WHAT IS APR?
The Annual Percentage Rate (APR) shows the total cost of borrowing over a year, including interest and fees. It provides a clear picture of how expensive a loan is. The APR for moneylending loans can go as high as 187%, meaning the higher the APR, the more costly it is to borrow. Comparing APR rates across loans can help you understand which loan is most affordable. Always check the full loan cost, which is the amount borrowed plus interest, to ensure you know exactly how much you’ll repay. Get more info about moneylender in Singapore
IDENTIFYING LEGAL VS. ILLEGAL MONEYLENDERS
A licensed moneylender is legally allowed to offer loans and is registered. If a lender lacks a license, they are considered illegal. While illegal lenders might appear friendly initially, borrowing from them can be risky, as you won’t have the legal protections offered by the Central Bank if issues arise.
If you suspect a lender is operating without a license, you can confidentially report them to local authorities. To confirm a lender’s status, check the “Register of Moneylenders” before borrowing. Additionally, if you’re struggling with everyday bills, taking out a high-cost loan might worsen the situation.
ALTERNATIVES TO MONEYLENDING LOANS
Before considering a moneylending loan, explore other options:
- Check your benefits: Ensure you are receiving all the financial support you’re entitled to.
- Credit Union Loans: Credit union loans are generally more affordable, with a legal APR limit of 12.68%. Some unions even offer “It Makes Sense” loans, which are tailored to people with financial challenges.
- Personal Loan Calculator: Use a loan calculator to compare costs and find the best option.
- Bank Overdraft: If you have a bank account, you may qualify for an agreed overdraft. Being above your limit without authorization may be quite expensive, so proceed with caution.
RULES FOR LICENSED MONEY LENDERS
Licensed moneylenders must adhere to rules set by the Central Bank. These rules help ensure transparency and fair practices. Moneylenders must:
- Warn About High Costs: If the APR is over 23%, they must highlight that it’s a high-cost loan.
- Show Total Loan Cost: They must clearly show both the amount borrowed and the interest payable.
- Be Transparent: All fees, charges, and the interest rate must be communicated openly.
- Provide MABS Information: If the loan is for essential expenses (like food, electricity, or rent), they must inform borrowers about MABS.
WRITTEN MONEY LENDING AGREEMENTS
When entering into a moneylending agreement, you should receive a written document with:
- The title “Moneylending Agreement” is displayed prominently.
- Your name, the lender’s name, and the company’s address.
- The loan amount, interest rate, and total repayment amount.
- Any collection fees (for loans collected door-to-door).
- Signatures from both you and the lender.
- Information on a 10-day “cooling-off” period.
ACCOUNT STATEMENTS AND LOAN TRACKING
Borrowers should receive regular account statements or a payment book that records each repayment and the outstanding balance. If the payment book is taken, a receipt should be provided. For borrowers with multiple loans, lenders must clarify how each payment is divided among loans.
In summary, licensed moneylenders offer a regulated way to borrow, but understanding the loan terms, APR, and possible alternatives can help you make the best financial decision.
