A moneylender loan can come in rather handy in many situations, be it to relief a temporary cashflow problem, settle a major hospital bill or pay off your credit card bills. Unlike a home loan or auto loan, a personal loan is usually unsecured, which is why you are usually charged much higher interest rates.
Having said that, with lenders facing a higher risk of default, there are some screening criteria they use to gauge who they should lend money to. On the borrowers’ side, there are also details of the loan to look out for to ensure you are not charged any hidden fees you do not know. If you haven’t gotten a personal loan before, here are some important factors to consider before taking up the loan:
Most personal loans you can take up from banks will require at least a minimum tenure of 12 months to ensure that they can get the said amount of interest rates from the borrower. If you decide to pay off your loan before the tenure, you will unfortunately incur a penalty.
Thus, it is best to consider various options before you take up a personal loan. For instance, if you only require a small amount of loan for a month, taking up a legal moneylender loan may make more sense. Although the interest rates might be higher, you can repay it as soon as possible and avoid the overall higher interest payments if you end up borrowing for a longer period from a bank.
Always be extra cautious about the published interest rates. Make sure that the rates calculated are effective rates and not advertised rates. The effective interest rate is the actual interest rate you pay for using the loan facility and compare the effective interest rate for each package to find out which package costs the least in interest payments.
Most of the time, you will find that the effective interest rate will be higher than the advertised rate due to the way interest is calculated as the former consists of the compounded rate.
Interest rates are not the only cost of borrowing; other fees and charges such as loan origination fees, processing fees, administrative fees, late charges, cancellation fees, default fees and prepayment fees can apply. It will be wise to ask for a list of applicable fees from your lender before you sign on the dotted line.
Depending on where you get your personal loan from, your lender may check with the Credit Bureau Singapore on your credit score and repayment history. If you are getting moneylender loan from a licensed moneylender, they may then refer to the Moneylenders Credit Bureau (MLCB).
The MLCB is a repository of factual information on all loan applications and repayment records with licensed moneylenders in Singapore.
Other than your credit history, there will be other documentation and income requirements as well.
Licensed Moneylender loan
Annual Income requirements
|Singaporean/PR – S$30,000Foreigner – S$42,000||Annual income of S$20,000 will allow you a loan of up to S$3000, up to 2 months’ income if your salary is between S$20,000 and S$30,000 or up to 4 months’ income if your salary is between S$30,000 and S$120,000.|
Documents for Singaporeans
|1) Photocopy of NRIC2) Past 12 month’s CPF Statement for salaried workers or3) Last 2 years’ Income Tax Notice of Assessment and last 3 months’ bank statements for self-employed persons||1) NRIC
2) Proof of residency: Any official mail received at the borrower’s residence
3) Latest pay slip
4) Latest bank statement of the account where pay is deposited
5) Singpass – as a prerequisite for loan application, borrowers will need to login with their Singpass to CPF/HDB/IRAS for verification purposes
Documents for Foreigners
|1) Photocopy of the front and back of your Passport/Employment Pass2) Latest Income Tax Notice of Assessment and latest original computerised payslip||1) S Pass, Employment Pass or Work Permit
3) Employment contract
4) Most recent three months of pay slips
5) Tenancy agreement
6) Proof of residency: Any official mail received at the borrower’s residence
7) Most recent three months of bank statements for the account where pay is credited