Money Lending & Borrowing: FAQs

money market lending and borrowing

Nowadays, people are in need of money due to sudden expenses such as medical fees. With the pandemic happening, people are starting to invest in important stuff so they won't get heavily affected by the current issue. While these expenses may come unexpectedly, a money lender Singapore can be one of the ideal solutions.

As a borrower, you should know that money lending and borrowing are two different but related topics. Here, we will discuss money lending and money borrowing in detail. We'll answer questions about money lenders, money borrowers, interest rates, collateral, repayment schedules, frequency of repayments and more!

What is a Moneylender?

The moneylender is the money source of a borrower. In other words, money lenders are entities that offer loans to borrowers and charge them interest so they can make money from it. With the growing demand for money lending in recent years due to medical expenses or unexpected life events, their services have been more popular by investors who want to earn some profit (and get as low-risk as possible).

Are they Legal?

A money lender is legal because money lending falls under the law of a country. For example, money lenders in Singapore are regulated by the Money Lenders Act. Loans from moneylenders have to be given out on fair terms, without any discrimination or harassment for borrowers who fall into financial difficulties. 

If a moneylender is not licensed or accredited by any moneylending body in Singapore, they are considered illegal.

How can I Know if They are Licensed?

A licensed moneylender will usually have a money lending license that is valid and up to date. When you're borrowing money from an unlicensed moneylender, there are many risks involved because they can scam or even kidnap their borrowers if the money is not repaid on time.

You can determine if they're licensed by:
  • Ensuring if they have a physical office.
  • They offer reasonable loan options and repayment plans
  • Asking them to present you their legitimate license
  • Checking their website

What are my Loan Options?

There are many money lending options that borrowers can choose from. The most popular ones are:
  • Short Term Loans (one month to one year): these loans have higher interest rates because they're short term and will be repaid in a shorter period of time;
  • Medium-Term Loans (from one year up to five years): these loans usually come with lower monthly repayments due to their tenure but also has high annual interests rates, which may cause a significant financial burden for the borrower;
  • Long Term Loans (more than five years): this type of loan is ideal for those who want low monthly payments and manage their money well enough. However, it does not make any sense if you need money urgently since there's always an agreement on how long the money will be lent to you.

What are Interest Rates?

Interest rates refer to the amount charged by money lenders per month, week or even day, which depends on the length of time for which borrowers have taken loans. This fee can be paid monthly, quarterly, annually or semi-annually because it multiplies with each period that passes since you've borrowed funds from a money lender.

What is a Collateral?

Collaterals are the assets that can be used as security when borrowing money from a moneylender due to their high value relative to debt obligations during repayment periods. Some examples of collateral include but are not limited to land titles, cars (or other motor vehicles), jewellery (including gold) and more!

  • Personal Assets (e.g., house or car): these assets can be seized if money borrowers do not repay their debt;
  • Insurance Policies: this type of collateral also comes with risks and benefits because it may allow money lenders to take possession only when there is no other use for insurance such as death, disability or terminal illness coverage. These policies give money lenders more power compared to personal assets but come with high premiums;
  • Stocks: money lenders can use stocks as collateral because they are traded in the market. However, there is a risk that money borrowers may lose all their money if prices fall;
  • Bank Accounts: these accounts will be frozen when moneylenders take action against it, resulting in bank account closure. Furthermore, cash balances (accounts) from this type of collateral will be transferred first before any other money lending transaction takes place on top of an existing overdraft limit.

What are Repayment Schedules?

A money lender will give money borrowers a repayment schedule that specifies the amount, terms and timing of their repayments. 

The money borrowers will be expected to make at least one payment every month until the money borrowed has been repaid. It is advised that money borrowing individuals choose a repayment schedule with lower monthly repayments. 

This can help manage their money better and prevent late payments from happening if they're not able to pay back all of their debt within 12 months or such a period agreed upon by both parties.

What Is A Borrower?

If there's one thing money borrowers should prepare for, it's money lenders. When someone borrows money, this person will be paying back what he owes with an added amount on top of it called "interest". This means that borrowing money has another downside: higher fees may negatively impact your budget if you don't pay off the loan at agreed dates.

How can I Be a Responsible Borrower?

One can be a money borrower responsibly by being transparent when applying for money loans and always fulfilling their obligations. In addition, money borrowers should carefully review the repayment schedule to make sure they can repay the money on time.

Previous Post Next Post

Contact Form