Licensed Moneylenders Vs. Banks: What Are The Differences
Moneylenders in Singapore are licensed by the Money Lenders’ Registrar. The presence of a license puts some limitations on the amount that can be loaned, fees they may charge, and permitted interests. This also implies that they have passed the moneylender’s test.
Borrowers need to recognize that licensed moneylenders run businesses. Therefore, it is best for them that they build good repute. They have no intent to chase away any prospective clients, or even get arrested by police. When a moneylender has to follow up on debtors, it is often by the use of reminder letters. This is not different from the legal techniques used by banking institutions.
Other than debt collection, moneylenders and banks seem to be running on very different levels entirely. Some of the main differences between the two are:
- Offer Smaller Loans
- Lenient Credit Assessment
- Higher Interest
In general, most money lenders in Singapore are a lot faster in processing applications for loans. Usually, they will be ready to authorize your loan application in less than thirty minutes. But provided you present to them all the needed documents. The reason for this is because most licensed moneylenders are smaller compared to banks.
This means they are a lot more flexible as they have lower bureaucratic tiers than what banks have. This implies moneylenders are able to help more borrowers compared to banks and especially under circumstances that require that you require funds urgently.
Getting your funds fast can help you not to get into some legal complications, and help you settle medical bills. Unfortunately, with banks, they are under these situations too slow to help.
But when you cannot access a credit card, then you could consider moneylenders as a good solution for acquiring quick cash. However, ensure that you only deal with legal moneylenders.
Offer Smaller Loans
There are few moneylenders who will grant a maximum loan amounting to $1,500 even after a borrower is earning an annual amount exceeding $30,000.
Usually, the fixed legal restriction is on 2 to 4 times the borrower’s salary for each month and is dependent on the amount you take home annually. But then, there are some moneylenders who might not lend you the entire sum.
Even then most moneylenders, have clients who only require to take out payday loans. This is a small loan to assist them in cope for a short while. Normally most moneylenders do not grant loans exceeding S$10,000.
Thus it makes moneylenders more suitable for offering small, and urgent loans. Some of the loan requirements may be for things such as clinic charges, car repairs, and even purchase of plane tickets. For individuals who require large amounts then moneylenders will not be suitable for such loans. Neither will they grant you renovation loans.
For further information, consider looking through the individual moneylender’s website or visit their physical offices so that you can inquire about the loan offers available for you. You can also utilize personal loan comparison tools to help locate the loan information you require.
Consider doing this before deciding on the loan amount you want to take.
Lenient Credit Assessment
Borrowers should realize that any late payments on their credit cards as well as warning letters can lower the credit score. It can sometimes be tough to attempt to enhance your rating, and many banks are rather stringent about them.
For those with low credit rating, banks will turn them down for personal loan applications. Then again, the licensed moneylenders are a lot more lenient and will not strictly analyze your score. This is because that amount they offer in the loan is often relatively smaller. Also, for those borrowers who have a bad credit score and cannot obtain personal loans from banks, they might look at talking to moneylenders to find out about the loan options available for them.
Borrowers need also to recognize that legal moneylenders have some limits and more so when you hold existing credit with other authorized moneylenders. It may also be that owe credit card debts. Then it can happen that the moneylenders will reject your loan application. Even though the moneylenders are lenient it does not imply that they do not do background checks.
As for those people who in the past have declared bankrupt, it is possible for them to access credit from legal moneylenders. But, only once they present a letter of discharge. This is different from banks, which require that borrowers meet an extra 5 to 7 years after the letter of discharge was issued so that they can offer you credit.
In general, most licensed moneylenders will not disclose the interest rates they charge on the phone or even via e-mail. Several of these money lenders might opt to discuss the rates of interest only face-to-face. Even then, by law licensed lenders are always obligated to explain loan terms to their borrowers. This gives borrowers the chance to ask questions regarding the loan conditions that they do not understand.
It is also a chance for borrowers to discuss their specific case with the lender. This can ensure that borrowers get loan packages that are tailored to suit their needs. Even with this, it is recommended that you carry out thorough research to locate the right lender offering you the lowest possible interests.
In so doing you will be able to make comparisons on different rates offered. This way you can get the moneylender who is offering the lowest loan rates that will suit your needs.
Most legal moneylenders offer interest rates of between 25% – 30%. Even with this the interests moneylenders charge on their loans are controlled by the Singaporean authorities. This helps ensure that borrowers and lenders are protected.
Owing to this make certain that you do background checks on lenders you work with. Doing so will protect you from getting loans that attract blown-up interests. Also researching will help you locate that lender who is willing to transact with you and provide you suitable loan packages.