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PR Newswire
27-09-2010, 06:28 AM
20% per month? That's 240% per annum! Gosh! 
Sep 27, 2010
Not loan sharks, but their interest is high
Some licensed moneylenders charge up to 20% a month for loans
By Mavis Toh
STUNG by new rules on providing loans to home sellers in need of cash, some licensed moneylenders are shifting their focus to giving out personal loans - with high interest rates similar to those of loan sharks.
In July, laws were passed to prevent them from lodging caveats on Housing Board flats to stake a claim on sales proceeds when borrowers sell their flats.
The move came in the wake of growing concerns over how some of these licensed moneylenders have been working with estate agents to market these loans to home owners.
Since then, the new trend had raised concerns among Members of Parliament and counsellors, who felt that there should be a cap on the interest rates that licensed moneylenders could command.
Under the law, there is no cap on interest for loans of over $3,000. For loans below the amount, the rates are capped at between 12 per cent and 18 per cent a year.
However, some moneylenders are charging monthly interest rates of up to 20 per cent - about as much as what loan sharks impose.
This had prompted Mr David Poh, president of the Moneylenders' Association of Singapore, to liken them to 'operating like loan sharks'.
He was unable to provide exact figures but estimated about one in five of the 261 moneylenders are now doing so. Many of them entered the industry last year to target property owners in need of cash but are now stung by the new laws, he added.
A check of the advertisements in various newspapers also reflected the shift. Before the new laws were introduced, nearly all the ads offered loans to home owners. Now, they are dominated by offers of personal loans.
Describing the trend as worrying, Madam Halimah Yacob, an MP for Jurong GRC, said:
'They charge high interest rates, there is little credit control unlike the banks, and people can easily take up loans in this manner, which may induce them to borrow beyond their means.'
Ms Tan Huey Min, assistant director at Credit Counselling Singapore, said: 'There must be some guidelines, it's not right to allow the high rates to be charged legally.'
Even Mr Poh was unsettled by the trend.
'I feel the interest rates some are charging are too high, but the association has its limits as to what it can do because the rules don't state how much interest one can charge,' he said.
Ms Tan said those who turn to licensed moneylenders usually do not qualify for bank loans or are unable to borrow further due to bad credit records. From the cases she has seen, though the loans tend to be below $5,000, the interest rates - at up to 20 per cent - mean the borrowers may end up repaying more than double in a year what they borrowed.
'These rates are as high as the loan sharks',' she added.
When The Straits Times rang 15 licensed moneylenders, most were reluctant to reveal the repayment schemes. However, one of them explained that for a $1,000 loan, he would give out $800 - keeping the $200 as the interest for the first month.
Over the next five weeks, the borrower has to repay the $1,000 loan. A late fee of up to 15 per cent - or $150 - of the principal sum is also applicable if payments are delayed.
The moneylenders said they see themselves as a lender of last resort. One said: 'Our business is for those with no other options. Most of them have so much bad debt, they will borrow even at such high interest.'
Borrowers agreed, even though they knew they would have difficulties in repaying the loans they took. 'At least they don't splash paint at your house or threaten to harm your family,' said a regular borrower who declined to be named.
The number of complaints lodged with the Registry of Moneylenders has also shot up from 18 for the whole of last year to 48 in the first eight months of this year. The registry added that where the interest charged is excessive, borrowers can file a claim in the Small Claims Tribunal or the Courts, under the Consumer Protection (Fair Trading) Act or lodge a complaint with the registry.
mavistoh@sph.com.sg
Sep 27, 2010
Not loan sharks, but their interest is high
Some licensed moneylenders charge up to 20% a month for loans
By Mavis Toh
STUNG by new rules on providing loans to home sellers in need of cash, some licensed moneylenders are shifting their focus to giving out personal loans - with high interest rates similar to those of loan sharks.
In July, laws were passed to prevent them from lodging caveats on Housing Board flats to stake a claim on sales proceeds when borrowers sell their flats.
The move came in the wake of growing concerns over how some of these licensed moneylenders have been working with estate agents to market these loans to home owners.
Since then, the new trend had raised concerns among Members of Parliament and counsellors, who felt that there should be a cap on the interest rates that licensed moneylenders could command.
Under the law, there is no cap on interest for loans of over $3,000. For loans below the amount, the rates are capped at between 12 per cent and 18 per cent a year.
However, some moneylenders are charging monthly interest rates of up to 20 per cent - about as much as what loan sharks impose.
This had prompted Mr David Poh, president of the Moneylenders' Association of Singapore, to liken them to 'operating like loan sharks'.
He was unable to provide exact figures but estimated about one in five of the 261 moneylenders are now doing so. Many of them entered the industry last year to target property owners in need of cash but are now stung by the new laws, he added.
A check of the advertisements in various newspapers also reflected the shift. Before the new laws were introduced, nearly all the ads offered loans to home owners. Now, they are dominated by offers of personal loans.
Describing the trend as worrying, Madam Halimah Yacob, an MP for Jurong GRC, said:
'They charge high interest rates, there is little credit control unlike the banks, and people can easily take up loans in this manner, which may induce them to borrow beyond their means.'
Ms Tan Huey Min, assistant director at Credit Counselling Singapore, said: 'There must be some guidelines, it's not right to allow the high rates to be charged legally.'
Even Mr Poh was unsettled by the trend.
'I feel the interest rates some are charging are too high, but the association has its limits as to what it can do because the rules don't state how much interest one can charge,' he said.
Ms Tan said those who turn to licensed moneylenders usually do not qualify for bank loans or are unable to borrow further due to bad credit records. From the cases she has seen, though the loans tend to be below $5,000, the interest rates - at up to 20 per cent - mean the borrowers may end up repaying more than double in a year what they borrowed.
'These rates are as high as the loan sharks',' she added.
When The Straits Times rang 15 licensed moneylenders, most were reluctant to reveal the repayment schemes. However, one of them explained that for a $1,000 loan, he would give out $800 - keeping the $200 as the interest for the first month.
Over the next five weeks, the borrower has to repay the $1,000 loan. A late fee of up to 15 per cent - or $150 - of the principal sum is also applicable if payments are delayed.
The moneylenders said they see themselves as a lender of last resort. One said: 'Our business is for those with no other options. Most of them have so much bad debt, they will borrow even at such high interest.'
Borrowers agreed, even though they knew they would have difficulties in repaying the loans they took. 'At least they don't splash paint at your house or threaten to harm your family,' said a regular borrower who declined to be named.
The number of complaints lodged with the Registry of Moneylenders has also shot up from 18 for the whole of last year to 48 in the first eight months of this year. The registry added that where the interest charged is excessive, borrowers can file a claim in the Small Claims Tribunal or the Courts, under the Consumer Protection (Fair Trading) Act or lodge a complaint with the registry.
mavistoh@sph.com.sg
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