In Singapore, you can find no shortage of services which are prepared to lend you money. Banks have made personal loans extremely easy to have, with approval processes that sometimes lastly just a few hours and up to day or two. Even bank card debt can also be offered at albeit high interest rates. And then you can find the so called “licensed money lenders” that are willing to give money to pretty much anyone. That are these people and could it be worth borrowing money from their website?
Based on Ministry of Law of Singapore, you can find about 160 licensed money lenders in Singapore, with 5 more that are suspended. These companies target borrowers who’ve difficulties in acquiring loans from more conventional sources like banks. Because banks typically require a minimum annual income and some amount of good credit history, they tend to reject loan applications from those who earn low income and desperately need a loan to pay for 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 incredibly high. Even with the us government instituted 4% cap on monthly interest rtes, this level is still could be as much as 2x more than what you will see on a bank card or 4-5x more than rates on an individual loan from banks. Therefore, we absolutely don’t recommend planning to these services unless you can find simply no other alternative. Below, we summarize and compare main characteristics of licensed money lenders against a bank. Once you borrow S$500, paying S$20 in interest 1 month might not seem like it’s exorbitant. However, if you don’t pay of this kind of loan immediately, it could set you back hundreds of dollars in fees and interests, potentially as much as the first S$500 you borrowed.
Licensed Money Lenders vs Banks
Because licensed money lenders are targeting customers that have been forgone by banks, they have distinct characteristics that serve needs of an alternative pair of customers. The biggest difference is the risk profile of the borrowers licensed money lender in Singapore . Because banks concentrate on people who have credible credit history backed up with stable income, they are inaccessible to those who make significantly less than $20,000 and lack a credible credit history. On another hand, licensed money lenders specialize in lending to the latter sounding people. You can find certain consequences with this key difference.
For instance, licensed money lenders tend 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 per year, they’ll likely lend 24% significantly less than your monthly paycheck, capping the quantity you are able to borrow at about S$1,200. Because money lenders are much smaller organizations than banks, they can’t bare the risk of earning a massive loan to someone with very risky credit profile. In contrast, banks can lend you around 2-6x your monthly salary as much as $200,000, though they only lend to borrowers with stable income.
Not only that, small size of licensed money lenders enables them to create loans extremely quickly. Sometimes within the hour, if not sooner. While personal loans in Singapore from banks happen to be quite competitive and extremely efficient since they are made available to borrowers within 24 hours of application, such speed still pales in face of the nimbleness with which licensed money lenders can operate.