How To Tell The Difference Between A Licensed Moneylender And A Loan Shark
Certified moneylenders are life savers. Like when you would like to borrow money fast. Recently, the illegal industry of ‘loan sharks’ has grown. They pose as money lenders and preying on innocent Singaporeans.
These people often have no one to turn to. The loan sharks are famous for their cruel business practices. They also charge massive rates of interest. At times they charge 40% a month or even more. And then coercing, threatening, and frightening borrowers.
Therefore, you have to know ways of identifying them. Be sure you can tell differences between the two. The below tips will aid you. Thus you’ll be able to tell a loan shark from licensed lenders.
Unsecured Loan Amounts Based on Your Income
Singapore law has a limit for unsecured loans. This is often based on your income. Beginning in 2016, the rates are:
- Below $20,000 per year: equal to $3,000.
- Above $20,000 but below $30,000 per year: equal to 2 months’ salary.
- Above $30,000 but under $120,000 per year: equal to 4 months’ salary.
- Yearly income $120,000 and above: no limit.
So you talk to a lender who is giving a higher amount. Normally the amount is unusually high. (Higher than the amount legally permitted given your salary. Consider this a warning sign: you could be working with loan sharks.
Interest Rates Charged
All certified moneylenders are bound by law. They have to follow Singaporean guidelines on rates. From 1st October 2015, the highest interest rate is 4% a month. An approved moneylender can never charge rates higher than this amount. The loan shark, in contrast, will typically charge way more than this. Loan sharks can charge 40% a month or even more.
Sign a Contract
Certified moneylenders have to make borrowers sign a contract. This is expected of the licensed lender by Singaporean law. This contract is written by the lawyer. Should someone offer to lend you money with no contract? OR you are asked to sign an incomplete or blank incomplete agreement. Don’t accept that loan offer. This person does not behave like a certified moneylender. And it could be loan sharks in disguise.
Types Of Fees Charged
According to the Singaporean law, specific fees may be charged. A moneylender may only charge 3 fee types. This is aside from the fates of interest fees:
- Late payment fees not more than $60 a month. And late fees of interest, not more than 4% a month. These fees are to be charged onto the remaining principal.
- Up-front service cost (it may not go above 10% of loan value).
- Legal charges coming from the court challenge.
So you encounter a lender who attempts to overcharge fees. That is an amount above the set maximums. Do consider this; it’s likely to be a loan shark you are working with.
Have An Office
According to Singapore law, this is a requirement. Certified moneylenders are expected to own an office. This has to match the registered one for them. The office is also indicated on the Law Ministry’s website. Normally, certified moneylenders often use the office. They do so by conducting their business. The office space is well-maintained in the building. The first meeting and the contract-signing take place here. Thus the moneylender will have you visit their office. Afterwards, they might communicate through email or phone.
Loan sharks, on the contrary, often won’t have an office. Since it’s an illegal business, they don’t worry about the law. Thus, the legal obligation to own an office does not affect them. So when you come across someone saying they are a moneylender. Yet the person does their business wholly online. The may openly even admit to not owning an office. Therefore; watch out. That’s possible to be the loan shark.
Terms of Your Loan in Language You Can Understand
Singaporean law always requires the certified moneylenders be clear. They are to clearly explain the loan terms to you. The language they use needs be easy to understand. This will include answering all questions you may have. This is regarding the payday loan and explains the interest rate.
They should also explain payment options and the repayment time. So when you encounter moneylenders who give you a contract. Yet they refuse to explain its terms in simple English. Then run! It’s possible you are working with loan sharks.
Confirm The Address And License Information
Realize that loan sharks may sometimes fake their identity. They may use licensed moneylender’s names, license numbers, and address. They will even use other information in pretence. This will create a false security sense and even trust with their victims.
To ensure your safety, it’s recommended you do research. Take time to confirm the details provided by the lender. Thus anyone saying to be a moneylender, just check. The following methods will help you:
- Confirm the license number given on the Law Ministry’s’ website:
- Confirm the address, licensed number, and the name. They should match
- Complete the payday loan process. And sign the agreement in person and only at the lender’s office. At the address listed with the Ministry. Accredited moneylenders always make you sign the complete contract. When you are asked to sign the agreement elsewhere. Or they don’t have an agreement. You can be certain that you are working with loan sharks.
Use Threats and Abusive Language
Approved moneylenders are not permitted to use these tactics. So when you meet a ‘moneylender’ whose reputation is of threatening. Or even for abusing their clients, stay away. That’s very likely to be a loan shark.
Sadly, procedures like these usually begin after you get a loan. Loan sharks will put on friendly faces at your first meeting. Then become abusive as they try to collect. Usually, when working with anyone alleging to be moneylender. You need to check the Moneylender Registry. This way you will confirm the licensed validity.
Know your rights as it concerns borrowing. This is important for your economic safety. There are numerous loan sharks currently in Singapore. They are preying on naive Singaporeans. These individuals don’t have the basic information to make right decisions.