In Singapore, there are no shortage of services that are willing to lend you money. Banks have made personal loans extremely easy to have, with approval processes that sometimes lastly only some hours and up to day or two. Even bank card debt is also offered at albeit high interest rates. And then there are the so called “licensed money lenders” that are willing to provide money to more or less anyone. Who’re these people and could it be worth borrowing money from their website?
Based on Ministry of Law of Singapore, there are about 160 licensed money lenders in Singapore, with 5 more that are suspended. These companies target borrowers who have difficulties in acquiring loans from more conventional sources like banks. Because banks typically require the very least annual income and some amount of good credit history, they have a tendency to reject loan applications from those who earn low income and desperately need a loan to cover an emergency. Therefore, licensed money lenders provide loans to these people at high interest rates than normal.
Interest Rates at Licensed Money Lenders
A number of these places will give you loans like payday loans, whose interest rates are really high. Even after the federal government instituted 4% cap on monthly interest rtes, this level remains can be as much as 2x greater than what you should see on a bank card or 4-5x greater than rates on an individual loan from banks. Therefore, we absolutely don’t recommend likely to these services unless there are zero other alternative. Below, we summarize and compare main characteristics of licensed money lenders against a bank money lender Singapore. Whenever you borrow S$500, paying S$20 in interest 1 month may not appear to be it’s exorbitant. However, if you do not pay of this kind of loan immediately, it may cost you countless dollars in fees and interests, potentially around the original S$500 you borrowed.
Licensed Money Lenders vs Banks
Because licensed money lenders are targeting customers that were forgone by banks, they’ve distinct characteristics that serve needs of a different pair of customers. The greatest difference is the danger profile of the borrowers. Because banks concentrate on people who have credible credit history supported with stable income, they are inaccessible to those who make significantly less than $20,000 and lack a credible credit history. On the other hand, licensed money lenders specialize in lending to the latter sounding people. You will find certain consequences of this key difference.
For instance, licensed money lenders have a tendency to only make small sized loans all the way to S$1,500. Specifically for payday loans for people who make significantly less than $20,000 each year, they’ll likely lend 24% significantly less than your monthly paycheck, capping the total amount you are able to borrow at about S$1,200. Because money lenders are much smaller organizations than banks, they can’t bare the danger of earning a huge loan to someone with very risky credit profile. In comparison, banks can lend you around 2-6x your monthly salary as much as $200,000, though they just lend to borrowers with stable income.
Not only this, small size of licensed money lenders enables them to produce loans extremely quickly. Sometimes within the hour, or even sooner. While personal loans in Singapore from banks already are quite competitive and extremely efficient because they are made open to borrowers within 24 hours of application, such speed still pales in face of the nimbleness with which licensed money lenders can operate.