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.
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.
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 76th 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 94/2018.
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.