Signed and legit: When dealing with a licensed moneylender, make sure it abides with moneylending rules and regulations. Photo credit: Pexels

In Part 1 of this article, we discussed the modus operandi of loansharks and why you should never borrow from them.

Sad to say, it doesn’t mean all licensed moneylenders are good just because they aren’t loansharks. It takes all sorts to make a world; so there are good, law-abiding moneylenders and errant ones too. The trick is being able to tell them apart.

Protect yourself (and your sanity) by knowing what to expect when borrowing from a licensed moneylender.

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How much can you borrow from a licensed moneylender?

Singaporeans and permanent residents whose annual income is less than $10,000 can borrow $3,000. Foreigners living here with the same annual income can borrow $500.

Singaporeans, permanent residents and foreigners whose annual income is at least $10,000 but less than $20,000 can borrow $3,000.

All three groups of borrowers who earn at least $20,000 per year can borrow 6 times of their monthly income.

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What about the interest rate?

From 1st October 2015, licensed moneylenders can only charge not more than 4% interest per month – regardless of the borrower’s income and whether the loan is a secured or unsecured loan.

This interest should only be charged on the principal amount remaining after part of the loan has been paid off. So if you borrow $3,000 but have repaid $1,000, interest should only be charged on the remaining $2,000.

Interest can only be charged on payments that are due but late; not unpaid but yet to be due. So if you borrow $3,000 and are due to pay the first instalment of $500 but can’t pay on time, the moneylender can only charge late interest on the $500 – and not the $2,500 because it is not due yet.

From 1st October 2015, licensed moneylenders can only impose the following fees and charges:

• A one-time fee of not more than 10% of the principal of the loan when a loan is granted;
• Not more than 4% interest per month;
• Late interest rate of not more than 4% interest per month;
• Not more than $60 for each month of late repayment; and
• Legal costs ordered by the court when the moneylender recovers a loan successfully.

Lastly, the total charges imposed by a moneylender that comprise interest, late interest, administrative and late fees must not exceed the loan principal.

So for example if you borrow $3,000, the interest, late interest, a one-time 10% administrative fee and monthly $60 late fees must not exceed $3,000.

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Other points to note

Before getting a loan from a licensed moneylender:

• Make sure you have explored all avenues (e.g. government assistance schemes, social aid, etc).
• Ensure you are able to pay back what you borrowed. There will be penalties for late repayments.
• Take your time to check out different licensed moneylenders before coming to a decision. Some may offer better rates than others.

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When signing the loan agreement:

• Ask any questions you may have. The licensed moneylender is obliged to answer all your questions in a language that you understand.
• Make sure you understand the terms and conditions, especially those pertaining to the interest rate, repayment schedule and applicable fees.
• Read the fine print carefully.
• Ensure you get a copy of the signed loan agreement from the licensed moneylender.
• You should get a separate cautionary statement in writing from the licensed moneylender.

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After signing the loan agreement:

• Check that you get the correct principal amount from the moneylender.
• Pay your loan instalments on time – late interest and late payment fees will be charged for late repayments.
• You must receive a receipt for every repayment made toward the loan. Check that the details (your name, the amount and date) are correct.
• You should be provided with a statement of accounts every half yearly – in July or January. Check that all the details are correct.
• Keep all your statements of accounts and payment receipts as proof of documentation.

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Help is at hand

If you feel you have been unfairly treated by the moneylender, you can approach the Small Claims Tribunal or the Court under the Consumer Protection (Fair Trading) Act for help.

However, if you are unable to pay your loan instalments, the Registry of Moneylenders cannot intervene – as the loan contract is an agreement between you and the moneylender.

But you may approach the following social service agencies to get help on how to manage your debt repayment:

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• Adullam Life Counselling

Address: 151 Chin Swee Road #08-04 Manhattan House Singapore 169876

Tel no: 9423 8832

E-mail: admin@adullam.org.sg

• Association of Muslim Professionals (AMP)

Address: 1 Pasir Ris Drive 4 #05-11 Singapore 519457

Tel no: 6416 3960

E-mail: corporate@amp.org.sg

• Arise2Care Community Services

Address: No. 5 Harper Road #02-01A Singapore 369673

Tel no: 6909 0628

Email: admin@arise2care.sg

• Blessed Grace Social Services

Address: 18 Arumugam Road, #05-01 Antioch@MacPherson Singapore 409962

Tel no: 8428 6377

Email: billy.lee@blessedgrace.org

• One Hope Centre

Address: 8 New Industrial Road #04-04B LHK 3 Building Singapore 536200

Tel no.: 6547 1011

Email: help@onehopecentre.org

• Silver Lining Community Services

Address: (East) 11 Playfair Road Singapore, (West) Jurong Spring CC, 8 Jurong West St 52 Singapore 649296

Tel no: 6749 0400

E-mail: admin@silverlining.com.sg