Have you ever found yourself short on cash for a significant expense or in need of funds for a major purchase on short notice? If you have, don’t worry, it’s not uncommon. The usual recourse is to seek financial assistance from friends and family, banks, or licensed moneylenders.
The first option, however, is not ideal for everyone due to the potential for relationship damage; the second, generally involves lengthy approval procedures and stringent requirements.
For many, that leaves licensed moneylenders as the most convenient option. But applying at the first licensed moneylender you find is not the best course of action. So, to help you make an informed decision, we’ve prepared a short guide to help you understand how to get the best rates from licensed moneylenders.
What is a Licensed MoneyLender?
Licensed moneylenders are financial institutions authorised by the Ministry of Law (MinLaw) to provide money lending services. They operate under specific laws and regulations designed to protect borrowers from predatory actions such as prohibitive interest rates, harassment and any other unlawful behaviour.
It’s worth noting that as of August 2023, the MinLaw has suspended the grant of any new moneylending licences. When in doubt as to the legitimacy of a moneylender, consult the full list of licensed moneylenders available on the website of MinLaw.
How Much Can You Borrow from Licensed MoneyLenders?
The amount of money you can borrow from licensed moneylenders is contingent on several factors; with secured loans, the amount you can borrow boils down to collateral, and whether the lender is willing to provide the amount you are requesting.
In contrast, when it comes to unsecured loans, the rules differ based on the borrower's profile. If you're a Singaporean citizen or a permanent resident with an annual income under $20,000, you can only borrow up to $3,000 in total from all licensed moneylenders. Yet, if you earn more than $20,000 a year, you have the leeway to borrow as much as six times your monthly salary from all such lenders combined.
For foreigners living in Singapore, the borrowing guidelines are distinct. If you make less than $10,000 a year, you're limited to borrowing $1,500. Those with yearly earnings between $10,000 and $20,000 can take out loans totalling up to $30,000. And if you earn more than $20,000 annually, you can borrow an amount equivalent to six times your monthly wage.
How to Get the Best Rates from Licensed Moneylenders
1. Compare Loan Rates from Different Licensed Moneylenders
When seeking a loan from a licensed moneylender, it's crucial to shop around and compare rates from various licensed moneylenders. Each lender may offer different interest rates and terms, so taking the time to compare can save you a significant amount in the long run.
Take advantage of online platforms that aggregate loan information to make your search more efficient. For example, with Lendingpot, you can reach out to over 20 pre-approved lenders on our platform with a single application and receive personalised offers.
Remember, the lowest interest rate doesn't always mean the best deal; consider other factors like repayment terms and additional fees.
2. Negotiate
Negotiation is often overlooked by many borrowers, but it can be a powerful tool in securing favourable rates. Before entering discussions, arm yourself with knowledge about the prevailing market rates and your own financial standing.
Don't hesitate to ask for a lower rate, especially if you have a strong credit history or a stable income. Sometimes, even the loan terms can be negotiated to better suit your financial situation.
Remember, the terms are, for the most part, not set in stone, and a bit of polite negotiation can go a long way in reducing your financial burden.
3. Consider Your Credit Score
Your credit score is a significant factor that moneylenders consider when determining your loan interest rate. A high credit score not only increases your chances of loan approval but can also give you leverage to negotiate for a lower interest rate.
Therefore, before applying for a loan, it's advisable to check your credit score and take steps to improve it if necessary. Paying off existing debts, ensuring timely bill payments, and avoiding new credit card applications are some ways to boost your score. A better credit score can translate into more favourable loan terms.
4. Get a Co-Signer
Having a co-signer can be an effective way to secure a loan with a lower interest rate, especially if your own credit score isn’t, well, good.
A co-signer with a strong financial background or a good credit score can provide the lender with additional assurance that the loan will be repaid, which reduces the risk associated with lending to you. Therefore, a more favourable interest rate.
Keep in mind, however, that the co-signer will also be responsible for the loan if you default. Making sure both parties are fully aware of the terms and responsibilities before proceeding will prevent irreparable harm to your relationship.
Final Thoughts
Obtaining a personal loan is a significant commitment. The time and effort invested in evaluating various options before making a decision can save you considerable time and hassle down the line.
Through our platform, Lendingpot aims to help individuals get the best outcomes in approvals and pricing. Visit our website to peruse our extensive list of lenders from banks, licensed money lenders and financial institutions. Book an appointment with us today and let us help you realise your financial goals.
