15-Step Checklist [Infographic] to Select the Right Moneylender
Everyone faces financial troubles at some point or the other, but you might not necessarily be eligible for a bank loan. If you’ve considered other government assistance schemes and are still lacking options, a licensed moneylender may be the right choice for you.
Perks of choosing a moneylender include an easygoing eligibility criteria and flexible repayment options. However, one must also be wary of loan sharks and their predatory lending schemes, which can only do more harm than good.
You can consider a moneylender for a foreigner, payday, business or personal loan. Keep in mind, however, that there are other factors which come into play, such as – legal obligations to fulfil the loan contract and contractual terms. Borrowers should also know about Effective Interest Rates or EIR. Take up a loan only when you completely understand the terms and conditions and are satisfied with them.
Here is a handy 15-step checklist we’ve created to help you select the right moneylender with ease:
Here is a more detailed version for your reference:
- Choose a Licensed Lender – View the complete list of licensed moneylenders.
- Check the Interest Rates – With effect from 1 October 2015, the following rules apply:
- The max. interest rate moneylenders can charge is 4% per month, regardless of a borrower’s income level & whether the loan is secured/unsecured
- For late payments, the max. rate of late interest a moneylender can charge is 4% per month
- Interest charged on the loan is based on the amount remaining after deducting from the original principal the total payments made (e.g. for a loan of $1,000 for which $500 has been repaid, only the remaining $500 can be considered for computation of interest)
- Late interest fees can’t be charged on outstanding amounts that aren’t yet due to be repaid (e.g. for a loan of $2,000, if the first instalment of $500 hasn’t been paid for, the lender can charge late interest on $500, but not on the remaining $1,500 as it’s not due yet)
- Know the Repayment Rules – Each contract for a loan must provide for the payment of equal instalments at equal intervals of time.
- Understand Business Loan Rules – A business loan means a loan granted by a licensee to:
- A company incorporated under the Companies Act (Cap. 50), or under any corresponding previous legislation, at least 2 years before the loan grant
- A limited liability partnership registered under the Limited Liability Partnerships Act (Cap. 163A) at least 2 years before the loan grant
- A person registered under the Business Registration Act (Cap. 32) at least 2 years before the loan grant
- Know the Borrowing Limit – For secured loans, you can obtain a loan of any amount. For unsecured loans, the following applies:
- Up to $3,000, if your annual income is less than $20,000
- Up to 2 months’ income, if your annual income is $20,000 or more but less than $30,000
- Up to 4 months’ income, if your annual income is $30,000 or more but less than $120,000 &
- Any amount, if your annual income is $120,000 or more
- Verify the Charges & Expenses – With effect from 1 October 2015, moneylenders are required to impose the following:
- A max. fee of $60 for each month of late repayment
- A max. fee of 10% of the principal of the loan, when a loan is granted
- Legal costs ordered by the court for successfully claiming recovery of the loan
- Total charges incl. interest, late interest, upfront administrative & late fee can’t exceed the principal loan amount (e.g. for a loan of $5,000, the interest, late interest, 10% administrative fee & monthly $60 late fees can’t exceed $5,000)
- Watch Out for Unethical Practices – Avoid borrowing from moneylenders who:
- Use abusive language or threatening mannerisms
- Ask for your SingPass user ID and/or password
- Try to retain your NRIC or other personal identification documents (e.g. driver’s license/passport)
- Ask you to sign on a blank/incomplete Note of Contract for the loan
- Grant you a loan without giving you a copy of the Note of Contract and/or without a proper explanation of the terms & conditions
- Withhold any part of your principal loan amount for any reason
- Use a mobile telephone no. as their business contact no.
- Know the Right Advertisement Channels – Licensed moneylenders are only authorized to advertise through:
- Business or consumer directories (e.g. Yellow Pages)
- Websites belonging to them &
- Ads placed within or outside their business premises
- Ensure you receive the Full Principal Amount of the Loan – Licensed moneylenders are not allowed to make up-front deductions of instalments/fees.
- Verify that you receive a Dated, Signed & Correct Receipt – This is applicable each time you repay your loan or pay any fees in cash. Other details such as name & amount should also be checked.
- Check for a Statement of Account – You should be receiving one at least once every 6 months. Verify that other details such as name, amount & date are correct.
- Keep all Statements of Accounts & Receipts – You might need to show proof of payment at any stage, so it’s best to retain all such documents.
- Understand the Contract Terms – This includes the repayment schedule, the interest rate charged, applicable fees & a lodged caveat against your property.
- Compare Various Moneylenders – Don’t commit to a loan unless you’re completely satisfied with the terms & conditions. Look around for a moneylender that provides the most favorable terms.
- Understand your Responsibilities as a Surety – Ensure that:
- You receive a copy of the Note of Contract at the time that the loan is granted to the borrower
- The moneylender has explained the terms in the Note of Contract in a language you understand
- The moneylender doesn’t keep your NRIC card or other personal ID documents (such as driver’s license & passport) &
- The moneylender doesn’t acquire passwords to your user accounts (such as SingPass account & Internet banking account)
Now that you have a checklist for borrowing wisely, you can go ahead and find the right moneylender!