Personal Finance

What If You Are Unable To Pay A Money Lender In Singapore?

November 20, 2022

If you’ve ever gotten a loan, you know that sometimes it can get tricky to repay. You could have lost your job or be facing an emergency. Or maybe you failed to keep track of your repayment schedule.

Perhaps you got too comfortable with the idea of taking loans and it has caught up with you.

Even though loans from licensed money lenders are fairly fast and easy to obtain, it goes without saying that you will be penalised for late payments.

The same applies if you’re unable to pay money lender Singapore. We’ll tell you the repercussions you can expect and how to handle the situation.

What Happens When You Are Unable To Pay A Money Lender?

There are a few repercussions of being unable to pay money lender Singapore. Here are some of the consequences:

Uncertain Loan Availability In The Future

All loan applications must go through the Moneylenders Credit Bureau (MLCB). The MLCB keeps track of your borrowing limit, unpaid loans, and payment history with other licensed money lenders.

Credit bureaus will also have information about loan payments that you’ve not made. So a lender may reject your loan application in the future if you have a history of not repaying your loans or if you still owe a sum of money.

You Risk Legal Consequences

A legal money lender in Singapore can recover the loan balance by suing you if you don’t repay it. So you may receive a letter from an attorney demanding payment for a lawsuit for the recovery of the debt.

Your Collateral Could Be At Risk

Mortgages and business loans are all examples of secured loans that necessitate the putting up of collateral.

You risk losing the collateral you pledged for a secured loan from a Singapore money lender if you cannot repay the loan. Lenders can legally seize the asset to recoup their losses.

What Licensed Money Lenders Can And Can’t Do

What licensed money lenders in Singapore can and cannot do is strictly regulated by law. They must strive to safeguard a borrower’s identity, personal information, and reputation.

Licensed Singapore money lenders may use debt collection agencies to recover their money.

This means debt collection companies can pursue outstanding debts on behalf of licensed money lenders.

But while following up with you for the money you owe, they must adhere to the Code of Ethics laid down by the Credit Collection Association of Singapore (CCAS).

The CCAS was established in 2013 to counter the widespread belief that lenders use illegal means such as physical force or coercion to collect overdue loans.

So it will be helpful if you’re aware of the applicable laws that protect you from licensed money lenders and debt collectors that might act illegally or unfairly.

A licensed lender or debt collector may do the following if you fail to pay your bill:

Discuss the financial situation with those closest to you, such as your family.
Debt collectors can also drop by your workplace and make phone calls to your residence.
Talk to you about terms of payment that are within your means.

An authorised Singapore money lender can use debt collectors to negotiate repayment plans with you if you are unable to pay money lender Singapore.

Licensed money lenders must also provide borrowers with detailed loan agreements. So make sure you receive your copy of the contract.

So what can’t licensed money lenders do?

Money lenders can’t directly market to you to get you to borrow money from them.
Loan approval requires a face-to-face meeting between the borrower and lender at its office headquarters. Parking lots and text messages aren’t appropriate places to discuss or approve a loan.
They are not allowed to ask for your bank account or credit card numbers.
A legal money lender in Singapore is not allowed to retain your personal documents after verifying your identity.
They cannot charge monthly interest rates that exceed 4%.
If you don’t pay on time, the interest rate can’t be more than 4% of the total amount you owe. You may be charged with a $60 late fee each month if your payments are consistently late.
It can’t charge extra fees if you pay ahead of time.
The lender cannot change the terms of the loan.
A legitimate lender can’t force someone to pay or do something illegal to get their money back.

Options To Take If You Are Unable To Pay A Money Lender

If you cannot repay a loan from a money lender, the interest on the loan will likely increase as time passes. So here are some ways on how to settle licensed money lender debt:

Discuss The Terms With The Lender

If you cannot repay your loan by the due date, you have some options. In most cases, licensed money lenders will be open to negotiating with their borrowers.

They may allow you to request for a repayment extension or refinancing. However, this could incur additional costs through licensed money lender interest rates.

If you want to avoid late payment fees, you should discuss this with your money lender before applying for a loan and before your next payment is due.

Apply For Bankruptcy

If a borrower consistently fails to repay a loan, the lender has the legal right to file a lawsuit to recover any losses from the default.

However, if you owe more than $15,000 and have no way of paying it back, you may file for bankruptcy as a last resort.

This means that the creditors cannot file a lawsuit against you until you are discharged as a bankrupt. Your debt will stop snowballing as the interest payments will be frozen.

Opt For A Debt Repayment Scheme

If your total debt is less than $150,000, the Debt Repayment Scheme (DRS) may be a viable alternative to bankruptcy. You will be protected from legal action by your unsecured creditors if the sum of your debts is less than $150,000.

An official assignee from the Insolvency Office of the Ministry of Law will work with you to create a manageable repayment plan for your debts under the DRS.

Can The Registry Of Moneylenders Help You Negotiate With The Money Lender?

Since a loan is a private agreement signed between a money lender and borrower, the Registry of Moneylenders can’t help you negotiate with money lenders about your loan.

You can consider looking for social security agencies that can help you resolve your debt problems.

How Credit Counselling Singapore Can Help

You can approach Credit Counselling Singapore (CCS) for help if you are unable to pay money lender Singapore.

With the institution’s assistance, you can restructure your debt using a money lender debt repayment plan.

In the past, CCS only assisted those who owed money to banks and credit card companies. It now aids those who have trouble repaying loans from financial institutions and legitimate money lenders.

However, social service organisations will only assist you if you owe money to legitimate loan companies.

You must attend a presentation before requesting an appointment with a counsellor. Make sure you do that if you need additional assistance.

CCS will offer you a monthly payment plan with a fixed interest rate. This can last anywhere from five to 10 years. Your income and expenses determine which time frame is best for you.

It also depends on whether you are a good fit for its plan. If you are, it is crucial to adhere to your payment schedule.

If you fail to repay your debts as agreed upon in your repayment plan, you will receive a Certificate of Failure from your official assignee.

Other Help Avenues

As mentioned, the DRS is a government-run programme that allows you to consolidate your unsecured debts into a single monthly payment.

However, the combination of your secured and unsecured debts must not exceed $150,000.

The DRS has a five-year term. You will, in other words, be debt-free once the term ends.

To calculate your monthly payment, add your monthly income and subtract your monthly expenses.

When you opt for a DRS, legal money lenders that gave you an unsecured loan can’t sue you unless the court allows them to.

Never Borrow More Than You Need To

If you are unable to pay money lender Singapore, you now know the best way to handle it. You also now have an overview of what will happen with regard to the money lender as the law has stipulated.

If you feel like you’ve hit a wall, make sure you make the right calls to help you out of the financial pit.

If you need more help, visit Credit Thirty3. As a trusted licensed money lender, we’ll give you more insight into some of the best ways to handle challenging financial situations.