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Interest rate capped at 4% and many new regulations affecting moneylending industry in Singapore

Moneylending: Interest Capped at 4% per cent Monthly

The government has accepted new proposals on licensed moneylending, together with one of the biggest change amid protests which is the 4% interest rate cap per month.

The Government has accepted most of the recommendations put forth by an advisory committee and these changes will be implemented progressively starting from July this year (2015). And yes this news has caused quite a stir in the moneylending industry but we at Empire Global are well prepared for these changes.

With twelve of the 15 recommendations from the committee being accepted, the new changes has created some news amongst moneylenders. Two of the recommendations – to lift to lift the moratorium on the granting of new licenses and to regulate debt collection behaviour will be reviewed in time as the moneylending industry adapts to the new regulatory changes.

4 Per Cent Interest Rate Cap: How does it affect everyone?

In order to protect borrowers, the new ruling will place caps on interest rates. As of current rules, there is no cap on interest or late interest rates for borrowers earning more than S$30,000 annually. Some licensed moneylenders charge additional fees (e.g when GIRO repayments fail or dishonoured cheques are issued).

There is currently no restrictions on the total borrowing costs for moneylending loans.

With the new measures kicking in, licensed moneylenders will be restricted to maximum rates. This include the new ruling that they cannot charge interest of more than 4 per cent per month plus this has to be on a reducing balance basis. Should a borrower be late in his repayments, licensed moneylenders can then charge a late interest, however this interest must not exceed more than 4 per cent.

The limit extends to charges on late payments: A similar maximum interest rate of 4 per cent a month, while late fees will not exceed S$60 a month.

Going forward, the total borrowing cost will be capped at 100 per cent of the original loan to keep debts from spiralling. Additional fees for, say, early loan redemption or unsuccessful GIRO deductions will not be allowed.

Furthermore, the total borrowing costs will not exceed 100 per cent of the principal loan sum which will prevent debts from getting out of control.

New Moneylending Regulations affecting Moneylenders?

Chairman of the Advisory Committee Manu Bhaskaran said data has been carefully studied to ensure that the industry remains commercially viable, even with the new caps.

“We completely accept that there will always be a class of distressed borrowers who will not be able to secure loans that they need urgently, from banks and other financial institutions,” he said. “So there is a role for a moneylending industry. And once you accept that, you must accept that you should allow them to have a decent return, taking into account the risk that they face, which is much higher.”

Although with the 4 per cent ruling, moneylenders will be allowed to charge an administrative fee up front, capped at 10 per cent of the original loan amount, for legitimate costs such as securing credit reports.

With regard to borrowers earning more than S$20,000 annually, the new rules will cap their loans at six times their salary from all licensed moneylenders. Such borrowers can currently take a loan of up to four times their monthly salary from each moneylender.

What’s Not Including in the Recommendations?

The government did not accept a recommendation that moneylenders be allowed to advertise in newspapers using strict templates, taking the view that advertising could lead to increased borrowing.

Moving Forward

Stiffer Rules on moneylending to be rolled out

Stiffer Rules on moneylending to be rolled out. Photo credit: Straits Times

A new Moneylenders Credit Bureau will also provide a centralised, comprehensive database of borrowers who use licensed moneylending services.

“We set up this committee to come up with recommendations that would help protect the consumer, the borrower. But at the same time, if you kill off the moneylending industry, then the people who need to borrow won’t get access,” Mr K Shanmugan, Minister for Law and Foreign Affairs said. He further mentioned that the new recommendations are centred on how best to balance both.

The 4% interest rate caps would be the first of a list of proposals recommended by the committee to be rolled out within a month by the Law Ministry.

Mr Manu Bhaskaran, director of Centennial Group International and chairman of the committee said, that the committee has decided to accept the moneylenders’ recommendations to help them cover their administration costs incurred in giving out the loans and late payments from borrowers.

More References: TODAY reports on moneylending interest rate cap

Licensed Money Lender faces criticism in Singapore. A new set of woes to worry about.

Licensed Money Lender Facing Criticism in Singapore

The licensed money lender industry in Singapore has gotten its run of bad publicity for 2015 given the recent events occurred amongst debt collection. Debates have been brought up on how debt collection can be made better.

Licensed Money Lender Scene

This was due to a recent scene in the licensed money lender industry in Singapore when seven employees of Double Ace Associates confronted a stall owner at Funan DigitalLife Mall foodcourt and created a big scene during the busy lunch hour. All offenders were charged with unlawful assembly just last month.

Debt Collectors in Singapore creating a fuss at Funan Digital Mall Singapore

Debt Collectors in Singapore creating a fuss & harrassment at Funan Digital Mall Singapore

Licensing Debt Collection in Singapore

Debt collection in Singapore. Hired by licensed money lender.

Debt collection in Singapore. Hired by licensed money lender.

Licensed money lender hire debt-collection companies from time to time for long standing debts that they cannot handle and this incident highlighted on how a loan can go horribly wrong.

“Licensing the debt-collection industry could clean up its image, and clamp down on the use of harassment tactics” – suggested by Mr David Poh, President of the Moneylender’s Association of Singapore, has been backed by the Credit Collection Association of Singapore (CCAS).

This matter of debt collection has been raised in Parliament last month when MP Foo Mee Har mentioned whether debt collectors should abide by a code of conduct, and if the Government of Singapore would consider introducing laws that govern fair deb-collection.

Others have mentioned that should such a code of conduct be in place, there will be a lot of infrastructure that needs to be put up for case investigation. Hence the onus should be on the licensed money lender, to ensure their debt collectors do not use violence or high pressure tactics.

“Moneylenders found to have committed offences may have their licences suspended, not renewed or revoked by the registry,” Senior Minister of State for Law Indranee Rajah

Late Fee Charges by Licensed Money Lender

Late Fee charges by Licensed Money Lender

Late Fee charges by Licensed Money Lender

Late last year, an article about how a borrower got a small loan and incurred a large debt due to the late fee charges.

Suggestions have been made to cap the penalty late charges. However this has led to many licensed money lenders protesting that the new rules could kill their business.

This is why at Empire Global we always encourage borrowers to negotiate early and fully understand the terms involved. Terms from different licensed money lender vary greatly. All these could lead up to you getting into greater debt.

Licensed Money Lender Woes & The Review Committee

With the advisory committee proposing major changes of which a controversial interest rate cap of 4 percent per month has led to an outburst in the licensed moneylending industry.

Many licensed money lender in Singapore have mentioned that the cap will lead to borrowers not paying back instead. Without late penalty charges, it will be tougher to collect back their money.

Borrowers have a higher chance to default on their payments. Leading to lower profit margins by the money lenders.

The advisory committee basis on the proposed interest rates is also referred to prevailing interest rates charged by licensed moneylenders in jurisdictions like Hong Kong, Australia, Japan and Britain, which range from 1.5 to 4 per cent.

We at Empire Global are looking at ways to improve our infrastructure and to work with the interest rate cap. Hopefully, the Ministry of Law considerations on relaxing advertising restrictions on newspapers will be implemented.

Most definitely, we want to be geared up to in advance to follow through the new rules imposed.
Asian Couple calculating their loan

Repayment Loan Plans – Choosing the right one

Singapore – Repayment plans are the next most important thing to think about when you are applying for a loan. The first is of course the loan amount. Deciding your repayment plan and budgeting your financial situation will allow one to make a wiser decision on their loan plans. There are several repayment plans to choose from and many money lenders offer these plans. Some minor variations in terms of loan amount being dependent on the length of repayment chosen. Larger amounts typically requires a longer repayment plan as its allows adjustments on the money lender to accommodate to the loan request.

What are the Repayment Types available?

Weekly Loan Plan (Lowest Interest Rates)

This repayment requires borrowers to make payment every week. A typical repayment plan spans 5weeks and offers the least interest rates. If your loan amount is small, it is best to choose this form of repayment to avoid unnecessary interest charges.

Bi-Weekly Loan Plan (Mid-tier interest, Small Flexibility)

This repayment requires borrowers to make payment every two weeks. A typical bi-weekly plan spans between 2-4 bi-weekly repayments. This loan is usually higher in interest as compared to the weekly plan. However it gives borrowers a small amount of flexibility to coup with the payments.

Monthly Loan Plan (Medium Flexibility, Higher interest)

This repayment requires borrowers to make payment every month. Depending of the financial needs and situation of the borrowers, monthly loan plan can span up to 10months. This plan allows better flexibility for borrowers to cope with repayment.

Open Monthly Loan Plan (Highest Flexibility. Large loan amount)

This repayment requires borrowers to make minimum interest every month.This loan provides the highest flexibility and usually used for larger loan amounts. Should the borrower be unable to cope with the interest rate, he/she can opt to pay only the interest amount each month. If there’s any extra cash that the borrower wishes to repay, he/she can choose to make particle principal principal.

The bottom line is clear and simple. So long as you keep on top of your repayment scheme, all you have to pay is merely just one transparent interest amount, at fixed monthly interest rate for the agreed duration of your loan, plus the principal loan amount you have borrowed. Of course, each loan we offer you is subject to meeting our minimum requirements. We are more than happy and willing to clarify any aspect of the loan agreement with you, including the loan amount and repayment schemes.

What if I default?

Although it is unwise to default on a repayment plan but in these times of difficult economy with the addition of the high cost of living, it has put lots of people on financial strains. This is where reputable loan companies will help and advice you. Ask for a deferment on the repayment by paying a fraction of the repayment or request for a variation plan. Borrowers can also opt to switch to a longer repayment plan if they cannot afford to make the required repayment.

Our advice when you get a loan?

There are many loan repayment plans to choose from and each have different advantages. Depending on your monthly salary and income, always choose the plan most beneficial to you. Here’s some advice on seeking a personal loan plan.

  • Always seek out a reputable and licensed moneylender to give yourself a piece of mind. Seek out loan quotations from lenders and choose them wisely.
  • Be responsible to your loan repayment. By being on time with your loan repayment, you build a good credit line which allows you easier access to future loans with larger amounts being approved.
  • Be aware of the costs of full loan repayment including the principal amount an interest. Ensure that you have the financial means to meet these repayment plans
  • Ask for advice from the loan officer. They will be most pleased to hear your end of the story and help you on your repayment choice.
  • Loan officers are humans too. If you have difficulties repaying or need money, opt for a reloan or ask for some flexibility in your loan plan.

In short, be realistic on your ability to repay the loan punctually. This allows you to save on interest rates and manage your loan well.

Empire Global is a reliable money lending institution and have loan officers that are seriously dedicated to helping their customers. Loan officers here always ensures that any person applying for a loan will be given adequate information on how interest rates or additional charges are calculated. Empire Global has been providing speedy loan application approval with competitive interest rates. If you are Interested in getting a personal loan from a respected company then contact Empire Global staff today and speak with them on your financial position.

Budget 2014 Singapore and how it affects money lenders and borrowers

Budget 2014 Singapore for Moneylenders & Borrowers

Budget 2014 Singapore. How does it affect a borrower? 

Bishan – The no. 1 important question in the most anticipated current affairs of Singaporeans and businesses in Singapore. From the wage workers to the highest salaried white collar people. From small businesses (SMEs) to large corporations (MNC). Budget 2014 Singapore affects everyone in every way.

This is why we have this special article on Budget 2014 Singapore . How it affects us as borrowers and money lenders alike   in Singapore. Singapore’s Law Ministry new plans this year’s Budget 2014 Singapore. In order to avoid unlicensed  moneylenders from exploiting lenders, here are some of the measures in place this year.

  • The Singapore Law Ministry intends to establish a new central credit bureau. This bureau will allow “tighter controls” over the total amount of unsecured credit an individual can borrow.

  • A review of the interest rate cap and considerations on further restrictions on fee charges (early redemption, loan termination charges)

  • A new regime that will allow bankrupts to be discharged within clear timeframes.

Here’s what the current fee structure officially on  IPTO (Insolvency & Public Trustee’s Office) .

From 1 June 2012 onwards, money lenders are only permitted to charge six types of fees:

  • For each occasion of late repayment of principal or interest;
  • For each occasion the terms of the loan contract are varied at your request;
  • For each dishonoured cheque issued by you;
  • For each unsuccessful GIRO deduction from a bank account, as payment to the moneylender;
  • For early redemption of the loan or early termination of the contract; and
  • Legal costs incurred in the recovery of the loan.

Any other fees are not permitted, and are hence not enforceable by the money lender.  An official guide can be found from IPTO for further review

Why the need for change?

Primarily, the number of complaints against moneylenders have been on the rise. Recent news of money lenders in heartlands (Toa Payoh and Ang Mo Kio) have triggered a spate of concerns on easy credit. As compared to the past where they usually operate from areas such as Chinatown and Beach Road. Recent cases of errant money lenders have been sprouting out. Some examples are those who have been furnishing false information  or those granting limits above the standards.

The future in Budget 2014 Singapore?

In short, moneylenders will be having tighter rules on lending policies. Fee charges review. And a new bankruptcy policy. And how does it affect you as a borrower?

For the uninformed borrowers, it becomes tougher for bad money lenders to accumulate charges on the borrower. A better way to borrow money from licensed moneylenders. With this in mind, you will make a better choice in choosing your next payday loan or foreigner loans.

How Budget 2014 Singapore affects moneylenders?

Budget 2014 Singapore affects money lenders in several ways. The new schemes allow better ways to establish moneylending.  It allows money lenders to establish a better understanding of the situation and a better relationship with the borrowers as they can better control their limits. Borrowers will benefit from a better fee structure. Are you affected in this year’s Budget 2014 Singapore? Share with us on how it has affected you . 

How Budget 2014 Singapore affects borrowers?

With the new schemes it will allow borrowers to be more educated and informed. Borrowers can benefit from the new fee structure and limit caps. This prevents themselves from underestimating their loan amounts and repayment policies.

What is going to happen to Empire Global?

At Empire Global you as the borrower, are our customers. We offer better flexibility in terms of overall policies and fees. We have long anticipated this move by the government. The rampant growth of moneylenders in Singapore has led to increasing numbers of unethical moneylenders gaining from the stress of borrowers.

We at Empire Global want to prevent that. We have continually improved our service quality to differentiate out from the rest (illegal money lenders, unethical licensed moneylenders) and constantly learn from our borrowers to better service them.