When it comes to borrowing money in Singapore, you have many types of loans to choose. You can take up a secured loan, unsecured loan, home loan, business loan, etc. In the case of secured loan, you have to mortgage some of your assets to the lender. On the other hand, if a loan does not require you to pledge any collateral, it falls in the category of unsecured loan. Banks usually offer you secured loans, while licensed moneylenders offer unsecured loans, such as, payday loan, business loan, and personal loan. Moreover, borrowing from a licensed lender is fast, hassle-free, and secured. Despite the benefits, many people in Singapore avoid seeking loans from a licensed lender. What hold them back are certain misconceptions. Here are four myths about licensed moneylenders debunked.
This is one common misconception among potential borrowers. Just because someone is borrowing from a moneylender does not mean they are financially weak. Even many financially adequate people choose to borrow from licensed lenders, for the convenience and fast turnaround they offer.
Make no mistake, money lending is a business. However, not all moneylenders are loan sharks. They cannot charge as much as they want from you. On the country, licensed lenders are bound by strict money lending laws in Singapore. There are caps on the interest rate they can charge on a borrower. Also, acclaimed money lending companies make their policies as customer-friendly as possible. They would never do something that would harm their reputation.
It is true that interest rate of money lending companies is a little higher than that of banks, but the higher cost commensurate with the level of risk on the lender. Think about it. Banks are eager to lend money only to people who do not need it, while licensed lenders offer loans to those who actually need it. Licensed lenders even offer loans to people with a bad credit history. They do not ask you to mortgage your assets. If you need the money quickly, you can rely on your money lending company to give a loan approval fast. Borrowers usually do not mind paying slightly higher interest rates for the facilities they get while borrowing from a licensed lender.
This is another common misconception. Some people think, if they borrow from a moneylender, they will never be able to borrow from the traditional lending institutions, such as banks. The truth is you can borrow from both of them simultaneously. Borrowing from money lending companies does not mean you are financially inadequate. In fact, if you borrow from one and repay the loan on time, it would help improve your credit score, which in future could help you get approval for a bank loan.
Some people also believe that money lending companies do not have any set rules for borrowing money. They think they can negotiate with the lender until they come to an agreement. The truth, however, is licensed moneylenders work under strict policies and rules.