Licensed Money Lenders vs. Banks: What are the Differences?

Woman thinking of benefits of licensed money lenders

There are times when you feel uncertain about borrowing money from a bank. After all, the ones who are most likely to qualify for a bank loan are those who have a ton of properties, take home a 5-figure salary per month, and barely have any need for extra money. To put it simply, if you don’t have a terrible need for emergency funds, this is the time banks are more willing to lend you some money. Ironic, right?

But of course, in the real world, the ones who take out a loan are those who are in dire need of extra funds because of a difficult financial ordeal they are facing. It only makes sense that the average individual who is going through a tough situation with money should be granted a loan easily. Yet, this is not the case, since banks make it tougher for these people to get past the application and screening process. There are hoops to go through, and it is next to impossible to pass these hurdles at your timeline.

Fortunately, there is a more practical and time-saving option for you whenever you need emergency funds right when you want them. Licensed moneylenders in Singapore are mainly all over the place, and these can help you tide over a difficult financial problem. The most important thing is that you steer clear of loan sharks as you look for a reliable moneylender since this can make a huge difference in getting though your crisis.

Here, we look into the vast difference between a licensed moneylender and banks in Singapore. Or you can do a quick read on before you request for a loan.

What to Expect from a Licensed Moneylender

The Registrar of Money Lenders in Singapore provide licenses to institutions or companies in the country that are involved in the money lending industry. Once a license is provided to these lenders, it means that they have gone through and passed the test required from a money lender. But then again, this does not mean that just because you have found a licensed lender, you can already eliminate the fear of being charged with unreasonable rates or unfair repayment terms. There is always the risk of dealing with a so-called loan shark, unless you check carefully who you are getting your loan from.

For the most part, moneylenders are there to establish and maintain their business. The main goal is to keep their reputation positive and professional. So, they do not have any intention of scaring away potential borrowers. They also do their best to keep all their operations legal to avoid being arrested and penalized by the police or having to shut down their business for not complying with the guidelines set by authorities.

In case there are overdue payments, licensed and trustworthy moneylenders only send reminders to their clients by sending letters. There are no unlawful acts done such as threats to their clients whether by phone, email, or letter. In simpler terms, the way these institutions request for payment is all legal and not at all far from how banks do it.

But at the same time, it is also worth noting that licensed money lenders in Singapore have other unique services and features including their focus on offering smaller loans, fast application and approval process, a higher interest rate, and lenient standards when it comes to assessing their clients’ credit score. Below are further information on each qualities that a licensed moneylender possesses.

1. More Focus on Offering Smaller Loans

If you need a huge amount of money for your emergency needs, yet your current salary is not too high, then you have to be more realistic whenever you send out your loan application to a lender. There is a legal restriction when it comes to the amount of cash you can loan, which is 2 to 4 times your income per month. Moreover, most lenders will refuse to lend you the entire sum since there are terms and guidelines they impose.

Borrowing a 5-figure amount for a personal or emergency concern does not always guarantee you of an approval since lenders do not want to take the risk of providing this amount to clients no matter how high their salary may be. Payday loans, for instance, are only smaller amounts that should suffice for clients to address their immediate needs. This is why if you have urgent bills to be paid, yet not amounting to several thousands of dollars, then you may approach a money lender for this purpose. Some instances when a money lender may be able to help you include having your car or motorcycle fixed right away, settling the fee for your plane ticket, or paying your clinic bills. Also, they offer short term business loans as well. This loan is important to those who are in need of capital to start a business.

2. Get Your Loaned Amount Fast

Money lenders do their best to address their potential clients’ needs the fastest way possible. In fact, it is not uncommon for these companies to provide feedback to borrowers within half an hour. As long as all the required documents are provided, then there is a huge chance of being approved of a loan. You should be able to walk away with the amount you need without getting exasperated from the long wait.

Money lenders are primarily smaller companies with more flexible rules. Since there are not much bureaucratic layers and intensive guidelines as compared with what banks offer, the amount of money that you can borrow from them is not too high. So, if you fail at getting the amount you need from a bank, then you can rest easy knowing that a moneylender may give you some extra cash. If fast money is what you need, then you might as well forget about going through major hoops from a bank and just go straight to a money lender for assistance.

3. Interest Rates are Higher

Perhaps you are wondering – there has to be a catch since you are getting your money fast and easily, right? If there is one thing you might want to know about a money lender, it is the fact that the interest rate is not always very low. Sure, there are those that offer cheaper rates, but you cannot simply settle for these companies since there are drawbacks. The cheapest is not always the best solution – in most things, at least.

More than the interest rate aspect of dealing with a moneylender, you need to consider the repayment terms offered. Are you happy with the services the company provides? Or you may also check with current clients and get their opinions of the money lender in question. If you want a cheaper rate, you may have to exhaust all your options first before sending out your loan application and worrying about the massive rates you have to pay afterwards.

4. Credit Rating

Perhaps you are worried that your credit score is nothing you can be proud of at this point. If you have late payments for your credit card bills, the rating may go down to a B. But once a warning letter comes your way, you can expect a C rating to hit you in the face. Sadly, it is not very easy to fix a credit rating. This is why if you want to take out a bank loan with a bad credit score, you may as well expect them to give you a sharp “no”.

While moneylenders are generally more forgiving when it comes to assessing their potential clients’ credit rating, they do not simply approve anyone of a loan if there are serious red flags on their credit standing. A letter of discharge may be required by moneylenders before the loaned amount may be given to you. This is still reasonable, though, since your chances of being approved of a loan remains high if you can produce this document.


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