Borrowing money is a practice that has been there for centuries. In fact, lending has become a desirable sector lately. As the world’s economy grows, there is an increase in demand for funds all over. Individuals borrow for various reasons. Some borrow to start a venture, while others borrow for personal purposes. The banks and other formal institutions cannot accommodate the needs of individuals. Besides, some people cannot meet the required criteria required by some of these institutions. This means they need to seek alternative sources of funding.
Today, individuals can borrow from friends and family members and meet finance whatever they wanted. Our emphasis today is on moneylending. We want to respond to an interesting question – is money lending legal in Singapore? Let us begin understanding what money lending really is.
What is Moneylending?
Moneylending refers to the act of providing cash loans with repayment to be made within a short period. It may also involve the supply of goods and services in some cases. Importantly, the following institutions are not considered moneylenders:
- Banks
- Building societies
- Insurance companies
- Credit unions
Moneylenders are basically individuals or organizations whose main objective is to lend money.
Is Moneylending Legal in Singapore?
The answer is yes. Moneylending is legal. Moneylenders are expected to have a license to participate in this business. Before a permit is granted, the central bank of Singapore considers several factors, among them the trading background of the applicant, their reputation, and the amount they intend to charge for credit. With this in mind, let us now look at some of the basics you need to know.
What to Consider While Applying for A Loan
- The interest rates charged are often high, and so before applying, try to consider other options like different financial schemes provided different government agencies.
- You are legally required to fulfill any contractual agreement you enter into with any licensed moneylender. For this reason, you must go through the terms of the loan carefully and understand before appending your signature.
- Assess your capacity to abide by the contractual terms considering your level of income as well as your current financial obligations. At all times, borrow safely. Borrowing safely has a broader meaning, but in this context, it means you should apply only for the amount you need and capable of repaying. Remember that if you will be unable to repay the loan, which will be a huge burden, not only to you as an individual, but also to your family.
- According to the law, it is the responsibility of moneylenders to all the essential terms of the loan and offers you a copy of the contract. Ensure you understand all the aspects of the contract, especially the repayment schedule, the rates charged, and any applicable fees.
- Moneylenders in Singapore charge different rates. You need to shop around to get a lower rate.
How Much Can You Borrow?
In case you need a secured loan, there are no restrictions as to the amount you should borrow. Nevertheless, there limits on unsecured loans, which also depends on several factors. If you are a Singaporean citizen or a permanent resident with an income of less than $10,000, you can borrow a maximum of $3000. In case you are a foreign resident, you are restricted to a maximum of $500 if you are in the same income level. However, if you are a foreigner with an income of more than $10,000 but less than $20,000, you can borrow up to $3000. Additionally, if you earn at least $20,000, you can borrow up to 6 times your monthly earnings, irrespective of your citizenship status.
What Rates Can Moneylenders Charge?
You’d expect some capping here because the business is guided by the law. Right from October 2015, the rate charged is 4% each month, applicable irrespective of the applicants’ income level or whether the loan is secured or unsecured. Also, the law requires that in case one does not repay the loan in time, a 4% monthly charge is applied for each of the months the repayment is late. The late interest only and only applies to the amount repaid late. This means it is unlawful to apply the late interest charge on the outstanding balance not yet due.
Which Fees Can Be Charged?
The following are the acceptable charges, right from the year October 2015:
- A fee of not more than $60 for every month of late payment
- A fee of not more than 10% of the principal loan amount.
- Legal costs required by a court of law in case of a successful claim by the lender in an attempt to regain the loan.
Also, the overall charges on a loan that includes the sum of the interest, late interest and other applicable charges, should not be more than the loan amount.
How to Identify A Licensed Moneylender
Only borrow from legit and reputable moneylenders, such as A1 Credit for more info click here. Do not borrow from an unlicensed moneylender. The list of licensed moneylenders in Singapore is available online. Be very concerned in case a moneylender:
- Becomes abusive appears threatening
- Demands your SingPass user ID and password, or any of the two.
- Keeps your NRIC card or any kind of personal ID documents such as a driver’s licence, your passport, your work permit and ATM among others.
- Asks you to append your signature to a blank contract form.
- Gives you a loan without offering you a copy of the contract for the same loan. Do not accept the loan unless the moneylender explains everything about the terms of the loan to you.
- Offers you a loan without carrying out proper due diligence.
- Fails to offer the full principal amount of the loan for whatever reason.
The above practices are unacceptable, and in case you encounter of them, report the incidence to the Registry of Moneylenders.
The Bottom Line
Moneylending is legal in Singapore. You are supposed to be acquainted with the provisions of the law while dealing with money moneylenders. In this blog, we have covered the basics that you need to understand. How can you become a legal moneylender? We will answer that question in our next blog. Do not miss it.