As the costs of living in Singapore are rising steadily each year, some of us may be caught offside when some urgent matters unexpectedly surface that need money. In these cases, it's money that you may not have but you need to have.
So you decide to borrow money. Rather than encroaching on family, relatives and friends, you turn to banks and licensed moneylenders for a personal loan.
Lending criteria for banks and licensed moneylenders:
For annual income of S$30,000 or more, you can apply for credit facilities that grant you credit up to four times your monthly salary; For annual income between S$20,000 to S$30,000, you can borrow up to twice your monthly pay; For annual income below S$20,000, you can only borrow up to S$3,000 from licensed moneylenders at maximum 18% interest per annum; To borrow from banks, you must have a clean credit history, as it is the first criteria they look at. So if you have not been regularly servicing your credit card bills or your hire purchases, then you are disadvantaged.
However, it is quite tricky to borrow from licensed moneylenders, as they are not standardised in their dealings. Each of the 243 licensed moneylenders (as of 1 February 2012) has its own set of terms and conditions for loans, and personal loans are the most popular in their business.
Things to do before seeing any licensed moneylenders:
Budget your monthly take home salary and whittle it down to your disposable amount after factoring in all your financial obligations; and Derive the amount you can repay in full each month from your disposable amount, having set aside some money for savings.
Things to ask the licensed moneylenders:
The amount you want to borrow and whether they can lend you; The interest rate and how it is calculated; The repayment period; and Any other extra fees and charges that may apply.
Things to consider in selecting the preferred moneylender:
The repayment amount matches or is less than your calculated repayment amount; Understand all the terms and conditions that the moneylender put forward; and The moneylender's demeanour and attitude.
Things to note when signing the contract:
The contract's content matches the verbal explanation by the moneylender; The contract lists correctly the principal loan amount, the interest rate, the repayment period and the repayment amount due monthly; The moneylender passes you the full loan amount as agreed without deducting any amount for any fee, if any, must be told to you earlier; and You are assured you will get a dated and signed receipt for each repayment and/or fees, as well as a half-yearly statement from the moneylender.
On your side, you must:
Promptly repay all monthly installments; If possible, repay your principal amount earlier, if there is no clause in the contract that prohibits it; and Keep all receipts and statements of account for future clarification if needed.
Do not borrow more than you can repay, and keep to your repayments strictly.
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