At some point in life, everyone needs a little extra money.
For some, it is for a sudden emergency.
For others it is a big purchase like a car, home, or exotic vacation. Sometimes they have the money, but they do not want to part with it in one lump sum.
Regardless of your reasons for taking out a personal loan, it is important to understand your options so that you can make the best decision for you.
Banks offer the lowest rates and the longest payment terms in the money lending industry. This is an ideal for someone who wants to make a big purchase with the payments spread over years.
Banks do have their drawbacks. A bank requires a great deal of documentation, paperwork, and proof of income and identity. It can take weeks or even months to secure a loan, which makes it a poor choice in an emergency situation.
They are also very cautious about who they loan to. They typically favor those who do not ‘need’ the loan or have ample means to repay it. Poor credit ratings and lack of proper documentation can mean high interest rates or even a rejection on your application.
Licensed Money Lenders:
A licensed money lender can be quickly verified on the Registry of Money Lenders. They are the best suited for fast, short term emergency payday loans and small loans for trips or other moderate expenses. They are also ideal for foreign workers and temporary citizens.
Singapore’s Moneylender Act requires all money lenders to operate under a license, and it strictly regulates what the lender can charge.
They also have restrictions on how they can collect on debts. Those caught violating the Money act can face revocation of their license, heavy fines, and even jail time. The licenses are very difficult to attain, so a licensed lender will be more careful about violating these rules.
Licensed money lenders have a much faster application process and have lower requirements for approval than a bank. Most will also take small risks with loans to foreigners within certain guidelines and people with little to no credit history. Because of these higher risks, they charge much higher interests rates and have shorter loan terms than a bank.
Unlicensed Money Lenders:
An unlicensed money lender, also known as a loan shark, are to be avoided at any cost. According to the Money Act of 2010, they are operating illegally in the country of Singapore. Because they are not regulated, they engage in business practices that can lead to ruin for a debtor.
They lend money to the desperate under unfair terms and excessive interest rates. They may demand payment early, change the payment terms without warning, or even engage in violence against you to collect the debt. Harassment and intimidation are common in the business. They may even hire young thugs to damage your property or harass you in exchange for quick cash, or force you to engage in illegal activity in exchange for relieve from the attacks.
What to Do if You Are a Victim:
Sometimes we choose poorly out of desperation. Sometimes a bad lender poses as a legitimate business. Regardless of the circumstance, you are protected by the Money Act of 2010. If you are a victim of harassment, vandalism, or threat of injury, you still have rights and protections regardless of how the situation came about. Contact the Insolvency & Public Trustees Office (IPTO) and your local police department immediately.
There are benefits and drawbacks to every method of borrowing money. The best methods are those that are government regulated like banks and licensed money lenders. Each one is ideal for specific circumstances. Avoid engaging with unlicensed money lenders, as they are operating outside the law. And regardless on which method you choose, if you are victim of harassment and poor lending practices contact the proper authorities right away.