Know Your Rights– Overview of Borrowing from Certified Moneylenders in Singapore
Exactly what should you do before approaching a moneylender? Read The Money Lenders Act in Singapore!
Do consider other means of monetary support such as those offered by the various government companies. Please note that you are legally obligated to meet any loan contracts you enter with a certified money lender. Always bear in mind to ensure you can satisfy your loan obligation (legal and monetary wise). It is always recommended to borrow only exactly what you can pay back.
The laws in Singapore needs all licensed money lenders to describe the regards to loans to you in a language you are and understand required by law to supply you with a copy of the contract. Do ensure you understand all terms of the agreement consisting of the repayment terms, interest rates, and all the suitable costs involved.
It is wise to look around for the best possible offer you can if you need a loan.
What does it cost? can you obtain?
For secured loans, there is no limit to the loan you can protect. For unsecured loans, the amount you can borrow depends upon your annual earnings:
You can obtain as much as $3,000, if your yearly earnings is less than $20,000;
You can obtain up to 2 months’ earnings if your annual earnings is $20,000 or more, however, less than $30,000;
You can borrow as much as 4 months’ earnings if your annual earnings is $30,000 or more but less than $120,000; and
You can borrow up any amount if your annual income is $120,000 or more.
Rate of interest That Moneylenders can charge
For loans contracted between 1 June 2012 and 30 September 2015, lenders are required to calculate and reveal to you the Effective Interest Rate of the loan, before the loan is approved. If your annual earnings are less than $30,000, the rate of interest which lenders can charge, for both secured and unsecured loans, is capped at:
13 per cent Effective Interest Rate for protected loans; and
20 per cent Effective Interest Rate for unsecured loans.
The Effective Interest Rate takes into consideration the compounding result of the frequency of installments over a one-year duration. This suggests that Effective Interest Rate better reflects the real cost of borrowing over a one-year period. Check out https://www.mlaw.gov.sg/content/rom to find out more about how the Effective Interest Rate is computed from 1 June 2012.
The caps above are not suitable and the interest rate is to be concurred upon in between the moneylender and the borrower if your annual income is $30,000 or more.
With impact from 1 October 2015, the optimum rate of interest moneylenders can charge is 4% each month. This cap uses despite the borrower’s earnings and whether the loan is an unsecured or protected one. If a debtor fails to pay back the loan on time, the maximum rate of late interest a moneylender can charge is 4% each month for each month the loan is paid back late.
The computation of interest charged on the loan needs to be based upon the amount of principal remaining after subtracting from the original principal the total payments made by or on behalf of the debtor which are appropriated to the principal. [To illustrate, if X takes a loan of $10,000, and X has paid back $4,000, only the staying $6,000 can be considered for the calculation of interest.]
The lender can not charge on quantities that are outstanding but not yet due to being repaid. To illustrate, if X takes a loan of $10,000, and stops working to pay for the first installment of $2,000, the lender may charge the late interest on $2,000 however not on the staying $8,000 as it is not due.
How do I understand if a lender is licensed?
Never ever obtain from unlicensed moneylenders. Ensure and confirm that a lender is certified by examining this site by Ministry of Law Singapore. Protect your rights by obtaining just from certified money lenders.
When you are securing a loan from a money lender, please do keep in mind of the following:
You ought to not provide your SingPass username and password.
They must not utilize abusive language or threaten you in any manner
You must never sign a blank file or insufficient loan contract.
They have no rights to keep your NRIC or any individual documents.
You ought to not accept a loan without understanding the terms and conditions of the loan contract or if you did not get a copy of the loan agreement.
No parts of the primary loan should be withheld for any factor.
You need to not accept a loan over the phone, email or SMS without going through the appropriate treatments in requesting a loan a required by law.
If you encounter any of the practice( s) above, please report the lender to the Registry of Moneylenders.
What are the costs that moneylenders can charge?
For loans contracted between 1 June 2012 and 30 September 2015, money lenders are just allowed to charge six types of fees:
For each celebration of late repayment of principal or interest;
For each occasion the regards to the loan contract differ at your demand;
For each dishonored cheque provided by you;
For each not successful GIRO deduction from a savings account, as payment to the moneylender;
For early redemption of the loan or early termination of the agreement; and
Legal costs incurred for the healing of the loan.
Any other costs are not permitted and are hence not enforceable by the moneylender.
With impact from 1 October 2015, all lenders are only allowed to enforce the following charges and expenses.
a fee not exceeding $60 for each month of late repayment;
a charge not surpassing 10% of the principal of the loan when a loan is approved; and
legal expenses purchased by the court for an effective claim by the lender for the recovery of the loan.
The total charges imposed by a moneylender on any loan, including interest, late interest, upfront administrative and late charge likewise can not surpass an amount equivalent to the principal of the loan. [To show, if X takes a loan of $10,000, then the interest, late interest, 10% administrative cost and regular monthly $60 late charges can not go beyond $10,000.]
If a customer fails to repay the loan on time, the optimum rate of late interest a moneylender can charge is 4% per month for each month the loan is paid back late.
The calculation of interest charged on the loan should be based on the amount of primary staying after deducting from the original principal the overall payments made by or on behalf of the debtor which are appropriated to the principal. To highlight, if X takes a loan of $10,000, and stops working to pay for the very first installment of $2,000, the lender might charge the late interest on $2,000 however not on the remaining $8,000 as it is not due. The total charges imposed by a moneylender on any loan, consisting of interest, late interest, upfront administrative and late charge likewise can not go beyond a quantity equivalent to the principal of the loan. To show, if X takes a loan of $10,000, then the interest, late interest, 10% administrative fee and monthly $60 late fees can not exceed $10,000.