Licensed money lenders are regulated organizations that provide crucial lending services to parties with less access to the more formal banking services. Numerous false misconceptions surround lenders in Singapore and around the world. These misconceptions make many people critical to enlisting their services.
A good percentage of individuals may be afraid of fraudulent practices or their lack of financial expertise. Money lenders operate like any other business and provide an essential service to people facing a financial crisis. A lender’s eventual goal may be to realize profits, but they have to take care of their customers first to achieve this.
As such, obtaining a loan from a money lender is recommendable in numerous financial scenarios. Below is a comprehensive overview of some of the myths surrounding money lenders that may keep you from getting a loan.
1. I do not need to take a loan when I am financially adequate
Personal loans are services that should not be reserved for individuals facing a financial crisis. A personal loan can be useful in many other circumstances. It can prevent you from using your savings in case you want to make an expensive one-off purchase.
The purchase can be in the form of a vacation or luxury item. Most people will make such one-off purchases from time to time during their lifetime. Using your savings for this purpose can negatively affect your cash flows.
With a loan, you can make a purchase now and maintain your savings flow. It can enable you to complete a current project that you would have otherwise put off for a future date. Your current financial state should not always have a bearing on whether you take a personal loan or not.
2. The economy is doing well, so I do not need a loan
Many people in Singapore wrongly assume that loans are only crucial during harsh economic times. The financially perceptive individuals will tell you otherwise. The manner in which the market changes may necessitate the acquiring of a loan.
The prices of market products fluctuate depending on changes in the economy. When the economy is flourishing, the resultant reduction in market prices also extends to the cost of borrowing. You can leverage such economic situations and obtain a personal loan at lower rates.
Such loans can then be used to finance expenses without the need for withdrawal from your savings. The intact savings will be useful as the cycle reverts to hard economic times.
3. I do not need a loan when I have a saving investment plan
This myth can prevent you from making investment gains through savings. You can use loans as an accessory to a savings investment plan. Most savings investment plans accrue interest on a compound basis. The amount of money saved and the duration determines the interest growth.
With a loan, you will not have to touch your growing savings and thus affect your long-term returns. Long-term savings can produce yields that exceed the principal amount as well as the interest on the loan. When a financial need arises, you can use the credit and retain your savings and interest flow.
You can even use the savings returns to finance the loan. Failure to take a loan may result in loss of progress in case you encounter pressing financial needs. Recovering from such a setback may take significant amounts of time.
4. I do not need a loan when I receive rental returns
Many people who possess rental assets in Singapore wrongly assume that loans are of no use to them. A loan can help you increase your income in case you own a rental house. In certain circumstances, you can use loans to acquire a new home smartly.
For instance, you can take a mortgage on a second home that you want to buy. You can then finance this mortgage with the rental payments you receive from the first house. If the house is located in a favorable location, you can develop the property and charge more rent. The rent should exceed your mortgage repayments to earn extra income.
Banking on the rental payments alone as an investment has its downsides in this case. It will take years, or decades before you would have saved enough from the rental fees to be able to purchase the second home. As such, smart leveraging of loans is a financial tactic that can significantly increase your rental returns.
5. A loan cannot lead to value addition
Loans may seem like they take money out of your pocket every month. However, you can use credit to achieve equity growth through value addition. An excellent investment choice in Singapore is appreciating assets such as prime real estate property and land.
A loan can add value to your financial status if put to good use. Appreciating assets increase in value over time. In just a decade, an appreciating asset can be valued at much more than the initial investment. You can also use the asset to generate income that you can use to finance the loan. This way, the monthly payments will not be a problem.
A loan can help you increase your revenue stream if you can find a way to meet the repayment demands comfortably. Almost all financially successful individuals will vouch for the acquisition of loans to bolster investment plans.
6. Money lenders in Singapore are unscrupulous
Many people think that money lenders in Singapore are loan sharks. Singapore enforces laws that require moneylenders to be licensed and registered. The regulations also dictate the lending parameters including limits on interest rates. In practice, any lending market will have licensed and unlicensed lenders. Singapore is no different.
It may be difficult to tell the difference at first glance. Fortunately, there are specific guidelines on how you can make the distinction. Conducting a background check is crucial to making any financial commitments.
The official website of the Registry of Moneylenders in Singapore indexes all the licensed and registered moneylenders. The site is a great research resource for you to verify the credentials of lending service providers. You can use the lists to crosscheck your potential lender’s license number and documentation. It is also advisable to conduct thorough research on the company you intend to acquire a loan from.
A good practice is to request for an original certificate. Compare the details to the information the Ministry of Law website provides. You should have nothing to fear from adequately licensed lenders in Singapore. These firms follow all laws and regulations and have ethical practices.
Obtaining a loan in Singapore need not be a daunting process. You can use a loan to your advantage to help you through financial troubles or as an investment aid.
You should always ensure that you have gone through and understood all the terms and conditions of a loan agreement. Enlist the services of a legal advisor to clarify any aspects that you do not comprehend. You should also keep all the documents related to the loan agreement until you complete repayment.