14 Dec Questions to Ask a Licensed Moneylender in Singapore
Have you been searching for loan providers who can help you get the capital needed at the moment? Feeling confident of picking one and proceeding to enter the agreement with them? If so, we implore you to hit the pause button on that. Take a breath and look at the different factors or variables involved in taking a loan.
After which, you will be able to question your chosen moneylender in Singapore about the loan arrangement. In this way, you would not be caught off guard by any unfavourable terms, conditions, procedures or offers.
Question 1: Is the moneylender licensed or authorised?
The most important question that you can ask a moneylender, would be to prove that they are licensed. An authorised moneylender should have no issue directing you to the Ministry of Law’s website. On it, you can find a full list of licensed moneylenders.
Why is this so important? On one hand, authorised moneylenders have been recognised by the government as having legitimate practices. This ranges from offering fair interest rates to using non-harmful debt collection procedures. In this way, you can be assured that the loan offer will not be inherently harmful to you and your family.
On the other hand, by taking a legal loan, you would be granted some level of protection by the law. The same may not be true should to enter into a contract with an unlicensed moneylender.
When to be suspicious of unlicensed moneylenders
A few tell-tale signs that the moneylender that you are talking to is unlicensed include:
- Soliciting a loan via text messages
- Directly calling you to solicit a loan
- Reaching you via social media
- Offers to complete the entire transaction online without ever meeting you face to face
- Requires a preliminary fee for GST or processing matters
- Mandates that you pass them your NRIC and address in order to request for a loan
All of these actions are explicitly prohibited by the law.
Question 2: What are the interest rates attached?
Interest rates are attached to any loan offered by a financial institution. This mechanism requires that you an additional percentage of your principal sum per time period. In other words, it is the cost of the loan in addition to the original amount you need to repay.
The significance of interest
Interest rates in loans are representative of two aspects.
Firstly, it represents the risk incurred by the lender when extending you the loan. For accepting the level of risk of the debt going bad, the lender must of course be rewarded financially. Otherwise, without interest, there is no incentive for the lender to extend you a loan beyond goodwill.
Secondly, a loan also represents the opportunity cost of the loan. When choosing to extend you a loan, the moneylender foregoes the use or opportunities that the same sum of money might have otherwise attained. For instance, instead of handing you the loan to earn interest, the lender could have use the money to purchase financial assets. These assets in turn could have returned interest on their end to the lender.
Interest is important but not everything
Typically, when comparing loan offers, you will be focusing heavily on the interest rates offered. Afterall, this is a primary determinant of the overall cost of the loan. Yet, it is not the solely differentiator between loan offers.
Other important considerations should include the fine print of the offer, namely the terms and conditions. For example, you should check if an early repayment penalty clause is weaved into the agreement.
As the name suggests, an early repayment penalty clause necessitates that you pay an extra sum should you repay the full loan sum before an indicated date. This clause is used to ensure a minimum level of interest that the lender can earn from the loan. However, in turn, it also thus ensures that you have a minimum level of cost involved in taking the loan.
Other factors that you shoulder consider include that of:
- Required repayment cycles
- Minimum repayment sums
- Term of the loan
- Reputation of the lender
Question 3: Is the loan a secured or unsecured loan?
The next question that you should ask is whether the loan offer is secured or unsecured. What is the difference between the two?
Understanding secured loans
Secured loans require that some form of collateral or security be attached to the loan agreement. Commonly coming in the form of a house or car, it gives the lender the right to size the property should you fail to repay the loan.
In this way, a collateral can be seen as a last resort for lenders to recoup losses when a debt goes bad. Simultaneously, it lowers their level risk and thus encourages them to offer you lower interest rates on the loan.
A common alternative for collateral comes in the form of a guarantor. A guarantor is an individual or entity who will take up the burden of your debt should you fail to repay it. Similar to collateral, it offers an avenue for lenders to recoup losses should you forfeit on the debt.
Understanding unsecured loans
Conversely, an unsecured loan agreement does not require any collateral or guarantor. Since there is substantially more risk taken by the lender in this arrangement, more interest is typically charged. Simply put, the higher the risk incurred by the lender, the higher the reward they expect for accepting the risk.
If low interest rates are your primary consideration, then you will likely need to offer collateral in exchange.
Enquire For a Loan From JD Credit
Here at JD Credit Pte Ltd, we strive to achieve each and every one of our customers’ needs and wants. We are an organisation that provides loans with the best rates to any individual that is approved by the IPTO (Registry of Moneylenders). Our team of well trained and experienced staffs are obliged and dedicated to help our customers with their financial matters. Our vision is to achieve excellence when serving customers provide the best information and finest service for our customers and lead in the money lending industry.