Borrowing money in Singapore is very simple because it is not compulsory you get a loan from a bank. There are numerous moneylenders in the country that you can approach anytime you need a loan. However, it is very important to make sure your moneylender is licensed by the Ministry of Law to avoid getting yourself into a more serious problem. More so, it is advisable to compare rates and terms offered by different lenders so that you can choose the one that meets your requirements. Always make sure you have borrowed money from a lender who allows you to repay your loan comfortably without pressure or change of terms.
The government of Singapore is aware that some licensed moneylenders can take advantage of desperate borrowers and charge them extremely high-interest rates. To protect the interests of borrowers, it is illegal for licensed moneylenders in Singapore to charge more than 4 percent per interest rate per month as from 1, October 2015. This is regardless of whether the loan is a secured one or unsecured. In a situation where a borrower has failed to repay the loan on time, no moneylender is allowed to charge more than 4 percent for each month the loan is in arrears. In other words, all loans borrowed from licensed moneylenders are capped at a monthly rate of 4 percent interest rate irrespective of the prevailing circumstances.
The law requires that interests charged on money borrowed from licensed moneylenders should be computed on a reducing balance method. This means that the computation of interest to be charged on a loan should be based on the principal amount remaining after deducting the amount paid in the previous months from the original principal. For instance, in a situation where borrower X has a loan of $20000 and has repaid $15000 in the previous months, interest for the current month should be computed on the remaining $5000, which is the current principal.
It is illegal for the licensed moneylenders in the country to charge interest on the outstanding loan that has not reached its pay date. This is a very important aspect to consider as a borrower if you have some amount in arrears. For instance, if a person borrows $20000 from a licensed moneylender and fails to repay the first installment of $4000 on time, the moneylender can only charge interest on $4000 and not the remaining $16000. This is because the due date for the remaining $16000 has not reached and therefore the amount cannot attract any interest. According to the MinLaw, the maximum fees that can be charged on late payment is $60 and the administrative fees charged on a loan approved should not exceed 10 percent.
There is no law that requires moneylenders in Singapore to charge 4 percent interest on money borrowed. This is the cap interest rate set by the government to protect the interests of borrowers. It is, therefore, the responsibility of borrowers to compare several moneylenders and negotiate for a lower interest rate. The good news is that competition among licensed moneylenders in Singapore is high and some charge interest rates of as low as 2 percent per month. However, low-interest rates should not make borrowers shop for a loan blindly. There are other important aspects to consider before picking the most suitable moneylender such as the terms and conditions.