from licensed moneylenders. They have higher rates of interest as compared to banks. They also have a lot easier requirements for any loan approval. They are also more forgiving on borrowers who have a low credit rating.
Differences between Pawn Shops and Licensed Moneylenders
Accredited moneylenders charge high rates of interest on all loans. When you by chance miss on making a payment. Your interest rates will get compounded onto the debts you owe. Then eventually you will wind up owing much more money than what you actually had borrowed.
This means, that when you fail to make your monthly loan repayments. Then you might end up in a much worse situation than before. Thus you will owe a lot more debt than the initial amount that you had borrowed.
However, when you choose to take out a loan from the pawn shop. Then you default on the personal loan, at the same time are not able to repay it. In this case, what will happen is, the security item you had presented to the pawnbroker. This was in exchange for the loan. – the security could be a golden ring or precious gold chain – now becomes a possession of your pawnbroker.
The broker is then eligible to sell it off in place of the personal loan offered to you. This means the debt does not snowball in interest. Thus you will not incur any additional payments from interest incurred. Since there are none. Therefore, you do not need to pay the pawnbroker anything, and that case is closed. Meaning the only thing you will risk losing is your valuable item or the collateral. That is what was given as security for the loan. Once that is lost, you no longer owe the pawnbroker anything.
Another major difference between pawn shops and legal moneylender is that. Pawn shops often charge rather low rates of interest on their personal loan. This rate is a lot lower when compared to interests charged by credit card issuers. When compared to what is charged by licensed moneylenders which are very high.
Generally, pawn shops will usually charge rates of interest at 1% for the first month. This then increases to 1.5% for the second month. Therefore, the lesser the period of time you take to pay back your loan. Then the lower your interest will be for the loan you owe the pawnbroker.
That is why, for borrowers who doubt their ability to pay back their loan. Yet they are in an especially unstable financial situation. Then they could consider working with a pawnbroker. This you can do provided you have a valuable item. This may be a lot easier for borrowers than from a licensed moneylender.
However, for borrowers who are rather confident concerning their financial status. Thus they have nothing to worry about defaulting on their loan. Then it makes sense to work with a licensed moneylender in Singapore. This is because they will not have to present something valuable to them. This is to act as collateral in securing the loan you want to take out.
Legal moneylenders usually provide smaller amounts of the loan. Even for individuals that earn more than $30,000 in wages. The loan amount provided in the loan will total $10,000. Usually, an amount equal to 4 times your wages per month is what a legal lender should lend.
On the other hand, pawn shops do not have a loan amount limit. The amount of loan money a borrower can get depends on the value of their security. This means the more valuable your item is the more money you can access. However, confirm their loan limit before you present your valuable item. Since they have a set amount that they can lend.
Pawn shops and licensed moneylenders help borrowers who are in need of small loan amounts. The two loan providers are able to serve many Singaporeans who are not able to access loans. Even then, licensed moneylenders and pawn shops have some differences. Before deciding to take out a loan, ensure you know the right lender for you.