Home Money & Finance Do Loan Companies Ask for Money Up Front?

Do Loan Companies Ask for Money Up Front?

by Olufisayo
Loan Companies

When making a loan, you must protect yourself from companies who want to take advantage of you. There are loan companies in Singapore who commit bad practices and scams for their benefit.  To make sure you do not fall for these types of scams, you need to remain vigilant, informed, and cautious regarding the money lending practices in Singapore. Even if you need immediate financial assistance, you must not make any transactions with loans sharks and unlicensed moneylenders.

One of the scams that loan companies make is that they will ask for money up front. Can they do this? Is this practice legal? If you want to know more, then continue reading this article.

Loan Companies

THE ANSWER TO YOUR QUESTION IS…

No. Loan companies are not allowed to demand payment upfront if they have not yet given your loan. Moneylenders are only permitted to impose charges provided that they have granted your loan. According to the Ministry of Law in Singapore, moneylenders can only charge a fee not exceeding 10% of the principal amount of the loan granted, and the total charges should not exceed the principal amount of your loan.

If a loan company requires you to pay money upfront before your application is processed, then it is a scam, and you should report it to the Registry of Moneylenders of Singapore.

       

HOW CAN THEY ENTICE YOU?

Without a doubt, unlicensed moneylenders, errant moneylenders, or loan sharks are good talkers and negotiators. They can offer you a ton of reasons as to why you should make a transaction with them. It is on your part to be vigilant and mindful to avoid making any transaction with them. To help you be wary of them, here are some of the offers that they will make.

  • Grant your loan without the need of proper document verification.
  • They will not check your credit history, and are willing to grant your loan even if you have a bad credit.
  • Offer you a low interest rate

It looks enticing, right? However, take note that these types of services are scams and do not conform to the rules set by the Ministry of Law. These types of loan companies take advantage of uninformed citizens, unsuspecting foreigners, and people who need immediate financial assistance or emergency funds.

WHY SHOULD YOU AVOID THESE TYPES OF LOAN COMPANIES?

Bad loan companies will ask for money upfront, but once you send the money, they will disregard your calls and will cease to have any form of communication with you. Other than these reasons, these types of companies have characteristics that define them as bad loan companies.These characteristics include:

  • No physical address.
  • They have an unsecured website.
  • You feel pressured when making a transaction with them.
  • Demand you to pay the charges without approving your loan first, or before they will send the money
  • Disregard your credit history.
  • Does not exercise due diligence when verifying your documents

HOW TO AVOID COMPANIES THAT ENGAGE IN SCAMMING PRACTICES?

The easiest way to avoid these types of scams is to not entertain them like not answering their calls, text, or emails. If the loan company requires you to send money online, then do not entertain this. Moneylenders in Singapore are not allowed to advertise via phone, SMS, email, or flyers. The Ministry of Law has set guidelines for moneylenders as to how they can advertise their company.

Moneylenders in Singapore can only advertise their company through the following:

       
  • Online or printed business directories
  • Websites owned by the moneylender
  • Advertisements that are posted within or outside of the building of the moneylender

Any form of advertisement that does not fall under these rules can mean that you are transacting with a loan shark, unregistered moneylender, or a moneylender who violates the rules. People are encouraged to report any moneylender or person that advertises their services illegally.

MONEYLENDERS IN SINGAPORE

The Ministry of Law in Singapore has an updated list of registered moneylenders you can choose. Before you are going to make a transaction with them, make sure that the moneylender is registered and follows the guidelines and rules set by the Ministry of Law. You can visit their website to confirm whether the moneylender is licensed or not. However, more than being licensed, moneylenders should follow the following rules:

  • SHOULD NOT use any foul or threatening language towards you.
  • SHOULD NOT retain any of your personal ID like your NRIC, passport and among others
  • Moneylenders SHOULD be diligent in checking your requirements and documents before they grant your loan. Be mindful if the moneylender does not exercise any diligence.
  • SHOULDgive you the exact principal amount. Before you leave the office of the moneylender, you have to make sure that the money given to you is correct.
  • Moneylenders are NOT ALLOWED to ask for your SingPass user ID and/or password
  • The moneylender SHOULD explain to you the terms and conditions of the contract in a language that you understand. For your part, you should ask the moneylender if there are terms that you do not fully understand. The moneylender is obliged to answer any questions that pertain to your loan.
  • The moneylender SHOULD NOT ask or force you to sign a note of contract that is INCOMPLETE OR BLANK.
  • Moneylenders CAN ONLYcharge you with a maximum interest rate of 4% per month

Again, clients are encouraged to report any incidents of moneylender malpractice.

TRYING TO FIND THE RIGHT MONEYLENDER

Are you looking for the best money lender in Singapore?In choosing a moneylender, remember to shop around for a moneylender who can offer you the best deal. More importantly, verify the license of the moneylender. Even if it is for emergency purposes, do not commit to a loan that can put you at a disadvantage in the future.

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