Although licensed moneylenders are known to charge higher interests compared to banks. Borrowers need to understand the reasons behind such rates. It also good to know why despite this they still have regular and new borrower even with the higher rates.
In fact, licensed moneylenders play an important role in any economy. For instance, they support the middle and lower ranked population in Singapore!
In order for banks to establish the creditworthiness of a borrower. They normally will perform thorough checks. They even access a customers income details and expense behavior. They often use deposits as well as repayment (like credit cards) to establish this. Actually, new customers who have no records with banks will usually be denied loans easily.
On the other hand, moneylenders lend to most customers. Starting with those with no or little credit records. The one way they are able to minimize the lending risk is through limiting the amount borrowed. They additionally will reduce the repayment tenure (mostly under 6 months).
In order to maintain the perceived little credit choice, smaller loans and shorter repayment period. The licensed moneylenders will need to raise the rates to enable them to run the businesses in a workable manner.
Type of Loan and security
In most cases, banks offer loans which are secured. They also are ranked high as lenders and have legal yet tight supporting documents. Banks will offer large loan amounts to borrowers for particular purposes. Some of the specific loans are for acquiring property and related renovation loans or the car loans. This then implies that banks can lend confidently and even ride on the large economic scale (these are of a larger quantity of several thousand).
For those borrowers who work with moneylenders. They usually are in need of smaller loans for handling their daily expenses and any emergency disbursements. The smaller loans and many of the quantities of hundreds can only be possible to lenders when the returns rate are high. The one way for lenders to do this since the loans offered are normally unsecured.
Meaning they have no collateral and even elaborate legal documents. They then offer high interest to cushion the risk involved in offering unsecured loans.
Things To Look Out For When Taking Out a Loan
Start by analyzing your income before getting a loan. This will help you decide on the amount you want to take a loan. Also, confirm the repayment period for your loan as well as the interest charged. After that, you can easily budget for the personal loan. With this, you will avoid challenges of being unable to repay the loan premium.
Loan contracts are by law binding. Meaning that all the parties involved, the moneylender and borrower need to play their part. Therefore, each party has to follow the set loan conditions. Make sure you read and understand the loan contract before you sing it. This will ensure you know what you are getting into since signing means you accept the terms. Failing to meet or stick to the regulation can be costly as you can be prosecuted in court.
Also, ensure that you clearly understand the documents you submit. Be aware that there are fraudulent lenders in Singapore who will even act as legal moneylenders. You need to know their traps and tricks for you to be able to spot them before you are caught in their trap. Note that licensed moneylenders run their business by giving short-term loan types. Hence, avoid fraudulent agencies which can lead to your financial downfall.
It is important that you make sure you are given the loan contract copy. This contains the personal loan conditions and terms. Also, ensure that you clearly understand the loan agreement. Find out about the rates of interest applied to your loan. Do not forget to look at the penalties, repayment options, and any extra costs. Ask about other essential formalities since such issues can eventually affect you.
What You Should Know About Moneylender Interests
In order for you to get the most suitable loan deal. It is a good idea that you take your time to compare various rates by different licensed lenders. In so doing you will find a loan that fulfills your needs. Therefore, avoid rushing into taking out personal loans. But, only unless the moneylender’s rates regulations are known to you. More so avoid the rush when facing an emergency. Regardless of the situation, make certain that you compare the personal loans packages on offer.
Even though banks have played a role in the economic development of Singapore. Legal money lenders also have contributed towards growth as well. Owing to the high cost of living in Singapore and little to no salary increments for most people. Money lenders have helped maintain the everyday financial needs of lower-salaried employees.
Elements That Affect Moneylender Interests
Moneylender interests are bound to be affected by elements such as;
- Duration of Employment and Job
- Existing loan and your repayment behavior
- Home-ownership (Rented/Living with Parents/ Own)
- Your monthly salary
Always Work With The Best
Always research, then make a decision based on what you find. Doing this will guarantee that you find the right and legal moneylender. Your lender of choice has to be prepared to deal with you. Hence you will be able to meet your passing financial needs with ease.
Carefully research so as to find the ideal licensed lender near you. Once you do this, you will be in a position to select a trustworthy lender. Only work with legal lenders who can accommodate your terms at all times. Remember to never sign blindly a contract but only when you accept the given conditions. Also, make sure you understand the conditions of your personal loan. Always ask when something is not understood.
In summary, although licensed moneylenders are said to charge higher interests compared to banks. They have alongside banks played a role in the economic growth of Singapore. It is essential that you know the reasons behind their high rates. Mostly they offer high interest to buffer the risk involved in offering unsecured loans.