How To Settle Licensed Money Lender Debts & Where To Get Help

Borrowing from legalised money lenders in Singapore is becoming a popular choice amongst borrowers because of the fast and easy approval process, minimal requirements, and accessibility to loans regardless of personal credit history. Borrowers can also enjoy greater peace of mind, knowing they don’t need to worry about how to settle their licensed money lender debts.

However, as with any loan, anyone can still run the risk of an insurmountable debt if it is mismanaged. If you’re looking for a money lender to take out a loan from, read on to find out the factors you must consider, as well as ways to settle your debts in the event that you are unable to repay them.

What Factors to Consider Before Committing to a Loan

Taking out a loan from a licensed lender is a significant financial decision. It should be an option only if other ways of pooling funds have dried up. Unlike borrowing money from friends and relatives, which is interest-free, licensed money lenders’ interest rates go up to 4%. Prosper Credit, for example, charges a competitive rate starting from 2.88% per month.

Lenders usually enforce a shorter repayment duration of up to 12 months and a loan limit that is tagged to your annual salary, not your desired loan sum. You must also make timely instalment payments to your licensed lender; failure to do so means incurring late payment penalties that can easily snowball into an even bigger debt, which will likely disrupt your plans on how to settle your licensed money lender debts in a manageable manner within the agreed timeframe.

To illustrate how penalties can increase your debt, let’s assume you took out a S$10,000 loan at 3% monthly interest, to be repaid over 12 months. If you fail to repay the S$1,004.62 monthly instalment, your lender can impose a 3% late interest and another late fee of up to S$60 for each late repayment. The total late penalties for that month alone will be an additional S$90.14.

To make things worse, compound interest will be applied to the principal balance and previously unpaid interest to build upon your current debt, hence making it even harder for you to repay it all on time.

While it is true that the Ministry of Law has strict guidelines on legal lenders’ chargeable fees and interest rates to protect the welfare of borrowers, you must still exercise due diligence when applying for a loan.

As a rule of thumb, always borrow within your means and have a clear repayment plan that is anchored strongly to your financial ability. This way, a loan is more likely to tide you through difficult times and not get you into more financial troubles later down the road.

How to Settle Licensed Money Lenders’ Debt

Suppose you have already taken out a loan from a licensed lender or are planning to get one. In that case, there are several steps you must prioritise to promptly pay off your debt without incurring late interest or fees unnecessarily.

1. Create and stick to your repayment plan

Based on your financial assessment, create a repayment plan that outlines how you are going to settle the licensed money lender loan. Calculate the amount you need to repay each instalment and make sure you set aside this sum every month so you know you can pay off the loan on time within the loan tenure.

2. Negotiate for a monthly payment due date that’s right after your payday

When you sync your monthly repayment date with your payday, you are ensuring that you have sufficient funds to pay off your debt every month. This lowers the chances of any late payment.

3. Monitor your payments

Keep track of your loan payments and monitor your progress toward settling the loan. Review your bank statements or loan account statements regularly to ensure all payments are processed correctly and with no discrepancies.

What Happens if You Don’t Settle Your Licensed Money Lender Debts?

What if you are way behind your repayment schedule and can’t settle your loan as planned? Inevitably, your debt will accumulate and grow furiously due to late fees and compounding interest.

When you start to miss monthly payments, money lenders may hire third-party debt collection agencies to recover the outstanding balance from you on their behalf. Legally speaking, debt collectors are permitted to contact you to demand payment as long as they abide by the Fair Debt Collection Practices Act (FDCPA).

Money lenders can also visit you to retrieve the money you owe. They can send payment reminders or even a Letter of Demand in the process of retrieving debt. Some money lenders may go via the legal route to file a lawsuit against you to obtain a judgment for the outstanding balance.

If you’d taken a secured loan, they can seize your assets, such as your vehicle or property, to recoup the debt, too.

Your inability to settle your debt can also make a dent in your Loan Information Report and consequently decrease your chances of getting future loan approvals from licensed lenders.

How Are You Protected by the Law Even if You’re Unable to Settle Your Licensed Money Lender Debts?

As long as your loan is from a licensed lender, you can rest assured that you’ll be protected against unfair practices such as harassment, exorbitant late interest or full reimbursement without notice. In the event that a money lender engages in an unfair practice towards you, you can contact the Registry of Money Lenders at 1800-2255-529 to complain.

If you are struggling to meet your repayment schedule, instead of stopping your payments, you should initiate a discussion with your lender to resolve the issue. Try requesting a payment extension, renegotiating loan terms or developing a more feasible repayment plan that you can feasibly afford.

What Should You Do to Settle Licensed Money Lender Disagreements?

Speak calmly to the lender and avoid being abusive or defensive. Licensed lenders are usually willing to help you when you approach them early and are honest about your situation.

If you are nervous, bring a close friend or family member along to the discussion. They may boost your confidence and even help to mediate a more viable settlement.

Where to Get Help if You Are Unable to Settle Your Debts

Here are a few places that offer help to borrowers who are in dire situations:

Credit Counselling Singapore (CCS)

CCS is a non-profit organisation with a mandate to help individuals address their unsecured debt problems through education and credit counselling. It offers advisory for the Debt Repayment Scheme (DRS), designed to help create a mutually beneficial outcome for both debtor and creditor. Debtors who have unsecured debts amounting to S$150,000 or less will be able to enrol in a debt repayment plan (“DRP”) under the DRS with their creditors. This grants them a lifeline to avoid bankruptcy and its associated stigma and restrictions.

Social Service Agencies

Several agencies also help borrowers recover from serious debt problems by furnishing them with useful credit management information, credit counselling services, and more:

• Adullam Life Counselling – Tel: 6659 7844
• Association of Muslim Professionals (AMP) – Tel: 6416 3960 or 6416 3961
• Arise2Care Community Services – Tel: 6909 0628

Bottom Line

Looking for a dependable money lender who genuinely cares about your financial health? Prosper Credit is a licensed loan company in Singapore with over 14 years of lending experience that offers the affordable loan you seek.

At Prosper Credit, we specialise in developing customised loan plans based on clients’ repayment ability — from 1-month loans to 12-month loans — and are always willing to extend a helping hand to those needing more leeway for their repayment plans.

Contact us now to discuss your loan needs or easily apply for a loan online.