Things to keep in mind when you apply for a loan from a licensed money lender

There are times in life when most of us require to apply for a loan. However, often the process sounds daunting and full of paperwork and formalities making it sound less smooth than it can actually be. However, with a little bit of research and the right guidance the process to apply for a loan can be an easy-breezy one. 

The best way to apply for a loan can be either through a bank or a licensed money lender in Singapore. If you too are considering to apply for a loan through a money lender in Singapore, here’s everything you need to acquaint yourself with 

Contractual terms

Goes without saying that before you apply for a loan, you should make a serious note of your income and the new financial obligations you are about to undertake. This is an extremely important step as the loan is directly going to affect your monthly cash flow.

When you enter into a loan contract with a bank or a licensed money lender you are legally bound to fulfil the loan contract. If you are unable to repay the money in time there would be repercussions like late payment fees and penalties. So, to avoid this inconvenience it is better to borrow the amount you are in a position to safely repay. 

Loan Contract

When you apply for a loan you are legally authorized to ask for a copy of the loan contract. Any licensed money lender or a bank would provide you with a document that clearly states all the details such as the interest rate, repayment schedule as well as fee for the contract. 

Look for the best option

In financial matters, it is important to be well versed with the terms and conditions before you commit yourself and sign any contract. It makes sense to research well and look for all the options that you might have. So look at the various interest rates being offered by different money lenders and pick one which offers the lowest and most reliable plan according to your needs. 

Interest rates

When you apply for a loan the most crucial factor remains the interest rate being offered to you by the money lender and, to make a more informed decision, you need to know what the law says about interest rates. 

According to the law in Singapore, you cannot be charged any interest rate exceeding 4% per month, which is regardless of the amount you may borrow and your income bracket.

Another important detail that many borrowers tend to miss out on is that the computation of interest that will be charged in case of non-payment is to be calculated on the remaining principal and not the total amount at the time of entering into a contract. 

What is the fee the borrower is liable to pay?

According to rules in Singapore, a money lender cannot charge you a fee exceeding S$60 for each month of late repayment and it should not exceed 10% of the principal of the loan. Also, the administrative fees can never exceed the principal amount the borrower is set to apply a loan for. 

Verify your money lender 

It makes sense to do a thorough background check on the money lender you are trusting with for probably one of the most important financial decisions of your life. Always check that the money lender holds a valid license

Do not ignore any unnecessary requests

If your money lender asks for your username or password or your Singpass you need to get alarmed. Never share these details. Also any interaction with the borrower must be in a clear, transparent manner. If you feel your money lender is not providing you with all the details you need or is behaving in less than a cordial way, be assured that the law is with you. You can report his behaviour to the registry of moneylenders. 

Know the source where you heard from

Very often people tend to contact a money lender after seeing an advertisement. But did you know that under the advertising rules in Singapore, a moneylender can only advertise for their services through three of these sources:

1.Business directories as well as consumer directories in media (print as well as online) 

2. Moneylenders’ website 

3. Advertisement placed at the moneylenders’ business premise.