Moneylenders often offer smaller loans. The legal limit is to loan 2- 4 times of a borrower’s monthly wages. This depends on the borrower’s annual income. However, most lenders won’t offer them the entire sum. These lenders help you to overcome a short-term monetary shortfall. Thus you’ll not get a loan to buy a new house from a moneylender. You’ll find some likeness in both organizations. However, there certainly are some major differences too.
Most differences between banks and moneylenders are in their services. You can keep your money safely in banks. And you are able to invest, get a loan, and access myriads of other services. But an accredited moneylender only offers personal loans. And possibly does a little check cashing also. Also in lending practices, there are considerable differences. This also differentiates moneylenders and banks in Singapore.
Below are some of the differences that you need to consider. That is before you can get a personal loan.
Less Strict Credit Review
When contrasted to banks, often moneylenders are less strict. This is when they are assessing a borrower’s credit score. They normally lend smaller loans. And they will charge higher rates of interest. This is because they have a higher apparent risk of defaults. Moneylenders will still verify your financial standing. They also check on your status of ownership of your home. Lenders will verify whether your stated earnings are correct. They do so by referring to your CPF statement of contribution. For the self-employed, two years of Assessment Notice is needed.
The key distinction between legal lenders and banks is credit checks. This is because the lenders aren’t focused on borrower’s credit rating. Many banks hold an instant policy of rejection. These they have against customers whose credit rating is poor. On the other hand, a moneylender is a lot lenient. They will use other ways to help their customers. They might opt to use the collateral option. Thus they will offer a borrower a secure loan option.
However, it’s true that most lenders do credit checks. They will often deny your application. That is when they find several loans under your name. But, collateral will come in handy in securing you a loan. To many lenders, your credit score isn’t as important. This is because the typical loan amount needed is usually small. This amount is far less when compared to amounts offered by banks.
Higher Interests for Moneylenders
Since moneylenders can only disclose their rates to the client. They frequently charge higher interests than the banks. Actually, most of these rates are very high. Thus it could be cheaper to sometimes use the credit card.
Should you be in need of a small loan to settle unexpected expenses. You could consider getting a credit card from banks. However, be sure to shop around for the right deals. These deals will need to be appealing to you and convenient.
Size of Loan
Normally licensed moneylenders often focus on issuing smaller loans. There are numerous reasons for this. The general one being that these lenders run smaller companies. These lenders serve a specific need in Singapore. In the contrary banks are quite tiresome when lending for a payday loan. This is since they follow an approval process similar to a mortgage or a start-up loan.
Legal lenders have built their business by loaning small loans. They offer these services to individuals who need fast cash. This loan amount could be used to pay unexpected bills. Some of the emergency bills include auto repairs for instance.
The moneylender is focused on customers with a modest amount. The borrower will likely not have savings to cover unexpected expenses. But, bigger expenses like mortgages are aligned with what bankers offer.
Generally, banks are transparent regarding their interest rates. But, licensed moneylenders don’t disclose their interests online. Even after you call you won’t get to know their offered rates. But the comparison websites will make your research less painful and faster.
Taking short-term loans from moneylenders is faster than banks. Once you visit a moneylender, you will have to complete an application. Thereafter you’ll have to enter your Singpass for your loan officer. This will help them check your details. (Don’t give your officer the Singpass, fill it in for them). Though, it could take lots of time. For you to get the cheapest rates offered by lenders. It’s hard to find interest rates details online. And even though you contact them, you won’t get the correct rates.
Moneylenders provide you interest rates based on the credit risk. And without your paperwork, they can’t give you the correct rate. Given that you have the right documents. A licensed moneylender will many times have the loan ready. Usually, within half an hour or less, you will have the money. Thus the whole process can be done in less than an hour. That is from the start to the time you get the cash in your account. This also includes time taken by lenders to conduct credit checks. Hence when the borrower holds good credit, it will be faster to get the loan.
Banks, however, take much longer usually before they approve a loan. The reason for this is a select few make the decisions. This means the approval procedure is much slower to complete. Certainly, a big part is also the size of your loan. But the process used is the same basically for all loan types.
That means for personal loans and especially a payday loan. It’s usually better to work with the legal money lender. This is because you will get your funds faster than from banks.
Most differences between banks and moneylenders are in their services. Moneylenders often offer smaller loans. As for banks, you can keep your money safely with them. And you are able to invest, get a loan, and access myriads of other services. It likely you will find some similarities in both organizations.
However, there certainly are some key differences too. Some differences include loan size offered and interests charged. Even then be sure to do some research to get the best deals.