For anyone who needs a quick way to borrow money, moneylenders are the most preferred option for many Singaporeans. Moneylenders have more lenient policies in terms of who they accept as clients and they only need 24 to 72 hours to give you a response about your loan applications.
Once you are approved, you can use the amount you borrowed to anything you need it for without any questions asked.
However, when it comes to interest rates for personal loans, it is often noted by many people that licensed moneylenders in Singapore have high-interest rates as compared to banks. As a result of this high-interest rate, people tend to shy away from it even if it is the best way for them to get money.
Why do these moneylenders have higher interest rates and why do people support them?
On Loans and Security
Banks mostly prefer approving secured loans with high value and borrowers with excellent supporting documents that will prove their trustworthiness. Borrowers borrowing large amounts of money for property, renovations, and car loans enable banks to lend without worries and they look into the benefits of loaning in huge quantities and what it could bring for the institution. They do offer unsecured loans like personal loans to consumers, but banks will apply stricter policies to ensure applicants will not default their payments.
Customers tend to lean towards moneylenders for personal loans which would cover their daily expenses and small emergency bills. Of course, small loans in high quantities will only be good for moneylenders if the returns are consistent. Moneylenders do not require clients to send elaborate legal documents and they mostly offer unsecured and no-collateral loans.
Who Can Borrow?
When you apply for personal loans through banks, they will do a thorough check of your credit history and trustworthiness. They will also look into your income sources and how you manage your expenses and their repayments. If you do not have a record with a bank yet, your personal loan application may not be accepted easily. The same would also be said if you have a bad mark in your credit history.
On the other hand, moneylenders can lend to customers who do not have a record yet or those with problems with their credit history. In order to ensure that they do not present a lot of risk for the lender, the loan amount is smaller and loans must be paid at a shorter loan tenure. The interest rates are also higher to ensure the business stays afloat.
What Determines Moneylender Interests?
There are many factors which can contribute to the interest rate imposed by moneylenders on loan applications.
Some of these factors may include:
- Outstanding or pending loan and repayment patterns
- Your Monthly Income
- Residency (If you own the house, renting it or you live with your parents)
- Employment history and Current Job/Business
Ready to Borrow?
Considering these facts about moneylenders and why their interest rates grow, you may need to consider if they really would work for your money needs. A great way to ensure that you borrow from a legitimate moneylender and if they are the ones you should talk to is by researching their service online.
The Singaporean Ministry of Law has the list of licensed moneylenders in the country, which can help you reduce the list of moneylenders you hope to borrow from. There are also blogs which would detail how well these moneylenders respond to inquiries and applications, or if other customers have complaints or other points to raise about these moneylenders.
Once you finish your research, decide which one you will sign with based on the facts you have gotten. Remember, each moneylender is different from one another so their terms, interest rates and conditions vary. If you do your research, you can find the one that would work with your status.
What Else to Remember When Applying for a Loan?
Aside from doing your own research about these moneylenders, here are some other points to consider when applying for a loan:
- When you sign a loan contract with a moneylender, it is binding and all of the parties who have signed have a responsibility throughout the loan tenure. The terms and conditions must be agreed upon by both parties prior to the signing to ensure that you will both abide by the ruling. If one of you breaks the conditions, it may lead to legal action.
- Before you sign the contract, it is ideal you review it before signing. If you are dealing with a loan shark, they will not offer you a contract at all. In this case, consider what they are offering and look into the documents they present. You should also look into the loan tenure being offered because most legal moneylenders only lend for a short period of time.
- You must also take into consideration your income before applying for a personal loan because it will tell you if you can afford an extra liability and prevent the onset of problems when you are unable to pay the premium.
- When you sign, ensure that you get a copy of the contract so you will be able to review the terms and conditions of the personal loan you just agreed to with the moneylender. This will also serve as your backup if your moneylender has made an error with your loan terms.
When you sign your personal loan with a licensed and trusted moneylender which you selected from your research and analysis, you will be assured that you are protected throughout the loan tenure. You won’t have to worry about the interest rate from increasing when you sign with a licensed moneylender, and they will not scare you into paying them if you are late in any way.
Moneylenders close the gaps left by banks who would deny applications of individuals who do not pass their standards. In exchange for their flexible rules, moneylenders do have to increase the rates they charge for their services, especially interest rates.
Regardless of this setback, people should not be held back because of the interest rates since these moneylenders may be the key to solve your financial worries.