When you are cash strapped and financial difficulties seem quite overwhelming, people often consider two major lending sources –banks and licensed moneylenders. In Singapore, there are significant differences between both these money lending institutions when it comes to getting a loan. Banks are traditional lending institutions that have been used by people for many decades for getting loans. Moneylenders, however, can often offer you the best loan package with quick approval, whether it is a personal, payday, or foreigner loan. All moneylenders in Singapore are licensed by the Registry of Moneylenders. Moneylenders need to abide by the Moneylenders Act and Rules. From a lending amount limit to interest rates, everything is determined by the Registry. Besides this basic, obvious difference, there are three major differences between banks and money lenders.
The Registry restricts money lenders in Singapore to providing loans that are two to four times of your monthly income. They look for customers who need payday loans and small amounts to cover their monthly expenses. A moneylender in Singapore will not bear the risk of your $10,000 renovation. For large loans, you have to go to banks and get it approved after proper verification. The reason more Singaporeans are looking to moneylenders for personal loans or small loans is due to the speedy approval process. You can easily secure a loan within an hour of submitting relevant documents. Banks take a much longer time to process your loan request as they have to check your credit score, income and other relevant documents. So speed of loan approval is one of the largest advantages of money lenders.
The Singapore Registry of Moneylenders set an interest rate and lending amount limit for all licensed moneylenders. The interest rates may be higher than what banks will offer and banks will charge lower interest rates for specific loans such as education and home loans. But banks also have very stringent standards for loan borrowers, such as minimum income requirements. So qualifying for a bank loan is just difficult and time consuming, especially when you need immediate cash.
If you missed your credit card payments or got a warning letter for late payment, then your credit rating will be affected. In Singapore, banks will check your credit score, reject your loan application if it is low. Money lenders in Singapore do not care much about your credit score as the amount they lend is comparatively small. You can always get a personal loan or fast cash loan as long as you show you are able to eventually pay it off.
Which one is better?
It is not about whether banks or licensed moneylenders are a better resource for obtaining a loan. It is about your needs and financial requirements. For home loans and business start-up loans, banks are arguably better as they specialize in this type of loan. However, a licensed money lender in Singapore is far better for your immediate cash needs, such as smaller payday-type loan or fast cash loan.