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Believe it or not, the bank often lends its money to people who are stable enough that they would not need to borrow the money anymore. This is why some Singaporeans turn to alternative ways of acquiring money including Licensed Money Lenders. Now, before you borrow money from any of these options, you must know their differences first.
BANKS
Loaning money from the bank guarantees that there would be future repayment of the principal amount and its interest. A loan can either be specific or open-ended credit up to a certain ceiling amount.
Characteristics:
1. Larger Loans – Banks are ideal for larger loans such as renovating your home, starting a business, or buying a car.
2. Credit Assessment – A good credit score with a low debt to credit ratio is a must to qualify for a loan. And, if you want to pay a low interest rate, you need to be vigilant about your credit score.
LICENSED MONEY LENDERS
Licensed Money Lenders are businesses that are regulated by the Singapore’s Law. Unlike the loan sharks that lend with high interest rates, licensed money lenders’ fees are controlled by the parameters of the Law, which means you can expect to have a fair deal. Some of the known money lenders in Singapore are Max Credit, CashMax Credit and Quickloan Pte Ltd.
Characteristics:
1. Smaller Loans – Licensed money lenders are the ideal option for smaller loans such as paying utility bills, getting your laptop fixed, or repairing your car (even amounting to S$1,500).
2. Credit Assessment – Unlike the banks, licensed money lenders give more leeway in the credit score. This is because they lend a significantly smaller amount. So, if you have a bad credit and you cannot get a personal loan, licensed money lenders are there for you.
3. Transaction Speed – Licensed money lenders approve the borrower’s application within the day itself!
4. Higher Interest Rate – Since they carry more risk for granting loan to people with poor credit rating, they usually charge a higher interest rate and late fees
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Although the license money lenders give more freedom in the credit score, they will reject your application if you have a large sum credit card debt or if you have an outstanding loan from another money lender.
Sources: Investopedia and Sumo Credit Pte Ltd
