When you face a financial crisis, a loan can free you from the pressure. While looking for a loan, you may come across licensed as well as unlicensed moneylenders. Unlicensed moneylenders are not legal entities. They charge outrageous interest rates and can make you uncomfortable with their contract terms.
Browse through the licensed moneylender list before you enter a contract with a company in Singapore. Listed below are the significant risks you may face while partnering with an unlicensed moneylender.
You May Lose Your Money
An unlicensed moneylender may pressure you into paying the processing fees before the transaction has been completed. After receiving a lump sum amount, the moneylender may stop interacting with you. The risk is very high if you have communicated only through the phone or an online medium.
You May Pay High-Interest Rates
The law limits the interest rates that moneylenders can charge in Singapore (4% per month). Moneylenders who do not belong to the authorized list can charge you a higher interest rate.
You Pay More Fees than Required
Licensed moneylenders follow certain limits and rules concerning loan expenses and charges. When you take a personal loan, a moneylender must follow the below conditions.
- The fee must not exceed $60 for each month of late payment.
- The loan processing fee must not exceed 10% of the principal loan amount.
- The total loan charges (including the interest, late payment interest, administrative fees, and miscellaneous fees) must not exceed the principal loan amount.
None of these limitations are followed by unlicensed moneylending companies. Some lenders may even demand a deposit amount to process your loan application.
You May Be Harassed
One of the key characteristic features of an unlicensed moneylender is an unclear contract. Often, the contract does not cover the essential details and includes unclear terms and conditions. If you neglect these drawbacks in your rush to get the money, you may be in trouble sooner or later. Many victims have been harassed for the money they did not borrow or to pay ridiculous interest rates in the past.
You May Disclose Confidential Information
When you apply for a loan, you may disclose critical data such as your bank details or personal information to your moneylender. If you are dealing with a company present in the approved moneylender list, you do not have to worry. Licensed moneylenders take full responsibility for facilitating a safe transaction and maintaining the confidentiality of borrower information. However, the same cannot be said about unlicensed moneylenders. Your personal and financial data is at stake when you are with the wrong money lending organization.
Unlicensed moneylenders can make you feel comfortable with their extravagant promises. But there is always a catch in the contract. Often, there is no clarity about repayment methods or time. Hidden costs may be involved. Sometimes, you may end up committing a crime to get away from the moneylender.
Unlicensed Moneylenders Continue to Cause Trouble
Unlicensed moneylenders are hard to get rid of. They continue to bother you with loan offers even after you have paid back the total amount. They call you or message you frequently and try to allure you into taking more loans.
You Lose Your Peace of Mind
Unlicensed moneylenders can trouble you in more than one way. They are a source of additional stress while you are already in the middle of a financial crisis. The legal implications of dealing with an unlicensed entity can be problematic too.
How to Keep Away from Unlicensed Money Lenders?
- Read through an updated moneylender list before you take the plunge.
- Gather reviews and do enough research before you sign a deal with a moneylender.
- Ask for the lender’s physical address and website. Browse through their website to understand their standing in the industry.
- Discuss the general terms of the loan. It is a warning sign if the lender does not follow the interest rate limits or processing fee conditions.
- No licensed organization will ask for your SingPass user ID or password. They will not demand you to submit personal documents such as the NRIC card or work permit.
- Do not entertain promotional phone calls or messages from moneylenders (licensed moneylenders do not advertise themselves through such means).
- Understand the various ways to differentiate between licensed and unlicensed money lenders.
- If you come across any warning signs, take professional help in handling the situation.
- Check the list to learn their license number. By using their registered license number, you can determine the status of their license.