It may be overwhelming to distinguish between licensed money lenders in Singapore and illegal ones when you desperately need instant cash.
These two kinds of moneylenders mainly resemble each other superficially by appearance, such as the lending services they offer. However, their standing in the light of the law and the amount of risk from them make them poles apart.
Therefore, in this post, we will take an in-depth insight into key differences to help you make informed decisions whenever you seeking loan services.
Who Are Licensed Money Lenders in Singapore?
A licensed money lender is a valid business that has legally obtained licensing from the government to lend people money at interest rates. These lenders are licensed to operate.
Notably, the licensed money lender follow specific regulations formulated by money lending regulatory bodies. For instance, the laws require licensed money lenders to cap the maximum interest rates they can charge, the loan repayment terms, and the manner of debt collection.
Importantly, you enjoy significant benefits by borrowing from a licensed moneylender because such regulations shall legally bind them. They will provide written agreements stating all the loan terms, so there is no room for confusion later. You should expect clear terms and conditions from the word go. Also, where there are disputes, you have legal recourse, providing you with a sense of safety and security.
Who are Illegal Money Lenders?
Illegal moneylenders operate outside the law, without licensing or regulation. Sometimes, these organizations are described as “loan sharks.”
Notably, sometimes, it’s hard to distinguish them from the licensed lenders. This is because, very often, they operate undercover or without public advertising of services. However, since they are unlicensed, they are not bound by any legal restrictions on the maximum interest rates they charge. Also, they are not regulated on the means through which they seek to recover their debts.
Therefore, you risk immensely when you borrow from illegal money lenders. When you borrow from them, they will more often than not impose grossly exorbitant interest rates that spiral out of control. Then soon, you find the loan is impossible to repay.
Besides charging high interest rates, they may use intimidation or even physical force to demand their money. Notably, since illegal moneylenders operate outside the law, you will not have the protection accorded to you by the law.
Differences between licensed and illegal money lenders
Legal standing
Licensed money lenders operate within the law, protecting you as a borrower.
On the other hand, illegal money lenders operate outside the law, and you are open to unfair dealings.
Interest rates
Accredited lenders charge only a certain amount of interest, which the government often fixes.
Unlawful lenders on the other hand have no restrictions. As a result, their charge s and fees are out-of-this-world. The interest rates are outrageous that you may never be able to pay off.
Debt Collection Methods
Licensed money lenders always collect debts ethically. If one fails to pay, there is usually an opportunity to explore and consider other options, such as loan extensions or restructuring.
The illegal money lenders threaten or use physical assault for their debt collections.
Transparency and Documentation
With a licensed money lender, you have clear documentation of the loan agreement. The loan documents stipulate how much the loan is, at what interest rate, and when that amount should be repaid. This kind of transparency makes it easier for you to understand your financial liabilities.
On the other hand, illegal money lenders may not give you such documentation. Under such circumstances, any lending terms can easily be changed, or higher payments may be demanded.
Dispute Resolution
You can take a licensed moneylender through the proper course of the law.
In the case of an illegal moneylender, you have absolutely no such courses since their operations fall outside the provisions of the law.
Conclusion
The ability to make this differentiation between licensed and an illegal moneylenders will enable you to steer clear of dealing with illegal money lenders in the best interest of your financial goals.
Importantly, while you may be tempted to turn to any lender who could promise quick and easy cash, remember that you should work only with licensed professionals. That way, you will not only be protected from excessive indebtedness and other hostile practices, but also get reassurance that your money is coming from regulated sources.
Therefore, the next time you seek loans, ensure your lender is licensed because that little step will save you a lot of trouble later.