Personal loans can help tide you through unforeseen circumstances. However, before taking a personal loan, it is important to consider the interest rate involved, as it determines how much money you eventually need to repay.
While Singapore licensed money lenders’ lowest interest rate is higher than what banks can offer, some borrowers may find it a viable option for when they can’t qualify for bank loans.
In this article, we share more about the permissible licensed money lender interest rate in Singapore, ways to find licensed money lenders with low interest rates, how to calculate interest amounts on a loan based on a private money lender’s interest rates, other money lender fees and charges allowed, etc to help you select a loan that is suitable for your needs.
What is an interest rate?
Interest rate is a proportion of the loan principal –the amount borrowed– that a lender charges a borrower. This amount is to be paid on top of the amount you are borrowing from your loan provider.
What’s the permitted Singapore licensed money lender interest rate?
According to the Moneylenders Act, private money lenders in Singapore are allowed to charge interest rates of up to 4% per month for personal loans. Most money lender interest rates in Singapore hover around the 1-4% monthly mark.
What’s the permitted Singapore licensed money lender late interest rate?
A licensed money lender’s late interest rate is also limited to a maximum of 4% monthly by law. Also, take note that late interest rate can only apply to overdue amounts that have not yet been paid, not balance amounts that are not yet due for payment.
How are interest amounts calculated based on a licensed money lender’s interest rate?
Interest amounts on a loan are computed based on the licensed money lender’s interest rate using a reducing balance method.
Instead of computing simple interest the usual way on the original loan principal amount and splitting the sum across the number of instalments to be repaid, private lender interest rates are only applied to the outstanding principal balance owed.
As you pay down your principal balance with each instalment, the amount of interest paid per instalment will decrease, meaning you’ll pay more and more towards your principal sum as your loan tenure progresses. Just in case you’re curious, your monthly repayment amount is fixed throughout your loan tenure.
Here’s a calculation example for your perusal
Assume your original loan amount is S$10,000, your licensed money lender interest rate is 3% monthly, and your loan tenure is 12 months.
Your monthly instalment will amount to S$1,004.62. This amount is fixed for all 12 payments throughout your loan tenure.
For the first repayment of S$1,004.62, S$300 will go towards interest while S$704.62 will go towards paying down your principal, leaving a principal balance of S$9,295.38.
For the second repayment of S$1,004.62, the interest of S$278.86 is calculated based on the principal balance of S$9,295.38 (i.e. 3% x S$9,295.38 = S$278.86).
This will go on until all repayments have been made and the debt’s cleared.
As demonstrated, thanks to the reducing balance method employed by licensed lenders in the computation of interest amounts, the amount of interest you have to pay per instalment decreases as you pay down your loan.
What are the other permitted money lender fees and charges you should know about?
Late fees and processing fees
Besides understanding how private money lending rates work, there are other charges by lenders to bear in mind as well.
Licensed lenders are allowed to charge you late fees not exceeding S$60 for each month of late repayment regardless of the late repayment amount owed as well as a one-time processing fee of not more than 10% of the loan principal at the point of loan disbursement.
Take note that the processing fee shouldn’t be charged at any time prior to loan disbursement! All lawful lenders should only charge this one-time fee at the point of loan disbursement. For instance, if you borrow S$10,000 and the processing fee is 10%, the processing fee of S$1,000 will be deducted from your loan principal before the lender transfers you the remaining S$9,000.
Additionally, be aware the total charges imposed by a money lender on any loan (including interest, late interest, processing fee as well as late fees, if any) cannot be more than the loan principal.
Case in point, if you take up a loan of S$20,000 with a licensed lender, the interest + late interest + administrative fee + all late repayment fees that apply cannot be more than S$20,000.
Legal charges
Did you know borrowers can also be liable for legal charges ordered by the court if their lenders take them to court due to non-repayment of debts and succeeds in making a claim?
Any loan with a licensed lender is a legally binding one. If you’re unable to negotiate new repayment terms or deadlines, or unable to repay your loan, your lender can take legal action against you as a last resort.
Why it pays to compare private money lender interest rates in Singapore
It pays to compare private money lender interest rates in Singapore, along with their fees and charges, because money lender interest rates vary across lenders and all these make up your cost of borrowing. How expensive or cheap your loan is depends on all these factors listed above.
Like it or not, it’s only when you comparison-shop that you’ll be able to find a licensed money lender in Singapore with the lowest interest rate offered to you!
Ensure your lender is legitimate before committing
Even if you come across licensed money lenders with low interest rates, it doesn’t mean you can borrow from them instantly; in fact, it means you have to be extra thorough in verifying the legitimacy of such low interest money lenders.
Read reviews online on the specific low interest money lender you’re interested in. At the same time, ask around for opinions or recommendations.
Make sure the lenders you’re dealing with and getting loan quotes from are listed in the Registry of Moneylenders’ list of licensed lenders.
Spend some time visiting the lenders at their office and ask to see their money lender’s licence. Ensure their business name, licence number, business address, and landline telephone number are the same as the information listed at the registry.
These are important yet simple precautionary measures that you can take to safeguard your interests!
Conclusion
Need to get your funds quickly? Cash Direct goes the extra mile to make that happen for you while being one of the top licensed money lenders in Singapore with the lowest interest rates!
As a trustworthy loan company, our interest rates are fair and loan terms transparent. Apply for a loan today or contact us to find out more.
