Before approaching a moneylender, consider other alternatives, such as the various financial assistance schemes offered by various Government agencies. You may contact the agencies to find out more about their schemes.
You are legally obliged to fulfil any loan contract you enter into with a licensed moneylender.
Consider whether you are able to abide by the contractual terms, bearing in mind your income and financial obligations. Borrow only what you need and are able to repay. Be mindful that if you are unable to meet the contractual terms, the late payment fees and interest payment will be a financial strain not just on yourself but also on your family.
The law requires moneylenders to explain the terms of a loan to you in a language you understand and to provide you with a copy of the loan contract. Make sure you fully understand the terms of the contract, in particular, the repayment schedule, the interest rate charged and the fees applicable.
Consider carefully before agreeing to any contractual term which allows a moneylender to lodge a caveat on the sale proceeds of your real estate property upon default of the loan repayment. When a caveat is lodged against your property, you will not be able to sell it without first repaying the moneylender in full. If the repayment is taken from the net proceeds from the sale of the property, it can wipe out all or a substantial portion of the proceeds.
You should shop around different moneylenders for the most favourable terms. You should not rush into and commit yourself to a loan until you are satisfied with the terms and conditions.
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% per month. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one. If a borrower fails to repay the loan on time, the maximum rate of late interest a moneylender can charge is 4% per monthfor each month the loan is repaid late.
The computation of interest charged on the loan must be based on the amount of principal remaining after deducting from the original principal the total payments made by or on behalf of the borrower which are appropriated to principal. [To illustrate, if X takes a loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken into account for the computation of interest.]
With effect from 1 October 2015, all moneylenders are only permitted to impose the following charges and expenses:
a fee not exceeding $60 for each month of late repayment;
a fee not exceeding 10% of the principal of the loan when a loan is granted; and
legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan.
The total charges imposed by a moneylender on any loan, consisting of interest, late interest, upfront administrative and late fee also cannot exceed an amount equivalent to the principal of the loan. [To illustrate, if X takes a loan of $10,000, then the interest, late interest, 10% administrative fee and monthly $60 late fees cannot exceed $10,000.]