Personal Finance

How To Settle Debt With A Licensed Money Lender And Where To Get Help When Required

September 24, 2022

Are you in a jam because you can’t repay the loan you took from a licensed money lender?

When you are in a tight spot, you should turn to reputable institutions like banks and legitimate money lenders rather than illegal ones such as loan sharks.

You may apply for a secured loan, but you’d need to put up collateral like your car or home.

What happens if you don’t have the resources to put up these kinds of valued assets?

Here are a few options you can consider when it comes to how to settle a licensed money lender.

What Types Of Loans Can You Borrow From A Licensed Money Lender?

Licensed money lenders offer both secured and unsecured loans.

A secured loan is backed by collateral, which could be a home, automobile, or something else of value.

On the contrary, unsecured loans do not require collateral. Instead, your annual income is what will matter more to the lender.

There is no cap on how much you may borrow with a secured loan. You can borrow as much money as you need if you have sufficient collateral.

But note that the lender will claim the assets if you don’t repay the loan.

There are numerous options for borrowing money from licensed money lenders without collateral. Here are some:

Personal loans
Business loans
Loans to pay medical debts
Renovation loans
Wedding loans
Debt consolidation loans

Remember that the amount you can borrow from legal Singapore money lenders depends on your annual income.

If you are a Singaporean earning less than $10,000 a year, you are eligible for a loan of up to $3,000.

Loan amounts up to six times your monthly salary are available to those with annual incomes over $20,000.

Check with your chosen lender first to determine if you can borrow from them and how much you can borrow.

Pros And Cons Of Borrowing From A Licensed Money Lender

Borrowing from a licensed money lender in Singapore is one option for those who are strapped for cash.

However, some issues may arise with getting a loan from a money lender that may require you to know how to settle a licensed money lender.

In that context, here are the benefits and drawbacks of borrowing money from a licensed money lender:

Pros

Swift approvals (less than 30 minutes if you have all the requested documents)
Interest rates and monthly payments that can be adjusted to meet your budgetary needs
The application procedure is simple and fast, and often done online
Your negative credit won’t be a reason for a legitimate money lender to reject your loan application. In contrast to banks, licensed money lenders will not reject borrowers solely based on their credit history.
Licensed money lenders can provide a debt consolidation plan to reorganise your finances

Cons

Your loan payment has a 4% monthly interest, which is pretty steep compared to that of banks
In most cases, a loan from a licensed money lender will have a 12-month repayment term
The amount you can borrow depends on your annual income
You have to pay compensatory charges for delayed or missed payments
Your credit score can take a hit if you don’t make payments on time
You may get caught in a debt cycle if you can’t repay your loan

How Are You Protected By Law When Borrowing From A Licensed Money Lender?

Several legal safeguards are in place to protect borrowers who deal with legitimate financial institutions.

Lenders must adhere to various regulations set forth by the government to maintain their right to lend money.

Interest rates and other costs are capped at a certain percentage.
Legal money lenders can only charge a maximum of 4% late interest on the missed payment and a maximum late payment fee of $60.
The maximum percentage that a money lender can charge for administrative costs is 10%.
The terms of the loan should be made clear and transparent. These specifics should be laid forth in the contract and answer any queries you have.
A licensed money lender cannot engage in dishonest or deceptive practices. Legal money lenders in Singapore are prohibited from charging any fees at any stage of the lending process until the loan has been disbursed.

In addition, the interest rate for late payments is not calculated based on the loan balance but the unpaid payment after the deadline.

The Ministry of Law also keeps tabs on licensed money lenders, making it possible to hold them legally accountable for any wrongdoing.

Call the Registry of Moneylenders or use its online form if you’ve had trouble with a licensed money lender.

Make sure that the licensed money lender you choose does not employ loan officers who are unprepared or challenging to work with.

You can ensure this by doing research on the company and reading reviews from previous customers.

What If You Are Unable To Pay Back The Loan?

If you are unable to pay a money lender in Singapore on time or settle a licensed money lender, here is what you need to do:

Communicate With The Loan Provider And Request For An Extension

If you feel the payment deadline would not give you enough time to repay the loan, you should revisit the terms with the lender.

A money lender debt consolidation plan allows you to consolidate your loans into one manageable monthly payment.

You can then extend the repayment term on your existing debt to pay less overall.

Apply For A Debt Repayment Plan

A money lender debt repayment plan gives you up to five years to repay your obligations. After that, your income will determine the amount of monthly payments you make.

Be sure you qualify for the programme before applying.

Seek Out Credit Counselling

Credit counselling is an excellent option for anyone looking to understand better and manage their financial obligations.

It provides education on financial responsibility and debt consolidation.

Declare Bankruptcy

You can declare bankruptcy if you have more than $15,000 in unsecured debt and have no hope of ever paying it off.

Filing for bankruptcy can discharge your need to pay interest on outstanding debts. The lender will not be able to file a legal suit to recover the debt.

It’s not ideal, but filing for bankruptcy will get you back on your feet financially and give you a fresh start.

On the downside, this will harm your credit score massively, and you might lose the chance of getting loans in the future.

What Happens If You Default On A Loan?

You shouldn’t default on a loan if you cannot make the required payments on time.

A licensed money lender can take you to court if you default on the loan you took with it.

For example, if you take out a secured loan and can’t make your payments, the lender can take whatever you put up as collateral and sell it to recover the money.

Therefore, borrowing money from a certified money lender can be risky if you can’t pay it back on time. You may be sued and must repay the entire debt, plus interest and other costs.

However, if you take immediate action, you may be able to prevent some of the more severe consequences of loan default.

How Credit Counselling Singapore Can Help

Debt relief organisation Credit Counselling Singapore (CCS) is a private, non-profit enterprise in Singapore.

If you have debt from not paying back a bank loan, regulated money lender, or credit card, CCS can help.

Through CCS, you can:

Attend a seminar on effective money management techniques.
Schedule a free counseling appointment. Taking your current circumstances into account, an experienced agent will review your available options.
Get going on implementing the help you’re due. Your representative may be able to negotiate better terms with your money lender or suggest ways on how to settle licensed money lender debts.
Take an online debt management course. This course will teach you how to deal with debt, different paths available to you, and the common tactics used by creditors.

Individual financial counselling is available to borrowers who feel they need further assistance to develop strategies for managing their debt.

Other Ways To Get Help

If you are having trouble making your payments, you may want to consider borrowing money from loved ones for zero interest.

This will prevent further interest charges from accruing on your loan.

You can also use money from the sale of your assets to settle your financial obligations.

If you cannot repay a loan to a licensed money lender, it would be best to contact it as soon as possible.

Explain your financial situation and see if you can come to a payment arrangement that you both can agree on.

In other words, don’t be shy about seeking assistance. It is in the lender’s obligation to work with you if you want to repay your debt, so don’t be timid about approaching it.

There Are Many Ways To Settle Licensed Money Lender Debt

If you’ve been struggling to settle your debts, now you have a few options to consider.

Of course, many of these options would severely affect your credit score, but the truth is that you wouldn’t have much of a choice at this stage.

So take responsibility for your choices and focus on building your credit score after you pay off your debt.

For more information on how to settle a licensed money lender, visit Credit Thirty3.

Here, you will get more insight of how you can handle your current debt situation. You can also apply for a debt consolidation plan to settle your debts with us.