How to Spot an Illegal Moneylender Before Borrowing Money?
The pandemic has increased unemployment rates in many countries, and Singapore is no exception. It has led to an increase in the need for cash for personal reasons or emergency issues.
The money lending business has become a vital part of Singapore’s economy. If you have lost your job or are looking for options to borrow money from private money lenders, you are at the right place.
Read on to find out more about ways to spot the differences between a licensed money lender and an unlicensed one in Singapore.
Who is a Money Lender, and When should You Approach One?
A money lender is either a public or a private financial organisation or a licensed individual who lends funds to people or businesses for a predetermined interest rate. Loan repayments can be made on a monthly, quarterly, half-yearly, or annual basis.
Before passing the loan amount, a lender evaluates various factors like the borrower’s savings, outstanding debts, credit score, income, assets, and investments.
A licensed money lender in Singapore is eligible to lend loans to Singapore citizens and foreigners who are employed. Legal money lenders strictly follow the government’s rules according to the Singaporean Ministry of Law (MinLaw).
Private money lenders come in handy when you have a bad credit score. The only drawback with private money lenders is they charge higher interest rates compared to public financial institutions like banks.
Here are a few benefits of choosing a money lender to borrow in Singapore.
- Compared to public banks, money lenders approve loans faster. The documentation process is slower in traditional banking systems. Hence, money lenders are a wise choice when you need emergency cash.
- Private lenders are flexible in terms of the loan amount and repayment options.
- A poor credit score increases the chances of your loan getting disapproved by Moneylenders are easy-going with your credit score.
- Private financial institutions offer 24-hour service to customers.
Problems with Borrowing Money from Unlicensed Money Lenders
Unlicensed or illegal money lenders, also referred to as loan sharks, are a huge problem in Singapore. According to reports, Singapore registered around 3,344 illegal moneylending harassment cases in 2020.
Here are a few reasons to avoid taking a loan from unlicensed money lenders.
- Desperate borrowers often fall prey to deceitful and unauthorised money lenders. They sign contracts for high interest rates and remain indebted for life.
- Illegal money lenders can resort to violence and life-threatening methods to retrieve the loan amount.
- Under the Singaporean Moneylenders Act, the borrower and the lender are both equally guilty. You may have to pay a hefty penalty if you borrow money from unlicensed individuals.
Tips to Spot an Illegal Money Lender
Here are a few ways to find if a money lender is operating legally or illegally in Singapore.
Check the Name in the MinLaw’s Listing
The best way to check the reputation and credibility of a money lender in Singapore is to see if they are listed on the Ministry of Law website. Only a legal money lender’s license number will pop up on the MinLaw site.
Google and third-party reviews are also one way to check if a money lender is legal or illegal. You may also go through customer reviews to compare and select a licensed money lender in Singapore.
It is important to verify if a money lender has a physical office and an official website.
Transparent Terms and Conditions of the Loan Contract
Loan scammers are not transparent with the terms and conditions of the loan contract. According to the Singaporean Moneylenders Act, any licensee who approves a loan amount without legal documents will be deemed guilty of the offence.
An illegal money lender will not share the exact details about the interest rate, repayment options, and loan term. They will try to keep you in the dark for as long as possible.
Wrong Advertising Channels and Methods
Loan sharks often use illegal means to lure clients. You may receive scam text messages and emails that promise faster loan approval at unreal interest rates.
Keeping an eye out for these illegal advertising methods is a crucial step in avoiding scammers.
High Processing Fees
Illegal money lenders often charge an upfront payment in the form of loan processing fees. They also insist on cash payments to avoid police investigations. You can easily spot a scammer who is charging you unfair extra fees before applying for a loan.
Applying for a private loan is risky and tedious. Following the above guidelines can help you make a wise decision and stay away from illegal money lenders.