There are mainly two different types of loans that can be issued to an individual by a bank or other financial institution – secured loans and unsecured loans. Here in this article, we will explore the various differences between these two types of loans.
The secured loans are those that are secured by a collateral or an asset of some kind. The purchased items such as a car or a home can serve as a collateral. A lien is put on such items. The bank or the financial company will hold the title or deed until the total amount of the loan has been repaid back along with all applicable fees and interests. Other items like bonds, stocks or personal property items can also be used for securing a loan.
Secured loans are by far the best way to get large sums of money as loans. Unless there is some sort of solid guarantee, a lender will be highly unlikely to loan out a large sum of money simply at the word of the mouth of an individual that the sum will be repaid. On the other hand, putting a car, a home or some other kind of property on the line is a good way to guarantee that a person will do everything that is possible to get the loan repaid within time. Some of the most common forms of secured loans are mortgage or home loans, construction loans, bridging loans, term loans and car loans.
Unsecured loans are those that do not involve a guarantee of payment or collateral like the ones commonly associated with secured loans. Some of the common forms of unsecured loans include credit card purchases, personal (signature) loans, student loans, certain home improvement loans and personal lines of credit. As the lenders take a considerable risk by making such loans without any assets or property to recover if there is a default, the interest rates for these loans are considerably higher.
When a person applies for an unsecured loan, the lender of the money believes that he or she will be able to repay it based on personal financial resources. There are five different criteria used for judging a person before an unsecured loan is approved. These include character, capital, collateral, capacity and conditions. The criteria character, capital, collateral, capacity is used to judge a person’s credit worthiness as well as the willingness to pay the loan back. Conditions relate to the situation of the borrower and various economic factors.
No matter what your requirements are, it is always better to take loans from a licensed money lender as this can get you a number of benefits. We have all heard stories of how certain people borrowing money from unauthorized sources have experienced major problems with harassment issues. By getting your money from legally approved money lenders, you ensure from the beginning that you are free from such troubles. So let’s have a look at the various benefits that you can get by loaning money from licensed money lenders.
1) Avoiding Harassments from Illegitimate Money Lenders
Borrowing money from licensed money lenders protect you from the harassments that illegitimate money lenders can expose you to. The money lenders in Singapore have to follow numerous strict money lending laws that are laid by the government. If the lenders are not able to abide by even a single of them, then they become liable to face serious punishments from the governmental authorities such as monetary fines or even revoking of the lender’s license. The professional licensed money lenders can offer you advice on how to stick to a repayment scheme that is feasible so that this helps you to manage your money properly.
2) Avoiding Very High Interest Rates
Usually, unlicensed money lenders ask for very high interest rates as they often have a need to ensure repayments from the people borrowing money from them. However, licensed money lenders in Singapore are registered under the “Registrar of Moneylenders”, that issue dictates regarding how much a money lender can charge as interest rates, what fees they can ask for and the maximum amounts that they can lend to the people asking for loans.
By the way, i-Credit offers one of the lowest interest rate in Singapore, compare to most licensed moneylender in Singapore.
3) Avoiding SMS Spams from the Illegal Money Lenders who try to convince you to Loan Money from Them
The licensed money lenders are not authorized by the law to send advertisements through SMSs or carry out telemarketing campaigns to entice potential customers. If you are bothered by such SMSs asking you to loan money, then you can report this to the IPT as this is a major violation of the DNC act and money lenders act.
4) Avoiding Illegal Ways of People Trying to Obtain Your Personal Information
Illegal money lenders often make use of a person’s SingPass login details for obtaining personal information about people who they try and can convert into customers. Private information if fallen into wrong hands can be used in wrong manner. Hence the legal lenders only carry out SingPass verification checks in the presence of the person in question as he or she is obtaining a loan in the office. The money lenders check your previously drawn salary so as to estimate your level of income before they can actually issue the loan on your name.
5) You can get your Loans Easily with Legitimate Money Lenders
Legitimate money lenders, unlike the illegitimate ones can issue your loans rather quickly. For example, if your yearly income is $30000 or more, then you can get your loan approved quite easily and in less time. Moreover, your credit history won’t be checked thoroughly or taken too much into consideration.
6) You can Loan ANY Amount For Any Income Group
If your annual income is more than $30000, then you can loan money up to 4 times of what is your monthly income. Moreover, the interest rates that will be applicable for you will be at 4% monthly. Check out the loan scheme for more info.
Suggestions of experts
Ramit Sethi, the author of “I Will Teach You To Be Rich” suggests that one should spend one’s income in definite streams of expenses. The first thing that he recommends is that people should create a budget and then stick to it in a steadfast manner. To start with, he asks people to spend the majority of their income – amounting to as much as 50 to 60 per cent – for the fixed expenses. This includes costs such as rents and/or mortgages, various utilities, bills to be paid for cell phone calls, insurance, payments for private vehicles, and other miscellaneous expenditure such as groceries, internet and clothes etc.
Next, Sethi says that 10 per cent of one’s income should be dedicated for making investments from the money that is left after paying the taxes. As far as savings are concerned, Sethi states that 5-10% should be kept aside for the purpose. Young people can save up for a variety of purposes such as going on a vacation, making down payment on the house that they have always wanted to buy. Savings also come in handy during wedding or at times of emergency. Sethi says that the remainder of the money should be used for guilt-free expenses.
He feels that every person needs to spend for fun and expects young people to do it more often than others would. This segment includes expenses such as going to bars, going to see a movie, attending a game or using cabs etc. Going by this approach, it would not be unwise to suggest that Sethi exhorts people to spend more money on things that they love and less on things that they dislike, and still be able to save some money that would come in handy later on. Bill Schultheis, who has authored “The Coffeehouse Investor – How to Build Wealth, Ignore Wall Street, and Get On with Your Life” has his own take on this issue.
Schultheis proposes that people should save for later but they should also invest some money for the present. He prioritizes areas such as mutual funds and stock markets for young people, provided they are interested in the same. He says that 10% of youngsters’ money should be used for investment – it does not matter what kind or form it is. He also says that young investors should not shy away from the prospect of losing their money in the stock market. Any loss suffered in the present would only make them wise in the future.
The author of “FAFSA Made Easy: Getting the Most Out of College Financial Aid” Arthur Isabella suggests that a 50-30-20 plan should be followed by young people. Isabella says that 50% should be dedicated towards regular expenses, 20% should be for debts and retirement savings and the remainder of the money should be used for recreational activities. He says that one should recognize the basic fact that all our expenses are related. Considering the critical condition of the job market he recommends that there be three kinds of budgets – one for good times, one for normal times, and one for when nothing is working.
Importance of self control
It is very important to be controlled in one’s expenses. Quite a few of us are lucky in the way that we inherit the virtue from our parents and it is drummed into us. With proper control on your expenses it will always be easier to maintain a leash on your spending as well. You can always use the credit card to buy something but isn’t it better to save for the same and then buy it?
It is not really worth it to pay interest on something as daily and mundane as a pair of jeans or a box of cereals. If you are not able to control your urges, it does not matter how much you earn at the end of a month – you will keep paying for them for a decade. In case you want to make sure your credit cards can be used for convenience expenses or for availing the rewards always pay the whole balance when the bill comes to you at the end of a month. Also, be sure to have only that amount of cards, which you can keep a hold of.
Be responsible for your own financial future
You should always remember this – if you have no idea as to how you can manage your own money others will always find ways to wreck your ship. Some of them can have bad intentions such as financial planners who work on basis of commissions and operate in a Machiavellian manner. Others might have only your good at their heart but they have no idea of what they are doing. Among them could be your own family members who might wish you buy a house but have no knowledge as to how you would pay off the mortgage.
There are certain other things that you should keep in mind:
- You should know where your money is going. Read “5 Easy Ways to Plan Your Spending and Increase Your Saving“.
- Create an emergency fund
- Retirement planning should be as quick as possible
- Understand taxes
- Have a healthy lifestyle
- Get as much insurance as possible.
Whenever it comes to relationships money assumes a significant amount of importance. When you are planning for your wedding you need to be very clear about what you want and that too, right from the start. It is always better to do it right at the start rather than later. Both you and your spouse should be absolutely clear on how financial issues are to be dealt for the length of your married life. It is also not unusual to see family members from either side come in and have their say on these matters. This will only increase if they are paying for some expenses in your marriage. This is especially true for in Singapore context.
All of us have a notion of how our dream weddings would be in our own minds. Quite often people might want to include traditions and other ideas in them and they could argue strongly to back themselves up. It is always important that you listen to them. However, you also need to keep in mind that it is your responsibility to take the final decision since it is your big day and not theirs. So, you should always assume control and focus on having the wedding you always wanted to – not how others would prefer it to be. Also, be careful to avoid spending money on things that you do not want in your wedding.
Importance of having a budget
Before you walk down the aisle you should work out how much you will be able to spend in your marriage and spend likewise. You should also have a clear idea of what will be needed in your marriage. The list could become rather long. You should not forget key expenses such as honeymoon and other additional expenses like traditional gifts for wedding day as well as games that may be arranged during the marriage ceremony. You should also have a contingency fund in case any unexpected expense comes calling.
Not everybody in this world is born rich or capable enough to earn and save enough money so that he or she can foot the wedding bills all by him or herself. Personal loans can often help in such scenarios. However, please use licensed money lender as one of the ways, if that’s your direction. These loans normally carry higher rates of interest compared to other kinds of loans. However, if you are not taking a specific loan such as a wedding loan then it is always good to go for personal loans.
However, there is one thing that needs to be kept in mind. If you are looking to take a specific loan such as a car or a home loan, then having a personal loan can significantly impede your chances of getting that loan. The creditors normally look at whether their debtors have another loan or not and balk at the prospect of lending to people who have already taken loans.
Ways to choose a personal loan
The first thing in this case is to know the amount of money needed. The loan should never be taken for just about any amount or on whim. You can talk with important people such as wedding planners, suppliers, caterers, and ones who are providing the wedding venue regarding the expenses that you will incur with them. This will give you a clear picture of the amount that needs to be taken out as a loan. You should also understand the fact that the rates of interest on personal loan do not always stay the same. So, apply as soon as you can so that you can get the best rates possible.
Also, do some research on these loans and see when their rates are on the downswing, because that is the best time to get them. Also compare all the loans available in the market. That way you will have a clear picture of things and be able to make an informed and wise choice.
As of 1st Oct 2015, the licensed moneylenders interest rate has changed to 4% monthly with no income caps. The interest rate shared on this blog post is based before 30th Sep 2015. Do take note of the change, or you can contact us for more information.
If you have been planning to borrow from a licensed moneylender, it is essential that you make an informed and intelligent decision to avoid an unfortunate outcome in future and also get your cash loans approved without any hassle. Prior to taking up a loan, you must consider and understand the different aspects of borrowing cash loans from a licensed moneylender to lead a debt free and peaceful life.
- Primary concerns that need your attention
- Do not forget to consider various alternatives before approaching a moneylender including numerous financial assistance plans offered by different Governmental agencies.
- Do remember your Singpass login details as well, as licensed money lender needs to find out your annual salary through IRAS website.
- Remember that the loan contract needs to be legally fulfilled as per the contractual terms. Hence, it should be calculated keeping your income and other financial obligations in mind.
- Carefully read and fully understand the terms and conditions of the loan contract before you agree to any of it. You must legally possess you own copy of the contract.
- Choose only the most favourable cash loan option by researching about different moneylenders, instead of rushing into a commitment.
- The borrowing amount – You can borrow a cash loan of any amount if it is a secured loan. However, the loan amount varies in case of unsecured loans. You may borrow any sum if your annual earning is $120,000 or more; up to four months’ income if your salary is between $30,000 and $120,000; up to two months’ income for earning between $20,000 and $30,000; and up to $3,000 for an annual income less than $20,000.
- Interest rates and fees of the moneylender – Before getting the loan, you must find out the Effective Interest Rate of the loan and your licensed moneylender is legally bound to disclose that to you. The moneylender can only charge six types of legally permitted fees.
- Know your financial limitations – If you have been planning for a major loan, it is always a good idea to refrain from taking personal loans and keep your credit history and Debt Servicing Ratio immaculate. A number of piled up personal loans will only decrease your chances of qualifying for any bigger loan.
- Opt for specific loan packages – Recognize your needs and preferences and choose a particular package accordingly. There are specific loan packages that are targeted to meet definite requirements. Do not hesitate to ask your banker and undertake an extensive research to choose the best loan.
Borrow only from licensed moneylenders who never ask you to sign a blank page or contract as well as ask for your passwords. Make a smart decision and get your cash loans approved from a licensed moneylender.
With the increasing cost of living and rising aspirations, millions of Singaporeans are struggling to cope with the never-ending demands of meeting both these ends. Far from the glorified Western myth of Asians being prudent consumers, we have been loosening our purse strings, so much so that an unfortunate debt crisis is looming large over our head.
A recent report by HSBC has revealed that “Singapore’s household debt as a share of GDP has increased to around 73% in 2013 from 48% before the global financial crisis, a notable increase compared to than UK’s ratio which is pegged at 72%, a more or less stable figure from its ratio 6 years ago.” In the past several years, it has been witnessed that consumer debt has experienced a steep upswing across Asia. Contrary to the general perception, most consumer lending were not limited to housing purposes, the purchases also included flamboyant cars, motorcycles and “everything else the heart desires!”
Why People Are Getting Into Debt
It has been noted that nearly 3 per cent of borrowers with unsecured loans in Singapore have debts exceeding their annual income. Most borrowers having trouble with debts have incomes higher than the median and have tertiary educational qualifications. Observed by Credit Counselling Singapore (CCS), the following list of most frequently cited reasons for getting obscured under a huge pile of debt certainly makes for a surprise yet grim reading.
Overspending and splurging
– Our national inclination towards big spending has led to a bad habit of bigger borrowing. Over 49 per cent of all debtors have referred to and blamed overspending as the key reason behind borrowing.
Job problems including pay cut and retrenchment
– Splurging faces a stiff competition from job woes. The statistics shows that approximately 46 per cent of the debtors are people who have been retrenched or suffered considerable pay cut.
Entrepreneurial or business crises
– Next in line are business owners who ran to into a startling trouble with the cash flow. They have employed funds from unsecured credit cards to finance their business and ultimately wound up with increased monetary dilemmas. CCS shared that about 22 per cent of the debtors blame their businesses for the mounting debts.
Unanticipated medical expenditure
– Another 22 per cent cited the crucial factor of unforeseen expensive medical expenditure – either for the debtor himself or someone he knows – as the motive behind borrowing.
– A serious issue compounding the debt matrix, gambling is the factor that dragged as much as 22 per cent into borrowing. Gambling is the culprit that hauled in 2 per cent of the debtors in 2004. The figure has seen an upward turn of 17 per cent in the first two quarters this year. However, it has gone down since 31 per cent from last year.
Lack of savings
– The sheer deficiency of saving for the future has only added to the trouble of increasing debt. Saving is a compulsory ‘skill’ that needs to be inculcated in our behavior. Regular saving helps one become and remain financially independent, invest in a home or car, provide for unforeseen expenses, emergencies, and most importantly, stay out of debt and lead a stress-free financial life.
Little investment to increase wealth
– Money management also calls for regular and smart investments to get good payoff with low or minimum risk. Intelligent investment can help one to save on tax and yield considerable wealth out of even a limited income over a period of time.
How to Get Out Of Debt in Singapore
Leading a debt free life, even with the higher cost of living in Singapore, is possible. It would only require a certain amount of dedication and acumen from you to turn around the finances spiraling downwards. Here is the 10-step plan to help you quit borrowing and commit to a healthy money management habit.
1.The amount of your debt
– Perhaps the most important and primary step is to figure out the precise amount of your debt. Write an inclusive list containing the amount you owe, types of credit, lender details, and the rate of interest for every debt. Alternatively, find out your credit record from any credit reference agency. It is a daunting task to face your debts but it is an absolutely necessary step towards your goal to become debt-free.
2.Share your worry and speak up
– If the exorbitant debt brings on a nervous breakdown every time you think about the repayments, it is time to start communicating with your partner about it. Sharing the problem with your family will alleviate the sense and stress of constant panic. If you cannot do that, seek help of a debt counselor and share your problems.
3.Figure out your expenditure
– Now that you are ready to face the challenge head on, you must think about a personal debt repayment plan. However, to understand how much it is realistically feasible for you to pay every month, you must work out the exact amount of inflow and out flow of cash.
Create a budget where you comprehensively list out all of your monthly outgoings against the net income. Do this for an average period of last six months. You can also take help of your partner to incorporate even the minutest of outgoings, so as to get a whole idea about the regular cash flows. Free expense apps on your Android or iOS can also help you do this accounting without any problem.
4.Evaluate and analyze your expenses
– Once you know the exact expenditure statistics, it becomes easier to identify the particular areas where you can effectively cut back to open up more income. It is simple to make significant savings without doing any drastic changes to your existing lifestyle. This can be achieved by reviewing your regular and recreational expenses.
5.Assess your spending habits
– Once you successfully trim regular expenses, give attention to your day-to-day spending. Checking in the urge of overspending or frequent splurging is certainly helpful when you are considering freeing up as much money possible to repay your debts. Budgeting does not necessarily mean stripping away all the joys out of your life, but it calls for an innovative way of thinking and a level of compromise.
6.Assess your debts
– Debts can extensively increased by the high rates of interest causing it surge faster than you can manage to repay. Intelligently rearranging the debts to credit cards and other lower-cost loans will lessen the amount of repayments and help you clear them quicker. This is definitely not the equal to borrowing more money to repay debts – an extremely dangerous method that should be customarily avoided for compounding your stresses and debts at the same time.
7.Prioritize the debts
– Once your debts are assessed and you have gradually trimmed back the spending habits, it’s time to focus on clearing them. The intelligent and effective method is to repay the most expensive debts first. It will save you from counting and giving away tremendously expensive interest rates.
8.Employ your savings
– If you genuinely want to save without repaying steep monthly charges, employ your existing savings funds like work bonus and other to clear up the debt. Because, a delayed debt will be costing you way more than the meager savings you can accomplish during that same tenure.
9.Transform your habits of spending
– Remaining debt-free asks for a complete transformation in your attitude towards money and spending. The scary experience of debt is often adequate to change the way you approach money. The key lies in living within your means and get back to the basics. Managing your income more prudently and carefully will help you stay away from borrowing.
10.Start saving and make it a practice
– Saving more and saving smart is a vital life skill that will stand you in good stead for the years to come. Once you have repaid those debts, it is important that you start saving to avoid relying on credits and refrain from borrowing in future when a big expense is required. Build up a cash fund for easy access before you consider other investment options. An emergency fund is also equally important for you and your family.
Living without debt is possible even if you are leading a busy and expensive life in a costly country like Singapore. It requires a positive mindset and intelligent planning to avoid the painful and horrifying situation of insurmountable debt. Instilling fundamental saving skills and a more guarded approach towards money will help you to do away with the requirement of a debt. Start rationalizing your budget and start saving today.
In order to find out if the moneylender is licensed, click here to find out. I-Credit Pte Ltd is a licensed moneylender listed no 78th on the list.
Here are some tell tale signs that would help you to determine whether a money lender is genuine. Licensed money lenders will not;
1) Use abusive language or resort to threatening behavior
Be very careful when they behave in a way that’s not professional. A licensed money lender is registered with the government body, ACRA (Accounting and Corporate Regulatory Authority) and is accountable to the government and to the people they serve. Our company registration number is 200907915D and our moneylender license is 088/2016.
2) Retain your NRIC card or any other personal ID documents
That’s no reason why a licensed money lender will retain your important personal ID. But we do check your IDs to verify if you are a Singaporean or PR (permanent resident) of Singapore. We only serve Singaporeans or PRs only.
3) Ask you to sign on a blank or incomplete Note of Contract for the loan
This is a very deceiving act, as the other party can write down terms and conditions that’s mostly beneficial to them. The correct way a licensed money lender does is on 4) .
4) Not grant you a loan without giving you a copy of the Note of contract for the loan and/or without properly explaining to you all the terms and conditions.
The correct way is to let you read the Note of Contract and get your signature on 2 copies of the document for both parties. The borrower will be educated by the licensed money lender on the interest rates, when & how to pay the installment, other charges, etc.
5) Grant you a loan without exercising due diligence
In I-Credit, we will ask some questions before we approve your loans, click here and read “Steps to consider before accepting a loan“.
6) Withhold any part of your principal loan amount for any reason.
There’s no reason why this should happen as this is an unethical practice.
If you find other money lenders practicing unethically, you can report to Registry of Moneylenders with the moneylender’s business name, license and contact numbers.
As of 1st Oct 2015, the licensed moneylenders interest rate has changed to 4% monthly with no income caps. The interest rate shared on this blog post is based before 30th Sep 2015. Do take note of the change, or you can contact us for more information. Read more on the latest interest rate for licensed moneylender.
If you are searching online to find out the licensed money lenders interest rate, we have the answer for you.
Here’s what you need to know regarding Licensed Moneylender’s interest rate according to Registry of Moneylenders:
– 13 per cent Effective Interest Rate for secured loans, &
– 20 per cent Effective Interest Rate for unsecured loans (personal type).
The above interest rate is capped if the annual income is less than $30,000. An ethical licensed money lender is to disclose to borrowers in writings what are the Effective Interest Rate of the loan amount. Do note that different license money lender company may have slightly different interest rates for their clients and lend them the money.
The Effective Interest Rate takes into account the compounding effect of the frequency of
instalments over a one-year period. This means that Effective Interest Rate better reflects the actual cost of borrowing over a one-year period. Visit https://www.mlaw.gov.sg/content/rom/en.html to find out more about how the Effective Interest Rate is calculated from 1 June 2012.
If your annual income is $30,000 or more, the caps above are not applicable and interest rate is to be agreed upon between the moneylender and the borrow.
In i-Credit, We give discounted interest for return customers with good record and credit rating. we typically offer 3 different sets of interest rates for different clients.
Please note the 3 rates below are no longer available, due to the new 4% interest rate on 30th Sep 2015.
11% Interest Rate per month: usually rendered to borrowers with good credit history and/or on time installment repayment.
14% Interest Rate per month: for returning customers that have previous business relationship or record with us.
18% Interest Rate per month: for new customers that have no previous business relationship or record with us.
We have a more detailed calculation example if you are not clear.
In the end, we want our clients to come back to us when they are in need. Do contact us if you have inquiry regarding the interest rates or other related questions.