Earlier this month, a friend received an SMS that started out “OWE $ PAY $“, included a lovely expletive and ended with “I SURE COME LOCK AND BURN YOUR HOUSE TONIGHT“.
Thankfully, it turned to be just a scam, but it was a reminder of the harassment tactics of an unlicensed money lender. Or, to use a term that most Singaporeans should be familiar with – “Ah Long“.
Banks and financial institutions have a lot of restrictions when they provide personal loans. You’re a Singaporean or PR but don’t earn more than $20,000 a year?
You’re a foreigner with less than $45,000 annual income? You’ve recently defaulted on all your credit cards and are trying to borrow money from the same bank to pay it back?
If your bank has taken out a restraining order on you, and your family has started cutting your face out of their photos, who do you have left to turn to for your money woes?
Legally speaking, your only option is the licensed money lender.
1. Where do you find a licensed money lender?
Ever since laws were passed that prevented them from advertising their services, many now turn to the Internet to ensure that desper- I mean, interested clients have the convenience of making an enquiry via an online loan application form.
A quick Google search turns up several individual licensed money lenders as well as several directories of money lenders, just in case you don’t want to settle on just one.
Currently there are 173 licensed money lenders in Singapore. Of course, you should always check the Ministry of Law website and make sure their license is still valid before you approach one.
2. How much can you loan?
As we said earlier, if your annual income is less than $20,000, it’s almost impossible for you to find a bank that is willing to give you an unsecured loan, even with the best personal loan rates.
However, a licensed money lender is legally allowed to loan you up to $3,000.
If you earn more than $20,000, a licensed money lender can give you a loan of up to 2 to 4 months’ salary. That doesn’t mean they will, of course. Ultimately, it depends on how much they trust you to repay them back.
3. How long can you loan for? And how much are the fees?
This is when things start to get tricky. Licensed money lender Credit88 got a bad reputation in December last year. The Straits Times reported that one of their clients had borrowed $400 but was expected to repay $1000 altogether, because of a “late fee” of $600.
How much time was he given on the loan? ONE DAY.
Either Credit88 thinks people loan money the way they rent bowling shoes, or they were quite cleverly abusing the fact that there are currently no laws about how much late charges they can impose on clients.
To make the story worse, that same client then went to two other licensed money lenders, Assure Capital and AP Credit for help, but ended up being slapped with the same problem – pay the entire loan by the following day, or pay a hefty late fee.
It’s interesting to note that, based on the latest list of licensed money lenders, Credit88 has lost its license. Yet, who is still on the list? Both Assure Capital and AP Credit, which charged the same client a more exorbitant late fee.
4. When can I get my loan?
This is the question that gets people in trouble. A licensed money lender can give you cash fast, sometimes even within the hour once you’ve provided the required documentation. Which means if you need the money urgently, you’re probably willing to get it at any cost, even if the cost is an arm and a leg.
(Licensed money lenders aren’t allowed to chop off your arm and your leg, of course. That doesn’t mean they won’t get someone to threaten to.)
Ultimately, budget your salary now so that you’ll never be in a position where you need money so urgently that you’ll resort to exorbitant fees and extreme consequences.
5. Okay, but what happens if I really can’t pay it back?
The problem with giving your employment details when you apply for the loan? It means the licensed money lenders do have the ability to claim the debt from your employers.
Whether or not they choose to do that is their prerogative, but the alternative is getting a debt collection company to do the chasing. This opens up two problems, neither of which are preferred.
If the debt collection is via legal means, then be prepared to be constantly bombarded by letters, SMSes and phone calls. It’ll start with some gentle prodding, but in extreme cases, they might turn to your family members or neighbours if you don’t respond.
However, if the debt collection in itself is not entirely legal, you may find yourself in a situation almost similar to having borrowed money from an “Ah Long”.
Being physically harassed by debt collectors and having them “visit” your residence in order to demand it from you, almost makes you wish you had gone with an illegal money lender instead.