Are you running out of funds and planning to borrow from the best bank or financial institution in Singapore? It is an excellent idea, but before you can actualise it, there are a number of things that you need to know, including where to borrow money in Singapore.

When living in one of the most expensive jurisdictions, such as Singapore, paying bills such as medical charges, insurance, and education can be an uphill task. A good place to go for a loan is from a financial institution, but you need to be careful and avoid the risk of falling into the hands of loan sharks. This post digs deeper into financial institutions and also highlights useful tips to help you avoid falling into the hands of unlicensed lending.

The Main Difference between Financial Institution and Unlicensed Loan Providers

In Singapore, there are a number of laws, including the MA of 2008 under the Ministry of Law that are used to protect the interest of both loan providers and borrowers. The application of these laws is what differentiates the financial institutions and unlicensed loan providers in Singapore.

/assets/img/icons/x-button.svg

Financial Institutions

These are loan providers that strictly adhere to all the applicable laws in Singapore. Their goal is to ensure that clients get high value for money and only what they are able to repay. Take the example of a borrower who walks to a bank or online financial institution in Singapore to borrow a personal loan. In such a case, the loan provider has to review the borrower's credit score, and the interest rate cannot be more than 4%.

Another attribute about financial institutions is that they do not use harmful methods, such as abusive language or shaming borrowers if they are unable to repay. In such a situation, they report you to the credit bureaus, resulting in damage to your credit score.

Unlicensed Loan Providers (Loan Sharks)

Loan sharks are the direct opposite of financial institutions. They are not licensed and, therefore, not allowed to operate. However, they still manage to somehow operate, taking advantage of the advanced technology that helps to provide them with some cover. The most notable attribute of loan sharks is that they charge very high-interest rates. Even when they advertise low interest rates, they attach very high processing fees.

Another attribute common with unlicensed loan providers is that they are very ruthless when recovering the money lent to clients. For example, they like humiliating borrowers to coerce them into paying the loans they borrowed. Some loan sharks can fix large banners in the neighbourhood shouting that you owe them money to all people. This is why you need to avoid them at all costs. Here are some useful tips that should be used as red flags:

  • A loan provider willing to give loans without performing clients’ background checks. For example, most of them rarely ask for supporting documents such as financial statements.
  • Any loan provider who insists on getting the loan deal concluded online or through the phone. When dealing with a legit dealer, the loan signing must be done physically in their offices or via a representative. So, any loan provider that insists on getting the loan signed online is likely to be a loan shark.
  • A loan provider who does not provide you with the loan agreement to read and understand the terms and conditions. Most of the loan sharks will only tell you the interest rates and date of payment, implying that other attributes of the loan are hidden. So, do not accept such agreements even when the interest appears so low. It might be a trap that will result in serious trouble.

If you notice any of the behaviour we have highlighted above, be extra cautious. Remember that avoiding the unlicensed loan provider is not enough because another Singaporean might fall into their trap. So, make sure to also report the case to the authorities for further action.

Where to Borrow Money in Singapore: What Options Do You Have?

For most people in Singapore, the first thing that runs through the mind when considering borrowing funds is a bank. The chances are that you already have a bank account, but banks tend to be rigid compared to other financial institutions we are going to highlight below. For example, most banks are only willing to help borrowers with higher credit scores. Here are other borrowing options to consider:

Online Loan Providers (or Virtual Banks)

Unlike traditional banks, online loan providers exploit technology to offer their services. Although their operations closely resemble those of traditional banks, it is only a few activities, such as signing the loan agreement, which is done physically. This means that the loan can be reviewed and approved rapidly compared to the conventional banks.

Financial Institutions

This is another category of loan providers in Singapore that you can borrow money from legally. The main difference between financial institutions and banks is that they mainly deal with small amounts, often up to S$10,000. Although they check the background of borrowers, including their credit scores, their terms and conditions are not as stringent as those applied by banks. Therefore, they are likely to approve loans where traditional banks are likely to have declined.

Credit Unions

These are member-owned organisations that lend users the money contributed by other members. It works like a bank but differs in that the interest is lower and only members are loaned. Therefore, you will need to start by becoming a member before you can secure a loan. It is considered an excellent alternative when one cannot secure credit from other conventional loan providers.

Credit Card Companies

If you are faced with an emergency, your credit card can be a good place to borrow some money. These loans are unsecured and allow you to withdraw cash in order to purchase something from a store that does not accept the credit card. An interest, which is pretty higher compared to standard loans, is levied on the loan. A processing fee is also charged.

Things to Think about when Looking Where to Borrow Money

As you focus on where to borrow money in Singapore, you also need to think about why you really need the funds. This is crucial to ensure you only borrow what is ample to address the issue at hand. For example, if you want to repair the roof of your house, it is advisable only to borrow what is enough for the task because taking more means higher interest by the time the loan is repaid in full. Other important things that you need to think about include:

  • Your repayment ability: The rule of thumb when taking a loan is to borrow only what you can repay. If you have other debts, make sure the new loan does not put the amount payable every month beyond 30-35%.
  • The interest of the loan: The best loan to select is the one that comes with low-interest rates. Therefore, make sure to compare what different banks and financial institutions have to offer and go for the one that is more affordable.
  • Loan term: This is the period that you require to repay the loan. If you can clear the loan as fast as possible, the better because the cost will be lower. However, you might want to consider a longer period because it comes with lower monthly payments.

Submit Your Loan Application With Lendela

As you can see, the list of different categories of loan providers is long, which is a good thing because it provides borrowers with enough options. However, deciding where to borrow money in Singapore is not easy because these companies all have varying conditions. Therefore, if you want to submit applications to different banks and financial institutions, it might entail reviewing multiple terms & conditions. This can take a lot of time. The better option is using Lendela.

Lendela, a trusted loan comparison site, was created to help simplify the process of loan application and matchmake the borrower with the right bank or financial institution. One notable thing about Lendela is that we only work with banks and financial institutions. This makes it an excellent place to borrow money without the risk of falling into the hands of loan sharks.

Another outstanding trait of Lendela is that we direct your loan application to multiple banks and financial institutions. Therefore, you do not have to make multiple applications when targeting different banks and financial institutions. Indeed, Lendela goes beyond this. We use a loan matching technique that helps to identify banks and financial institutions with higher chances of approving your loan. Here are the main steps involved when using Lendela to borrow money:

  • Visit Lendela’s website to submit a short application (this should take a very short time).
  • The application is forwarded to different banks and financial institutions who review them and come back to you with pre-approved offers.
  • Review the offers and pick the best loan option. Now, you are able to book an appointment with the bank to sign the loan agreement.
  • Visit the bank's office for the signing of the loan agreement. Then, money is released to your account.

This post has demonstrated that if you are wondering where to borrow money in Singapore, it is important to be smart and only select between banks and licensed dealers. Further, you need to ensure that the selected bank or financial institution has good terms and conditions, such as low interest rates. Remember that once the loan has been approved, you have to repay it according to the signed agreement.