The Moneylenders Act governs moneylending in Singapore, and there are around 160 licensed moneylenders in Singapore. The Rules and Regulations were developed to ensure that moneylending activities are carried out honestly, fairly, professionally, prudently, and without causing financial or other harm to borrowers.
The Moneylenders Act (Rule 3(3)) also specifies that persons who need to borrow money should not be compelled to use more than one moneylender. No moneylender should harass or exert undue influence on borrowers.
Thus, it is not surprising that borrowers often “shop” around before borrowing from moneylenders. If you are one of those who are currently looking for funds but are unable to secure approval from the banks or your relatives, here are some of the questions that you should ask a potential moneylender:
Are You a Licensed Moneylender?
The Moneylenders Act in Singapore states that any person who wishes to carry out the lending business must apply for and be granted a moneylending license under section 6(2) of the Act.
All moneylenders must display, either at their business premises or in any other public place where their activities are carried out, a list of particulars prescribed by the Registrar under section 12(1) of the Act. If you are unsure, go to the government website for more information on checking if they are licensed moneylenders
How Much Will You Have to Pay as Interest?
This information is essential for you to know before taking out a loan to compare among different moneylenders or loans offered to you. Moneylenders are prohibited from charging any interest on an unsecured loan that is deemed “exorbitant” or higher than what the law allows.
What are the Terms and Conditions of Your Loan?
You need to know what interest rate is being charged and whether there is a late payment penalty.
In addition, ask for information on how much you would have to pay as administrative fees, arrangement fees, or other charges that the moneylender may impose. To help you compare, you can look at the comparison table of interest rates for various types of loans offered in Singapore.
How Much Money Do You Have to Pay as a Cash Advance Fee?
A cash advance loan is a short-term loan that an individual can take out from a licensed moneylender to meet his immediate financial need (e.g., paying for an urgent/imminent expense).
Cash advance loans are generally more expensive than unsecured personal loans, so you should know the details before borrowing from a licensed moneylender.
Where is Your Business Located?
You should do some research on the location of all financial institutions, including moneylenders, to make sure they are within the vicinity.
When you need to borrow money, it is best to go to a moneylender near you. This can save time and effort as well as ensure that the business hours are convenient.
How Much is the Highest and Lowest Loan Amount You Lend?
Some moneylenders will require you to borrow a certain minimum amount, while others may be flexible enough to accommodate your cash needs. Hence, you should find out what their requirements are before deciding on whether to borrow from them or not.
What is the Duration of the Loan Repayment Period?
Longer repayment tenure means that you will have to pay a more significant sum as interest than you would for a shorter term. If possible, always try to borrow with the shortest repayment tenure so that your monthly installments will be affordable and less burdensome on your finances.
Do You Require the Borrower to Provide Any Documents?
Before signing an agreement, the moneylender may ask for certain documents such as NRIC or employment pass, driver’s license, or other means of identification. You should always check if the documents are required by law and ensure they are necessary before providing them to the moneylender.
What are Your Charges, and Are There Any Hidden Fees?
You should always ask for an estimate of the fees you have to pay before deciding. You don’t want to get a nasty surprise when you receive your statement later on, so it’s best to check beforehand if there are additional charges or hidden costs involved.
Going to a licensed moneylender is one of the best alternatives for borrowing money because the interest rates are lower than what you would have to pay if you borrow from unlicensed lenders.
As long as you conduct your research and due diligence before borrowing any money, it’s unlikely that you will be mis-sold a loan by a licensed moneylender. In such a case, be sure to lodge your complaint with the relevant authorities for further action.