The general rule in applying for type of loans in Singapore is if you need to choose between applying for a bank loan and borrowing money from a moneylender, it is for the best that you go with the bank. It is a known fact that in Singapore today you have three options by which you can procure financial assistance and these are applying for a loan from banks; from large financial institutions or FIs and the more common moneylenders. Moneylenders should be your last option.
These types of lenders usually provide only small loans and payday loan. As much as possible, try and stay away from moneylender (especially from unlicensed ones) because although most of them are allowed to provide loans, they may still put you into more financial problems because of the following reasons.
First moneylender is a loan company that usually charges very high interest rates. Normal interest rates for loans charged by banks ranges only from 6 to 9% per annum while the interest rate charged by moneylenders is a whopping 48% per year. A loan of around 5,000 dollars at 48% interest can go as high as over 24,000 dollars within the next five years. As a matter of policy and because of laws covering loan transactions in Singapore, moneylenders do charge legal rates, interest but what is questionable are the hidden terms and conditions that makes the interest rates much higher than they seem. For instance, the re-contracting fees that moneylender charges their clients are fees that allows them to repeatedly charge a specific amount for renewing the loan.
Second, loan contract provided by moneylenders are full of hidden charges. Administration, late payment and new transaction fees are just some of the charges incurred by the borrower. Third, some moneylenders use debt collection agencies to collect their outstanding loans. Big banks and other large financial companies are content to deal with recalcitrant borrowers by bringing them to court or by just denying them future loan.
Some moneylenders in Singapore use debt collection agents that usually embarrasses the borrowers by continually harassing them. Fourth, moneylender’s repayment schemes are usually very hard to comply with and most moneylenders don’t have payment outlet that makes it hard for the borrower to pay them. Fifth, unlike credit cards or standard bank loan, borrowers don’t get additional benefits from getting a loan from moneylenders.
However, Singapore like any other countries have their share of good and bad moneylenders. Not all moneylenders in Singapore are bad, but to be safe, there are ways by which you can avoid the bad ones and all you have to do is consider these following facts.
First honest and legal money lenders do not send SMS or perform telemarketing services; second, they do not perform online bank transfers; third legal moneylenders never ask personal detailed information over the phone; fourth, legal moneylenders have physical offices that you can go to and lastly legal moneylenders operate from registered local landlines. These lending tips should be enough for you to know which type of lenders you should avoid and which lending company to go to once you are in need of a good loan.