You borrowed from a licensed moneylender in Singapore, but you may be wondering what happens if you cannot continue paying.
Usually, even with all your good intentions, circumstances can crop up at some point, forcing you into a difficult financial position not to deliver on financial obligations, leading to failure.
However, you should not feel frustrated when life becomes overwhelming. Knowing what you can do and your rights can make a big difference.
Therefore, in this post, we’ll discuss what happens if you fail to pay your loan to a money lender.
About Defaulting on a Loan from a Moneylender in Singapore
A licensed moneylender in Singapore has the right to do some things when trying to recover their debt. For instance, they can send reminders, issue letters of demand, and even haul one to court.
On the other hand, they are bound by certain restrictions. For instance, they should not harass, abuse, or even threaten one with acts of violence. However, you will never have reasons to file any complaints with the Registry of Moneylenders or the police if they adhere to all the regulations.
Therefore, as a borrower, you should be informed of your rights so you don’t feel threatened as a borrower.
Implications of Defaulting on Loan Repayment
Penalty upon Defaults by Your Moneylender in Singapore
If the moneylender in Singapore decides to take legal action, they may file a lawsuit against you in court. If the court rules in favor of the money lender, you may be ordered to repay the loan amount, along with the accrued interest and all court-related costs. Additionally, the court may issue an order allowing the lender to deduct the owed amount directly from your bank account or your paycheck.
Notably, while that sounds daunting, the good thing is that licensed money lenders do not have the right to overcharge in terms of interest rates or fees. The interest rate should not exceed 4% monthly, and the total amount owed in the case of interest and costs cannot exceed the principal amount of money lent. Therefore, you will not be plunged deep into a bottomless pit of debt, even with penalties.
Effects on Your Credit Score
Usually, defaulting on a loan hurts your credit score. In this sense, bad scores always make it challenging to secure loans, credits, or housing shortly. Anyone facing any financial crunch would say that this acts like a second blow.
Fortunately, credit scores are not permanent. Over time, you can improve your creditworthiness by making consistent and responsible efforts to pay off your debts and manage your finances. While it may take some time, it’s never too late to start rebuilding your credit. You can start by making timely payments, reducing your debt, and avoiding new credit applications unless necessary.
What to Do in Worst Loan Default Case Scenarios
If you find yourself unable to repay your loan, it’s important to reassess your financial situation. Start by creating a budget and identifying areas where you can cut back to free up money for debt repayment. When prioritizing your debts, it’s crucial to focus on high-interest loans first, as they can quickly spiral out of control. If you’re still unable to manage, consider discussing your options with the money lender.
Notably, during this challenging time, always remember that you are not alone. Help is always available to see you through getting back on your feet. Therefore, in the worst cases, when it all becomes too much to handle, seek the services of a financial adviser on how to deal with debts and negotiate with your creditors.
Conclusion
Defaults on loans are distressing, but they are not the end of the world. You can take any such situation in hand and try to manage it with knowledge, openness, and proactive measures.
Lastly and most importantly, do not hesitate to seek help if things worsen further. After all, everybody faces misfortune at one time or another, and what matters is how you decide to face it. At Power Credit Enterprise, we help our customers with professional financial advice on dealing with debts to ensure smooth loan repayments.