Borrowing from licensed money lenders can give you quick access to cash for all your financial needs.
However, knowing how much you can borrow before taking out a loan is important.
The amount you can borrow depends on the time left until your next payday, how much disposable income you currently have, and the type of personal loan you want.
Most people who seek to borrow money from licensed money lenders do not know the amount they can borrow, and this is where they go wrong.
Explain to the lender why you need the money and what you intend to do with it. It will help the lender decide whether it should lend you the amount you requested.
If you intend to apply for a loan and are unsure how much you can get, this guide will help you figure it out.
What to Consider Before Taking Up A Loan
Before you take a loan, it’s essential to understand the implications of taking on debt. Here are some considerations.
Whether you have good credit: Lenders may be reluctant to give you a loan if your credit score is low or poor.
This is because they don’t trust that you will make your payments on time each month. In general, lenders want to see that your income covers all your expenses, and that you have money left over for savings and retirement.
The type of loan: Many loans are available with varying interest rates and terms based on factors such as creditworthiness and income level.
Some borrowers may benefit from consolidating their existing debt, while others should avoid doing so because it could lower their credit score even further.
But if you have other alternatives such as family and friends, try those first. They might be willing to lend you money at a lower interest rate or with fewer requirements than a bank.
If you’re legally obliged to take out a loan – for example, if the government has required you to pay for your child’s college education – then do so. But ensure that it’s affordable for your family.
However, if you can abide by the contractual terms (for example, if there’s an early repayment penalty) and are comfortable with using debt to pay for something important (such as buying a home), then go ahead and take out a loan.
That said, if you’re unsure whether it makes sense financially, don’t sign up for a loan until you’ve done some research and made sure it’s right for your family.
Differences Between Licensed And Unlicensed Money Lenders
When you have a financial emergency, looking for a quick fix is natural.
You may have heard of people who have used money lenders to get through difficult times, and you may be tempted to do the same.
However, it is crucial that you understand the difference between licensed and unlicensed money lenders before making your decision.
The main difference between these two types of lenders is that the government regulates licensed money lenders, while unlicensed ones are not.
A licensed money lender has a business license, and works under the guidelines set by the authorities. Licensed money lenders also have to get their clients’ information and vice versa, which is why it is easier to track them down if there is a problem with your loan.
In addition, a licensed money lender has been approved by the Registry of Moneylenders to lend money to consumers. The Registry of Moneylenders, which is under the Ministry of Law, regulates all lenders in Singapore – including those who provide personal loans and mortgages.
When you apply for a loan from a licensed lender, you will need to provide details such as your employment history and income so that it can decide if it should lend you money.
You should also expect that the money lender will check your credit report before approving or rejecting your application for a loan.
On the other hand, unlicensed money lenders can operate anywhere without any restrictions. It makes them much harder to track down if there is a problem with your loan or if you need help with paying it off early.
An unlicensed money lender operates without having obtained approval from the Registry of Moneylenders.
It means there are no regulations on how much interest they can charge their customers or measures they can take to recover their money.
Moneylenders Act And Rules Singapore
Singapore’s Moneylenders Act and Rules is a piece of legislation that governs the moneylending industry in Singapore.
The Moneylenders Rules set out the requirements for becoming licensed lenders, and stipulate the terms and conditions when borrowing from one.
The Moneylenders Act also provides a fair and efficient resolution of disputes between borrowers and lenders.
It is an offence for money lenders to lend without a license or more than the prescribed limits.
Moneylending companies granted a license under the Moneylenders Act may also apply for an exemption from certain provisions of the Moneylenders Rules if they satisfy certain conditions.
Differences Between Borrowing From A Licensed Money Lender And Bank
There are notable differences between borrowing from a licensed money lender and a bank.
- Borrowing from a bank often requires a good credit history. On the other hand, a licensed money lender does not consider your credit history when lending money.
- Borrowing from a bank will require you to have collateral such as land titles, vehicles and other assets that can be used as security for the loan amount. However, a licensed money lender does not require any collateral as security for their loans.
- Borrowing from a bank usually involves strict repayment terms and agreements, which may include high interest rates if you cannot make repayments on time or default on your loan agreement.
On the other hand, a licensed money lender offers flexible repayment terms and payment schemes to accommodate even those who are in financial difficulties but still can make repayments on time under certain conditions.
How To Tell If A Money Lender Is Licensed
In Singapore, all money lenders are required to be licensed by the Registry of Moneylenders.
If you’re thinking of borrowing from a money lender, here’s how you can tell if they are licensed and registered with the Registry of Moneylenders.
Find the list of licensed money lenders on the Registry of Moneylenders’ website. This list is updated regularly. Look for your lender on this list, and compare its license number, phone number and address on their website or business card with what is stated on the list.
If there are obvious differences, your lender may not be a licensed money lender.
You can also call the Registry of Moneylenders hotline to confirm if its license is valid and if there have been any complaints against them in the past 12 months.
Or contact the banking or financial regulation department and ask if the lender has an office at that address. The lender could be unlicensed if it does not.
Can You Borrow From Multiple Money Lenders?
It’s possible to borrow from multiple lenders at the same time. It is known as “multiple lending” or “borrowing from multiple sources”.
The most common reason for this is when you have a bad credit rating and one or more traditional lenders have rejected you, so you need to find another way to get the funds you need.
You can borrow from multiple money lenders at the same time, but only if they’re all offering identical terms and conditions.
This means the lenders must all have your credit history on file, so it’s a good idea to go with a well-established lender when you apply for credit. If you have several offers of interest, take time to compare them before deciding.
However, borrowing from multiple money lenders at different times can be challenging.
If you have more than one loan outstanding at any time, this will show up as debt on your credit report and affect your credit score.
You can pay off a single loan early without affecting your credit rating. But if two or more loans are outstanding at any one time, this will show up as debt on your report and affect your score negatively.
What Is The Maximum Loan You Can Take?
If you’re trying to figure out the maximum amount you can borrow, there are a few factors: income, credit score, collateral, and debt.
Your income will affect the number of money lenders that will let you borrow since it shows your repayment capabilities.
The maximum loan you can take also depends on your credit score. The higher the score, the better your creditworthiness is considered to be, hence the more likely you’ll be approved for a loan.
In Singapore, a credit score that is a low of 1,000 is not ideal. A good score is 2,000 – or a figure close to that.
The credit score helps lenders to assess your ability to repay loans. If your credit score is about 1,000 or below that, it will difficult for you to obtain an unsecured personal loan from a bank or financial institution. This is even if you had a good track record of repaying debt in the past.
Another determinant is the collateral money lenders have to secure the loan.
For instance, if you want to take out a mortgage on your home to finance its renovation, the money lender will use your property as collateral for the amount you want to borrow and then give you the loan based on that amount.
Lastly, the amount of debt you have compared with the assets (money) you have available will also affect whether you qualify for a loan.
What To Do Once Your Loan Is Approved
Once you have been approved for a loan, there are several things you should do.
- Sign the loan documents: You will be legally bound to repay the loan as stipulated in the documents. If there are any changes to the terms of your loan, contact the lender immediately so it can amend the documents.
- Contact the lender if anything changes: If the value of your property declines or the licensed money lender raises the interest rate, contact the lender immediately.
Let them know if you can continue paying your mortgage on time. You may also want to discuss increasing your payments or lowering your loan term with the lender if necessary.
- Ensure all information is correct: Check all information carefully before signing anything and confirm everything is correct before moving forward.
What Happens If You Can’t Pay Back The Loan?
If you can’t repay the loan, the licensed money lender will come after you. It may try to get its money back by putting a lien on your home.
Note that the money lender can file a lawsuit against you if you don’t have any assets. It will result in an order from the court that requires you to pay the debt. If you don’t pay, there will be consequences.
The judge can issue a judgment against you and require that it be paid off before any other debts.
If you have leftover money after paying off all your other debts, you must use it to pay off this judgment first (much like child support).
If you don’t pay up voluntarily, the court may eventually garnish your wages to collect the debt.
A loan is a great way to get the money you need, but it’s not always the most sensible option if you already have considerable debt.
Before committing to a loan, ensure you’ve considered all available options.
The amount you can borrow depends on your income level, employment status and credit score, so it’s advisable to only borrow from licensed money lenders.
To find out how to get a loan from a legal money lender, contact Lending Bee today.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.