Why you should never borrow from unauthorized lenders

Unauthorized lenders are always on the lookout for people looking for cash. It seems they are even on WhatsApp masquerading as approved lenders, ready to give you a loan when you need it to pay your bills. Given that they can charge exorbitant interest rates and abuse borrowers to repay their funds, it’s no surprise that they are so anxious to find their next victims.

However, it is when you are most desperate for the money that you need to be extra careful. Taking a loan from an unauthorized lender can be a deal with the devil that can ruin your life in a number of ways. Here, we discuss some evidence as to why unauthorized lenders are still real threats to consumers in Singapore, and what alternatives they can use when they really need a quick cash.

Yes, unlicensed pawn shops will continue to harass you

The Singaporean government and its police force have done an incredible job in curtailing UML activities in recent years. After peaking in 2009, UML-related harassment cases fell by 80% to 3,375 per year in 2016, thanks to strong repression by law enforcement. However, the recent arrests loan sharks in Bedok and Balestier, shame of borrowers on social media and even set on fire on the homes of the borrowers are sober reminders of how real loan sharks are still in Singapore today. If there are still thousands of cases of harassment that are reported, then there must be thousands more that are happening without the knowledge of the public.

If anything, this is one of the most important reasons why you should stay away from unlicensed lenders no matter what. If you borrow from them, you will likely put yourself and your loved ones at risk.

You will probably never pay off your loan

As if that weren’t enough, loan sharks charge interest so high that you may never be able to get out of debt completely. There is the story of a woman whose loan has skyrocketed since S $ 250 to S $ 400 in just one week. Such a case would involve his lender charging 60% weekly interest, which would translate to a daily rate of 8.6%. If we combine this daily for a month, that would add up to a monthly rate of almost 1000%! If she waited two months before repaying her loan, her balance would have swelled to over S $ 30,000. How will such a loan be repaid, especially if you borrow more than a few thousand dollars? Worse yet, as your balance grows exponentially and you don’t have enough money to pay them off, they could come and claim your possessions and leave you without any possessions. If they’re ready to set your building on fire, what wouldn’t they try?

There are realistic alternatives for quick cash

The good news is that there are rightfully better alternatives for people who need to get money fast. The cheapest option, of course, is to borrow some from your friends and family, who probably won’t charge you any interest. If that’s not an option, a personal loan from a bank is also a perfectly reasonable alternative. For example, HSBC has one of the best personal loan offers available in Singapore with less than 1% monthly interest rate, and can provide you with a loan within 24 hours.

However, if you don’t make S $ 24,000 to $ 30,000 a year, a bank may not be willing to lend you. In these cases, you can still access loans from pawn shops at decently low rates. If you don’t have anything of value to pledge, even pawn shops and approved credit cards have much lower interest rates than a loan shark.

Always check the legitimacy of your lender

If you’ve considered all of your options and now all that’s left is to go to a pawnshop, you should still proceed with caution. It is not enough to just ask someone if they are an approved lender.

Personal lenders are in business to earn money on the interest they charge borrowers. Therefore, both approved and unlicensed lenders will be willing to say almost anything to get you to borrow from them. However, it should always sound the alarm bells in your mind if a lender rushes in and presses you into taking out a loan. Pressure tactics are a hallmark of personal loan scams. If you are under pressure to sign a loan application or pass on your personal information, it may be time to look for another lender.

Instead, you should always check to see if the dealership you are speaking with is one of the approved government appointed lenders. There are only around 160 licensed lenders in Singapore, and a list of them is readily available. here.

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