According to a study by the global consultancy firm, Mercer, Singapore is now the 10th most expensive city in the world to live in.
And while the cost of living, particularly in the city, continues to rise, so does the possibility of potential liquidation issues for the regular citizen. It is at times like these that one will inevitably turn to financial institutions. But how can ensure you are choosing the right one? Here are a few things to consider before selecting a money lender in Singapore.
Authorised Money Lender
The first and most crucial thing you should do before choosing a money lender in Singapore is ensuring that they are an authorised lender. Before taking a loan from any institution, ensure that they are licensed under the Singapore Moneylenders-Act and that they comply with the regulations laid down by the Registry of Moneylenders.
Failure to do this could see you taking loans from loan sharks or any other financially exploitative institutions. Don’t fall for scams or fraud messages from illegitimate lenders claiming to be authorised institutions either. You can always confirm an entities authenticity yourself by verifying if they are in fact an authorised institution. There are a number of online websites and registries that will provide you with a definitive list of all the licenced lenders in Singapore.
After ensuring the lenders you are considering are all licenced, the next step is for you to decide on the amount of the loan. It is here that you must be very financially responsible. Take only the amount you need to cover your respective shortfall and nothing more.
It is easy to be drawn into the temptation of taking more than what you had initially intended. Be wise, as this is an easy way for you to get caught up in the debt cycle indefinitely.
There is an important balance to consider when paying back a loan. The principle of future value of money generally accepts that it is always best to pay back as slowly as possible. There is more to consider, however, as often, longer payback periods come with higher interest rates.
While shorter periods do come with shorter interest rates, you must pay mind to your current situation and financial liquidity. While it may sound wise to payback your loan as soon as possible, always ensure that the amount you proportion to pay back the loan is something you can reasonably afford to pay back every month under your current budget.
Terms and Conditions
Look carefully at the terms specified by the loan. While authorised lenders are obliged to ensure that you fully understand the terms of the financial obligation you are undertaking, it is always wise for you to take the initiative of understanding the stipulations and all the obligations thereof that will accrue to you should you take this loan.
The first key to getting ahead of your finances is understanding, so never make any decision while unsure about the full obligations therein.
Another aspect to consider when lending money in Singapore is The Total-Debt Servicing-Ratio or (TDSR). This framework was authorized by the MAS to ensure borrowers aren’t overleveraged before taking on a loan.
This rule however, applies only to property loans. TDSR is as a percentage of income that would potentially go into servicing your loan. Currently, TDSR threshold sits at 60%, i.e. you can use no more than 60% of your income to service a loan. Should the amount you wish to loan require a payment of more than 60% of your salary, the TDSR will not allow you to undertake that loan and you would then have to consider another financial option.
Payday vs Personal Loans
A payday loan is a very short-term loan with equally high interest rates that obligate you to pay back at your next pay check. The idea behind this, is to allow you to meet any immediate obligations that arise before your next pay check.
A personal loan is a standard loan given by financial institutions that have their own defined payback periods that aren’t necessarily tied to your next pay check. Payday loans gained popularity because of their short-term nature however in truth, they are extremely inadvisable. Banks in Singapore can process a loan within a day and offer far more reasonable interest rates. Therefore, it is advised to avoid Payday loans at all costs.
Should you find yourself in financial trouble, there are financial institutions that can assist you. However, always ensure that you are making the right decision when selecting a lender and not one that could eventually push you even further into financial ruin.
There is an abundance of resources you can use to get in touch with the right money lender in Singapore for you. Use them wisely and you can get on top of your finances once again.