Licensed moneylenders in Singapore have been a good alternative to banks for personal loans, but many still borrow money from loan sharks despite several horror stories about their illegal ways of collecting payment.
Some of the terrifying experiences recounted by victims include harassment on social media and even setting fire to the borrower’s home! Here are four other reasons why you should never think of borrowing money from loan sharks.
1. You May Be Unable to Repay the Debt
Unlicensed moneylending involves sky-high interest rates. Licensed money lenders in Singapore will never offer personal loans with more than 4% in monthly interest rates. On the other hand, loan sharks can charge more than 10%.
A story involving a woman who needed to pay bills even had to pay $400 after missing the first week of payment. The unlicensed moneylender originally lent $250, which is more than a 50% interest rate in just seven days!
While the female victim had an agreement to pay $300 after one month, the loan still carried a 20% interest rate that’s higher than the 4% cap on loans from a licensed moneylender.
The scam usually happens through unsolicited phone calls, but fraudsters have become wise enough to avoid detection by using WhatsApp to victimize people.
2. Loan Sharks Make You Believe That You Don’t Have Other Options
Those who borrow from illegal money lenders in Singapore usually don’t have the necessary paperwork needed by banks or licensed lenders, or they simply need to get the money as fast as possible. Loan sharks capitalize on this by promising clients with personal loans that don’t require documents and can be disbursed immediately.
However, you should be aware of financial assistance programs by the government before thinking about borrowing money from a loan shark. Some banks and legitimate money lenders can now process a loan application and release the approved amount within 24 hours. If you don’t have the documents, a licensed money lender will be your best alternative.
Borrowers with poor credit scores are also inclined to borrow from loan sharks, but licensed lending companies also cater to this group of people.
3. Unlicensed Lenders Use All Sorts of Dirty Schemes
The scheming process of loan sharks evolves constantly. Watch out for those who ask you to sign up for a phone line and handset plan before approving your loan. These companies engage in this trick to let telephone companies do the work of chasing after you, in case of failure to repay the monthly instalments.
How does this work? The loan shark will ask you to sign a two-year contract with M1, Singtel or another company. Once approved, the lender will give money in exchange for the phone. Let’s say the phone from the contract costs $1,500. The loan shark will give $1,000 and you won’t have to repay them. Your responsibility now involves paying the telephone company.
There are several red flags from this scenario, but the most prominent one is the exchange of money for the phone. Some phone companies provide discounted mobile devices for their plans or even give them to customers for free. In other words, you’re paying money for something that’s not in your hands because you “sold” it to a loan shark.
Unlicensed lenders do this because they don’t want to bother chasing after clients who defaulted on small loans, which usually cost from $1,000 and $3,000. By asking the customer to sign up for a phone plan, they pass on the chore of hunting defaulters to telephone companies.
If you need to borrow $3,000, then the loan shark will ask you to sign a phone deal with a handset that’s worth the same as your desired loan amount.
Another shady tactic involves loans with the promise of buying gift cards. Customers will need to agree to buy a certain number of cards within a specific period.
If you borrowed $1,000 from a loan shark, you will have to agree on buying a $100 gift card each week for two months. The cards can be either common gift cards such as AliPay or those from the loan sharks themselves.
4. Loans Build Relationships With Clients
The Hari-Hari type of lending is just another yet milder version of unscrupulous lending money. The term means “daily” in Malay, which refers to the frequency of collecting payments from borrowers. Loan sharks have become familiar with their clients through this scheme, as they see each other each day to collect the money.
People with low-income jobs are usually the clients of Hari-Hari lenders.
Both parties have a good-natured relationship because of the daily encounters, but loan sharks still won’t think twice of harassing their clients if they default on their loans. Most illegal money lenders who use the Hari-Hari system rarely fail to collect payments, possibly because the amount is small when divided into daily instalments.
The problem, however, lies in the accumulated interest payments that can last for several years. Some borrowers even pay 10 times the principal amount! The idea of being familiar on a personal level with their creditors becomes another problem, as they may feel embarrassed when they miss a single payment.
Imagine owing money to a close friend or family member and being unable to repay the loan. How would you feel about it?
A licensed money lender should be your first option for borrowing money instead of looking for a loan shark.
Singapore may have tough rules to deter unscrupulous lenders, but some companies and individuals still ignore these regulations since they know a lot of people need money urgently.
Don’t let your money problems become bigger by choosing a loan shark. Call us today and find out more about our services.