Borrowing money is a big decision. Once you make up your mind for taking a loan, the next few steps are to decide how much to borrow, whether the repayment amount is well within your financial capability, and what would be the right repayment tenure for you. For better decision making, you should arm yourself with enough information. If you are borrowing from a licensed moneylender, here are two important things you should know.

How much you can borrow from a licensed moneylender

After knowing about some of the misconceptions about personal loans that has been circulating, the next thing to understand is that there are two types of loans – secured and unsecured. If you pledge any collateral for taking up a loan, it would be considered a secured loan. This means you have to put some of your assets, such as your car or your house in mortgage to the lender for getting approval to a secured loan. On the other hand, all loans taken without having to pledge any collateral fall in the category of unsecured loan.

For secured loans, there is no limit on the amount of money you can borrow. However, if you choose to take up an unsecured loan from a licensed money lender in Singapore, there could be a limit on how much you can borrow. It depends mainly on your annual income.

• If you are currently earning up to $20,000 per year, you can borrow up to $3,000
• If your annual income is between $20,000 and $30,000, you can borrow equivalent to your two months’ income.
• If you are currently earning anywhere between $30,000 and $120,000 per year, you can borrow an amount equivalent to your four months’ income.
• There is no cap on how much you can borrow if your annual income is $120,000 or more.

What service charges can they charge?

Earlier, moneylenders in Singapore were allowed to charge six different types of service charges. If you took a loan before September 30, 2015, that rule still applies for your loan. However, all loans taken after October 1, 2015, are bound by a new law, which says that licensed moneylenders can charge you only the following three types of service charges.

• If you make a delay in paying your monthly installment, they can charge you maximum $60 for each late monthly repayment.
• They can also charge you a flat administrative fee at the time of loan approval. This fee should not be more than 10 percent of the principal loan amount.
• If a moneylender files a claim for loan recovery and gets the claim approved by the court, they may charge you an amount for the costs they had to incur for legal proceedings.

Also, the total amount your moneylender can charge you must be less than the sum of interest paid, initial administrative fees, and late payment charges. For instance, if your total loan amount is $20000, your moneylender cannot charge you more than $20000 on account of interest rate, plus initial administrative fees, plus late payment charges.