All too often, when people hear the word moneylender, tales of aggressive collection, exorbitant interest rates, and dinky offices staffed by dubious individuals come to mind, thanks to the notorious activities of loan sharks. Not only is this unfair to the individuals who are deprived of the services of legitimate moneylenders, but also unfair to licensed moneylenders who go above and beyond to ensure the integrity of their business.
Those familiar with us (Lendingpot) know that we are vocal advocates for helping consumers gain access to the best loan outcomes. Read on as we set about debunking common myths of moneylenders in Singapore.
Starting with the most common misconception: licensed moneylenders and loan sharks are the same. In no way is this true, in practice and spirit.
Licensed money lenders are financial institutions that are authorised by the Ministry of Law (MinLaw) to provide loans to individuals or businesses. They operate under a strict set of regulations aimed at protecting borrowers from predatory actions. Verifying the legitimacy of a moneylender is easy: simply check the moneylenders name against the complete list of licensed moneylenders provided by MinLaw.
Another misconception associated with moneylenders deals with taking your ATM Card. Some believe that, should you default on the loan, moneylenders can use your ATM card and withdraw the cash out on their own.
Keep your NRIC card or any other forms of personal identification (such as a driver’s license, passport, work permit, employment pass, or ATM card) safe and secure, as moneylenders are not permitted to hold onto these documents. If your moneylender asks you for them you can report them to Ministry of Law, otherwise, stop dealing with them immediately as they may not be licensed.
Many people are concerned that moneylenders will hound them if they can't make repayments to their loan. This is completely false. Licensed money lenders are regulated by the Ministry of Law. This means they are explicitly prohibited to resort to such methods. Moneylenders that employ these tactics risk getting their licence revoked and should be reported to the National Crime Prevention Council’s X-Ah Long hotline at 1800-924-5664.
Read more: Your Ultimate Guide to the Moneylenders Act in Singapore
Contrary to popular belief, borrowing from a licensed moneylender does not automatically damage your credit score. In fact, responsible repayment habits can contribute positively to your credit history. However, a history of late payments or defaults can negatively impact your creditworthiness.
While licensed moneylenders can be great for people with less-than-ideal credit scores, it's not accurate to say that only people with bad credit utilise licensed moneylenders. They provide a range of solutions that are beneficial for various financial situations. For example, moneylenders tend to have shorter processing times compared to banks, this can be especially useful for borrowers who need quick access to funds for an emergency.
Not all licensed moneylenders require collateral to secure a loan. Unsecured loans are available, depending on the amount borrowed and the borrower's individual creditworthiness. However, in some cases, you may be able to negotiate better terms and lower interest rates by offering collateral.
Some people are wary of working with moneylenders, for fear of perpetuating a cycle of debt. The concern is that moneylenders will offer you more money than you can actually afford. This couldn’t be further from the truth.
Licensed moneylenders are required by law to offer not more than 6 times of your monthly income on an aggregated basis. Also, if you are self-excluded, they are also not allowed to lend money to you.
Read more: 5 Factors to Consider When Choosing a Moneylender
We hope this article has helped clear some things up about moneylenders in Singapore. Licensed moneylenders can be a viable option when you need financial assistance. By understanding the regulations, separating truth from fiction, and being a conscientious borrower, you can make the most out of borrowing money from licensed moneylenders without sacrificing your long-term financial stability.
If you are looking for a loan, you’ve come to the right place. Register today to gain access to competitive rates from more than 20 lenders registered on our platform. If you wish to consult an expert, you can always reach us here.
.png)
.png)
