A licensed money lender in Singapore is an important institution because it provides legal and fair loans to those who need fast cash. Because they are licensed with the Ministry of Law, such moneylenders are sometimes subjected to strict rules to protect borrowers. In 2018, new rules were announced by the Ministry of Law that targeted borrowers. Let’s take a look at what these licensed money lender new rules are and how they would affect you.
Changes to loan caps
The Moneylenders (Amendment) Act 2018 and Moneylenders (Amendment) Rules 2018 aim to provide better protection for borrowers, according to the Ministry of Law. As such, aggregate loan caps were set to control the amount Singapore citizens, permanent residents, and foreigners living in Singapore can borrow from all licensed money lender in Singapore added together.
In simpler words, there is now a maximum anyone can borrow from a licensed money lender in Singapore.
Here are the updated amounts:
Singaporeans and permanent residents with a yearly income of lower than $20,000 may borrow a maximum of $3,000 from all licensed money lender in Singapore added together.
Singaporeans and permanent residents with a yearly income of more than $20,000 over twelve months may borrow a maximum of six times their monthly income from all licensed money lender in Singapore added together.
For foreigners residing here, a lower maximum of $1,500 will be set for those whose income is lower than $10,000 per year.
Foreigners whose income is from $10,000 to $20,000 every 12 months can borrow a maximum of $3,000. Above $20,000 lets the person borrow a maximum of half their yearly income.
How this affects the locals
While the licensed money lender new rules mean that you can borrow up to a lowered maximum, they also afford greater protection for you.
Firstly let’s explore the negative impacts. A lowered maximum of $3,000 for those who earn less than $20,000 a year and six times their monthly income for those who earn more than $20,000 a year means that certain cash needs cannot be fulfilled. For instance, if you earn $36,000 a year, you can borrow only up to $18,000. If you need $20,000 to renovate your house, then you will be short of $2,000. In that case, it presents an inconvenience.
However, a lowered maximum pegged to your income means that you are more unlikely to find yourself in a situation where you cannot pay the loan back in time. As they say, prevention is better than cure. This means that you will not find yourself borrowing from loan sharks or illegal money lenders to pay back the legal ones as you are likely not owing more than you can afford to.
This greater protection also extends to protecting your credit scores as you are less likely to default now. This, therefore, protects your ability to continue borrowing safely in the future.
How money lenders are still a good option
Despite the new cap rules, the licensed money lender in Singapore is still a good option when it comes to legal and fair borrowing.
Firstly, licensed moneylenders offer fantastic interest rates. Because the people behind the desks are everyday folk like you, they understand that the loans are often used to finance certain urgent and important needs like hospitable bills or crucial investments. Hence, the interest rates offered are often better and lower than many banks, which may charge exorbitant interest fees.
Secondly, legal moneylenders are known for their personalised services. Throughout the meetings, your financial situation and needs will be carefully listened to and assessed. Whether you are looking at personal loans, debt consolidation loans, payday loans, or others, be rest assured that you will be carefully guided towards financial stability. This is done by setting a comfortable payment structure as per your situation, as well as providing any other services such as consultations as much as possible.
Lastly, even with the new rules, you still have a higher chance of getting your loans approved by licensed money lenders. For instance, banks usually only extend loans to people with an annual income of $20,000 or more. If your annual income is lower, a licensed money lender in Singapore will be able to provide a superior alternative. In addition, you stand to receive your loans in a faster time as money lenders require fewer documents and have a less bureaucratic and more streamlined process.
Thus, despite the new rules, a licensed money lender in Singapore is still a viable, legal and fair option to consider.