Know Your Rights– Overview of Loaning from Licensed Moneylenders in Singapore
What should you do before approaching a moneylender? Read The Money Lenders Act in Singapore!
Please note that you are lawfully bound to meet any loan agreements you get in with a certified money lender. Always bear in mind to ensure you can meet your loan responsibility (contractual and monetary wise).
The laws in Singapore needs all licensed money lenders to discuss the regards to loans to you in a language you are and understand needed by law to supply you with a copy of the contract. Do ensure you understand all terms of the agreement consisting of the payment terms, interest rates and all the appropriate charges included.
It is smart to search for the very best possible deal you can if you require a loan.
How much can you obtain?
For safe loans, there is no limitation to the loan you can secure. For unsecured loans, the quantity you can obtain depends upon your yearly income:
You can borrow as much as $3,000, if your annual earnings is less than $20,000;
You can borrow approximately 2 months’ income if your yearly income is $20,000 or more but less than $30,000;
You can borrow as much as 4 months’ earnings if your yearly income is $30,000 or more but less than $120,000; and
You can borrow up any quantity if your yearly income is $120,000 or more.
Rates of interest That Moneylenders can charge
For loans contracted in between 1 June 2012 and 30 September 2015, lenders are required to calculate and disclose to you the Effective Interest Rate of the loan, prior to the loan is approved. If your yearly income is less than $30,000, the rates of interest which moneylenders can charge, for both protected and unsecured loans, is topped at:
13 percent Effective Interest Rate for secured loans; and
20 per cent Effective Interest Rate for unsecured loans.
The Effective Interest Rate takes into consideration the compounding impact of the frequency of installments over a 1 year duration. This implies that Effective Interest Rate much better reflects the real cost of loaning over a 1 year period. Go to https://www.mlaw.gov.sg/content/rom to learn more about how the Effective Interest Rate is computed from 1 June 2012.
If your annual earnings is $30,000 or more, the caps above are not applicable and rates of interest are to be decided upon between the lender and the customer.
With effect from 1 October 2015, the maximum rate of interest lenders can charge is 4% monthly. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or protected one. If a customer cannot repay the loan on time, the optimum rate of late interest a lender can charge is 4% per month for each month the loan is repaid late.
The calculation of interest charged on the loan should be based upon the quantity of principal remaining after subtracting from the initial principal the total payments made by or on behalf of the borrower which is appropriated to the principal. [To show, if X takes a loan of $10,000, and X has actually paid back $4,000, just the staying $6,000 can be taken into account for the computation of interest.]
The lender can not charge on quantities that are impressive however not yet due to being repaid. To highlight, if X takes a loan of $10,000, and fails to pay for the first installment of $2,000, the lender may charge the late interest on $2,000 but not on the staying $8,000 as it is not due.
How do I know if a lender is licensed?
Never ever borrow from unlicensed lenders. Verify and make sure that a lender is accredited by checking this website by Ministry of Law Singapore. Safeguard your rights by borrowing only from licensed money lenders.
When you are securing a loan from a money lender, please do take note of the following:
You should not give them your SingPass username and password.
They must not use abusive language or threaten you in any manner
You should never ever sign a blank document or insufficient loan agreement.
They have no rights to maintain your NRIC or any individual files.
You need to not accept a loan without comprehending the terms of the loan agreement or if you did not get a copy of the loan contract.
No parts of the principal loan must be kept for any factor.
You must not accept a loan over the phone, e-mail or SMS without going through the correct procedures in looking for a loan a needed by law.
If you experience any of the practice( s) above, please report the moneylender to the Registry of Moneylenders.
What are the costs that lenders can charge?
For loans contracted between 1 June 2012 and 30 September 2015, lenders are only permitted to charge 6 types of costs:
For each event of late payment of principal or interest;
For each occasion the terms of the loan contract are varied at your demand;
For each dishonored cheque released by you;
For each unsuccessful GIRO reduction from a savings account, as payment to the lender;
For early redemption of the loan or early termination of the agreement; and
Legal costs sustained for the recovery of the loan.
Other fees are not permitted and are for this reason not enforceable by the moneylender.
With result from 1 October 2015, all lenders are just permitted to impose the following expenses and charges.
a cost not exceeding $60 for each month of late payment;
When a loan is approved; and, a cost not going beyond 10% of the principal of the loan
legal costs purchased by the court for an effective claim by the moneylender for the recovery of the loan.
The overall charges imposed by a lender on any loan, consisting of interest, late interest, in advance administrative and late cost also can not go beyond a quantity equivalent to the principal of the loan. To highlight, if X takes a loan of $10,000, then the interest, late interest, 10% administrative cost and regular monthly $60 late charges can not exceed $10,000.
If a borrower fails to pay back the loan on time, the maximum rate of late interest a lender can charge is 4% per month for each month the loan is repaid late.
The calculation of interest charged on the loan needs to be based on the quantity of primary remaining after subtracting from the initial principal the overall payments made by or on behalf of the borrower which is appropriated to the principal. To illustrate, if X takes a loan of $10,000, and stops working to pay for the very first installment of $2,000, the moneylender may charge the late interest on $2,000 but not on the remaining $8,000 as it is not due. The total charges imposed by a lender on any loan, consisting of interest, late interest, upfront administrative and late fee also can not surpass an amount equivalent to the principal of the loan. To highlight, if X takes a loan of $10,000, then the interest, late interest, 10% administrative cost and month-to-month $60 late costs can not go beyond $10,000.