Singapore has no shortage of lenders. These lenders are often ready to lend you some money. Banks have made it easy to get personal loans. Their approval processes sometimes take few hours to 2 days. Then there are licensed moneylenders. These lenders are willing to offer you money to about anyone. However be sure to know who moneylenders are.
As said by Singaporean Law Ministry, Singapore has about 160 accredited moneylenders. And 5 more who have been suspended. These lenders target borrowers with difficulties getting loans. The borrowers have no access to loans from sources such as banks.
Since banks normally require a minimum yearly income. Also, you have a good credit record. They often reject loan requests from those with low income. And these individually desperately want a loan to settle an emergency.
For that reason, licensed money lenders offer loans. Thus these individuals can access loans. But these come with high interests than usual. Here are a summary and comparison of differences. These compare licensed money lenders against the bank.
Licensed Moneylenders vs. Banks
Licensed money lenders focus on borrowers forgone by banks. They have different characteristics. This helps serve different sets of clients. The main difference is their risk profile on borrowers.
Since banks target people with good credit history with a stable income. They have become inaccessible to those earning below $20,000. In addition, these borrowers have a poor credit history. However, licensed money lenders operate differently. They focus their lending on the second category of Singaporeans. This key difference has certain consequences.
For example, certified money lenders often offer small loans. The small size loans add to a total of S$1,500. And for payday loans for individuals who earn below $20,000 a year. They likely lend you 24 percent less than the monthly paycheck. Limiting the amount you may borrow at around S$1,200.
Since money lenders are a lot smaller institutions than banks. They cannot manage the risk of offering a huge loan. And more so to individuals who have a risky credit report. On the contrary, banks may loan you about 2-6x the monthly income. This is for an amount totalling $200,000. However, they loan out money only to borrowers with a steady income.
Not just that, the small size of certified moneylenders is advantageous. It allows them to process payday loans very quickly. At times it’s within an hour, when not sooner. Although personal loans issued by banks in Singapore are efficient. They are also quite competitive.
Since the loans are made accessible to borrowers in 24hours after application. With such speed the certified money lenders are handy. And in availing the funds fast, you get to meet your needs. Thus you will have no stress over financial problems.
Some moneylenders operate throughout the week. Thus you can access money anytime of the day. These are convenient for you. This means you can access money over the weekend. This is because some licensed lenders are open over the weekend. These lenders are thus sensitive to lenders needs.
On the other banks work five days a week. This makes it restrictive when you need a loan. Even though the banks have ATM option. The line of credit option may not be the best. This is because of the interest rates they attract. And they start charging after the first withdrawal.
Lastly, the major distinction is in the rates of interest charged. While bank rates often range from 5- 7 percent. And up to 25% for a line of credit card debt per year. The certified money lenders will charge between 30 to 40% a month.
Interest Rates at Licensed Moneylenders
Most of these lending companies offer different loans. Some of the loan products include payday loans. This loan has rates of interest that are really high. Yet after the Singaporean government established 4% limit. This was for the monthly rates of interest. This loan level can be equal to 2x higher. This is more than the charges you will see on credit cards. Or 4 to 5x higher than the rates on personal loans from banks. Therefore, it is recommended that you seek loan services. Unless you absolutely have no other funding source.
When you take out S$500 loan amount. Paying S$20 in interests for 1 month might not seem like it’s inflated. Though, when you don’t pay off this loan immediately. It might cost you a lot more in hundreds of dollars.
Most of this will be in fees and interests charged. This may potentially be almost amounting to S$500. This will be as much as the initial amount you had borrowed. Monthly rates of interest in Singapore vary. This will depend on the loan type. Some of the different loan types available include. Pawn shop loan, moneylender loan, personal loan, and the credit card advance.
Therefore, educate yourself on the different loans available. Know the amount you need for your needs. They do consider the rates of interest charged on each loan.
There are other options than loaning from licensed moneylenders. For instance, credit card debts and personal loan are cheaper. These funding sources are also more accessible. That is unless you don’t have access to them. You could also borrow a small loan from your relatives and friends.
When it doesn’t work out for you financially. You could consider licensed money lenders to help. Provided you repay the money quickly. Since they are certified they are regulated by the government. This way you don’t need to worry. About the harassment or even other complications that might come up. This often comes with loaning from loan sharks. So when you are considering taking a moneylender loan.
It may be the time you reconsider your financial situation. And take actions to help make key changes. This way you won’t have to misuse the loan tool option.