The general rule in applying for the type of loans in Singapore is if you need to choose between applying for a bank loan and borrowing money from a moneylender in order for you to shop and buy some rose gold sequin dress short, then it is for the best that you go with the bank. It is a known fact that in Singapore today you have three options by which you can procure financial assistance and these are applying for a loan from banks; from large financial institutions and the more common moneylenders.
Moneylenders should be your last option. These types of lenders usually provide only small loans and payday loan. As much as possible, try and stay away from moneylender (especially from unlicensed ones) because although most of them are allowed to provide loans, they may still put you into more financial problems because of the following reasons.
- The first moneylender is a loan company that usually charges very high-interest rates. Normal interest rates for loans charged by banks ranges only from 6 to 9% per annum while the interest rate charged by moneylenders is a whopping 48% per year. As a matter of policy and because of laws covering loan transactions in Singapore, moneylenders do charge legal rates, interest but what is questionable are the hidden terms and conditions that make the interest rates much higher than they seem. For instance, the re-contracting fees that moneylender charges their clients are fees that allow them to repeatedly charge a specific amount for renewing the loan.
- Second, loan contract provided by moneylenders are full of hidden charges. Administration, late payment, and new transaction fees are just some of the charges incurred by the borrower.
- Third, some moneylenders use debt collection agencies to collect their outstanding loans. Big banks and other large financial companies are content to deal with recalcitrant borrowers by bringing them to court or by just denying them the future loan. Some moneylenders in Singapore use debt collection agents that usually embarrasses the borrowers by continually harassing them.
- Fourth, moneylender’s repayment schemes are usually very hard to comply with and most moneylenders don’t have payment outlet that makes it hard for the borrower to pay them.
- Lastly, unlike credit cards or standard bank loan, borrowers don’t get additional benefits from getting a loan from moneylenders.