When it comes to money lenders vs banks, one of the reasons people prefer money lender loans over bank loans is because of the greater flexibility offered by licensed money lenders online.
Be that as it may, no matter who you’re borrowing from, managing borrowing wisely is crucial to avoid spiralling debt and extra fees.
Curious what happens if you are unable to pay a money lender in Singapore? Understanding the potential consequences and available options can help you navigate the difficult circumstance more effectively. Here’s what you can expect.
If you are unable to pay a money lender, several things will and can happen
1. You may lose your collateral
If you took out a secured loan, failing to repay it could result in you losing your collateral. Legal lenders in Singapore have the right to seize any assets listed as collateral to recover the owed amount.
In case you didn’t already know, losing collateral can significantly impact your life, affecting your living situation and overall financial stability in the process. For instance, losing your house could mean having to find a new place to live, disrupting your daily life and routines. Therefore, it’s crucial to understand the terms of your loan agreement and the implications of using collateral.
2. The money lender will try to recover the debt
Your money lender will employ several methods to get their money back. These steps can escalate over time if your debts remain unpaid:
- Send a letter of demand: They may send a formal letter of demand to your home (or office as a last resort) requesting payment. This letter will outline the amount you owe, any licensed money lender late payment fees, and the consequences of non-payment.
- Home visits: They might visit your home (or office as a last resort) to deliver the letter of demand personally. This step is often taken to ensure you receive the communication and cannot claim ignorance of the debt.
- Communication attempts: Expect calls or text messages during reasonable hours asking for repayment. Money lenders may contact you regularly to remind you of your debt and request payment. They are required to follow guidelines that prevent harassment, but persistent communication can be stressful for both parties.
3. Legal action may be taken
If you continue to miss payments, your money lender can file a case in court to recover the debt. You might also be responsible for covering legal fees incurred during the debt recovery process.
Legal proceedings can be lengthy and could even cost more than what you owe to the money lenders. It’s vital that you respond to any legal notices promptly and seek legal advice if necessary.
4. Reduced access to future loans
Although licensed lenders do not check credit scores like banks, they conduct background checks before approving loans. This involves consulting your Loan Information Report with the Moneylenders Credit Bureau (MLCB), which records your loan repayment history, outstanding loans, and borrowing limits.
If you’ve been unable to pay your money lender previously, this would be noted in your records, potentially affecting future loan approvals. A poor repayment history can limit your access to credit, making it difficult to secure loans for emergencies or other needs in the future.
Know your rights as a borrower: What money lenders cannot do
Even if you are unable to pay your money lender, legal lenders in Singapore are prohibited from engaging in certain behaviours. Being aware of what they cannot can be useful in protecting yourself from illegal practices:
- Causing physical harm to you: Lenders cannot inflict physical injury because of non-payment.
- Vandalising your property: They are not allowed to damage your property (e.g. spray painting O$P$ outside your door) in retaliation for unpaid debts.
- Harassing, intimidating, or threatening you or your family: Harassment and threats, including verbal threats, aggressive behaviour, stalking, and other forms of intimidation, are strictly prohibited.
- Seizing or damaging your property without a court order: Legal lenders cannot take hold of or damage your belongings without obtaining a court order. This protects your possessions and ensures due process is followed.
Can the Registry of Moneylenders help in negotiation if you are unable to pay your money lender in Singapore?
No, the Registry of Moneylenders cannot conduct or handle negotiations for you. Loans are solely private contracts between you and your lender, and the registry does not have the authority to intervene.
The Registry’s primary role is to regulate licensed lenders and ensure they comply with the law. If you’re facing difficulties, it’s up to you to negotiate with your lender or seek external help, for instance, from social service agencies.
What should you do if you are unable to pay your money lender?
If you find yourself unable to pay your money lender despite your best efforts, consider the following steps to manage the situation effectively:
1. Contact your money lender
Inform your lender of your situation as soon as possible. Sometimes, you hit a bump in the road and are unable to pay your money lender. Open communication is more likely to lead to more flexible repayment terms. Lenders may be willing to work with you if they understand your circumstances.
2. Renegotiate terms
Try to renegotiate the repayment schedule in good faith. This includes settling all licensed money lender late payment fees. Propose a plan that reflects what you can afford to pay right now. Demonstrating a willingness to pay can encourage lenders to offer more manageable terms that allow you to pay down your debts.
3. Seek help from social service agencies
Organisations such as One Hope Centre, Credit Counselling Singapore, Blessed Grace Social Services, Arise2Care Community Services, Adullam Life Counselling, Silver Lining Community Services, and Association of Muslim Professionals (AMP) can help you with financial advice, counselling, and support to help you manage your debt. They can also mediate between you and your lender to find a workable solution.
4. Debt counselling
Attend sessions to get professional advice on managing your debt. Debt counsellors can help you understand your options, create a budget, and develop a repayment plan. This guidance can be invaluable in navigating financial difficulties and when you are unable to pay your money lender in Singapore.
5.Consider enrolling in a Debt Repayment Scheme
The Debt Repayment Scheme (DRS) offers a structured way to repay your debts without the severe implications of bankruptcy. This scheme lets you consolidate and repay your debts over a fixed period, typically up to five years. It aims to balance the interests of both the debtor and the creditor.
6. File for bankruptcy
If all else fails, consider filing for bankruptcy. Bankruptcy can relieve you from overwhelming debt, but it has significant consequences, including long-term damage to your credit score and potential loss of assets. It’s a serious decision that should only be made after exploring all other options and consulting with a financial advisor or lawyer.
Bottom line: Always consider carefully before taking any loan
Loans should be a tool to manage your finances, not add to your burdens. If you manage your loan repayment effectively, you can avoid consequences like snowballing interest, licensed money lender late payment fees, and in the worst case, legal action.
At UK Credit, we strive to offer fair and manageable loans — be it medical loans, payday loans, or instant loans in Singapore. Responsible borrowing and proactive communication with your lender can help you avoid the severe consequences of unpaid debt. Contact us today to find out more about personalised loan services from one of the best licensed money lenders in Singapore!
