In emergencies, stress often leads people to turn to less-than-ideal solutions to solve a problem: like using water to put out a grease fire or a tourniquet to stop a bleeding wound.
In urgent situations that require monetary assistance, many have acquired loans with unfavourable conditions or worse, turned to unlicensed moneylenders - which almost always causes more problems than it solves.
Today, we present 5 factors to consider when choosing a moneylender.
Before deciding on a moneylender, it is imperative that you ensure that they are credible.
But what does credibility mean in this case? Simply put, it means that the lender abides by all laws and regulations set out by the Ministry of Law. This is pertinent because these laws and regulations are set out to protect borrowers from predatory lenders.
What are some ways to check the credibility of a lender? Doing research using their company or business website is a start, but it would be better to consult the Ministry of Law’s list of licensed moneylenders.
It also helps to consult trusted services like Lendingpot that aggregates pre-screened lenders for you to apply. Another good way to check on the lender is through their google reviews and to cross check against the experience of others.
When choosing between moneylenders, you’ll also need to consider the types of loans they offer. As you might expect, different loan types may carry different uses, along with different requirements and limitations.
To illustrate: if you need a large loan to buy an expensive asset such as a house or car, it may serve you better to acquire the loan from a large financial institution such as a bank. A loan from a smaller lender may be easier to acquire but carries along higher interest rates.
If you only need a small amount of money, licensed moneylenders may be the best way to go, as they generally offer shorter loan tenors and have more lenient requirements as well. Typically a small amount is no more than 6 times of your monthly income.
Banks and licensed moneylenders are the two most common sources for loans. Besides differences in loan amounts that you can extract, both also vary in loan requirements.
Banks tend to have lengthy processes and more stringent requirements for loans compared to moneylenders. This, of course, doesn't mean that banks are a bad choice for a loan. It just means that you would be well served by knowing all of the documents, paperwork, and other prerequisites to have in order before you make your loan application.
The better you can prepare the requirements beforehand, the smoother your loan application will be, and the faster the loan funds will appear in your account.
Working with trusted services that are familiar with the requirements of banks and licensed moneylenders can also help streamline and expedite the loan application process, and also increase the chances of receiving an offer from them.
Another important point to clarify when choosing a moneylender is: Do they require borrowers to pledge collateral during the application process?
The quick answer is no as most moneylenders lend on an unsecured basis. However if you require a larger loan quantum you can secure your loan against assets like your property. Neither type is superior to the other, and each has its own advantages.
For example, secured loans may be tougher for borrowers initially since they must provide collateral; but that also means that borrowers get to pay lower interest rates and get a bigger loan quantum. On the other hand, unsecured loans require no collateral, which for many is a benefit in and of itself. What it all boils down to is your needs and preferences.
It goes without saying that repaying loans isn’t as simple as paying back the amount borrowed; naturally, you’ll have to pay it back with some interest. However, the devil’s in the details; it’s crucial that you know what your options are in terms of interest rates and what it translates to in terms of payment.
The good thing is that all Minlaw approved moneylenders are required to publish the effective rate of the loan which takes into account a reducing principal balance. There is also a cap on the interest rate that they can charge which is up to 4% per month and an admin fee of no more than 10%. With that knowledge you will be able to best protect your self against errant interest rate pricing.
Beyond interest rates, it pays to keep a keen eye on the repayment terms that a lender offers. Some of the questions you need to ask yourself and/or the lender include:
Before signing any contracts, get a clear understanding of how your repayment schedule will unfold to avoid situations that may negatively impact your financial health.
Often, the biggest challenge when choosing a moneylender is actually finding one that offers favourable terms. This is one of the main issues that Lendingpot aims to address.
Our platform connects borrowers to lenders such as established banks, licensed moneylenders, and other financial institutions through a process that is not only speedy and cost-effective but also backed by expert advisory. What differentiates us from the rest is that we put power in the hands of the borrowers: you need only submit a single application to receive multiple competitive offers from partner lenders on our platform.
You can find a variety of different loan products, from personal loans to mortgage loans. If you’re overwhelmed by all the options available, our dedicated support team is always ready to offer you assistance or advice.
Click here to begin your application. As ever, we remain committed to helping consumers receive the financial products they deserve.