1) What to consider before taking up a loan with a moneylender?
You should keep these key points in mind:
- Check on the financial assistance schemes offered by various government agencies. If you are Singaporean in need of financial help, they do have both professional and volunteer social workers to help you resolve matter.
- A loan contract or any amount you agreed into with a licensed moneylender is legally binded.
- Decide whether you are able to accept the contractual terms, considering your income and financial obligations. Borrow only what you need and repayable means within a timeframe. In the event, if you are unable to meet the contractual terms, the late payment fees and interest payment will be imposed
- Singapore law requires moneylenders to explain the terms of a loan to you in a language you understand and to provide you with a copy of the loan contract. Make sure you fully understand the terms of the contract, in particular, the repayment schedule, the interest rate charged and the fees applicable before you commit.
2)How much can I borrow?
For secured loans, you can obtain a loan of any amount. For unsecured loans, please refer to the table below for the total maximum amount that you may borrow at any time across all moneylenders in Singapore:
|Borrower’s annual income
||Singapore Citizens and Permanent Residents
||Foreigners residing in Singapore
|Less than $10,000
|At least $10,000 and less than $20,000
|At least $20,00
||6 times monthly income
||6 times monthly income
3) What are the fee or interest rates moneylenders can charge?
With effect from 1 October 2015
, the maximum interest rate moneylenders can charge is 4% per month
. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one.
The computation of interest charged on the loan is based on the amount of principal remaining after deducting from the original principal the total payments made which are appropriated to the principal.
[To illustrate, if X takes a loan of $20,000, and X has repaid $8,000, only the remaining $12,000 can be taken into account for the computation of interest.]
- a fee not exceeding $60 for each month of late repayment;
- a fee not exceeding 10% of the principal of the loan when a loan is granted; and
- legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan. The total charges imposed by a moneylender on any loan, consisting of interest, late interest, upfront administrative and late fee also cannot exceed an amount equivalent to the principal of the loan.
[To illustrate, if X takes a loan of $10,000, then the interest, late interest, 10% administrative fee and monthly $60 late fees cannot exceed $10,000.]
4) What should I do after my loan application is approved?
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- Make sure the moneylender delivers to you the correct principal amount of the loan. The moneylender is permitted an upfront deduction of a loan approval fee of up to 10% of the principal amount.
- Pay the loan instalments on time to avoid incurring late payment fees and late interest.