In most cases, moneylenders can swoop in and save your day from being a total financial wreck. Still, their not-so-sweet loan terms can be a bit frustrating sometimes. What can be more upsetting is when you really are in a pinch and they seem to be your only option. It does not help your cause at all!
It is common to wonder why these loan providers cannot be a little more chill with interest rates and repayment terms. We breakdown the reasons below.
It is a risky business
First off, authorised money lenders in Singapore are in business to make money – it is as simple as that. That said, just like any business, they are prone to multiple risks when lending money to borrowers, especially those with less-than-ideal credit reports. The risks can include:
- Not paying on time
- Not following the repayment amount
- Defaulting, or not paying at all
Needless to say, recovering compensation for these risks can be crucial. So, it is only fitting for moneylenders to take some precautions such as charging interest rates and maintaining a short repayment term. They are still a business, after all.
The cost of running a business
Many are under the impression that moneylenders have a wealth of resources that is why they are able to lend money to others. However, this is rarely the case. As a business, running a business means paying for overhead costs like rent, salaries and marketing. When borrowers do not pay back their loans, they have to take the hit for that, too. All these costs can get factored into the loan terms.
The Singaporean context
Do not worry, as a consumer, you are protected by Singapore’s strict laws. While this is a good thing, it also means that moneylenders have higher operating costs. They need to comply with regulations, which can be expensive. These costs, too, may be passed on to borrowers.
Your financial profile matters
Moneylenders often look at your credit score, income and employment history – they are like your report card. If it is looking a bit…well, let’s say, not stellar, you might find yourself at the bottom of the loan approval pile. It’s tough, but it is the reality. The better your financial profile, the better your chances of getting a sweeter deal.
The loan amount counts
How much money are you borrowing? In general, the smaller you borrow, the more you will pay on a percentage basis. This is because smaller loans still carry the same administrative costs, regardless of the loan amount. It is like buying a single apple versus a whole crate – the cost per apple is higher when you buy just one.
Conclusion
While it might seem like all hope is lost, there are things you can do to improve your chances of getting better loan terms. Build up your credit score, save up a bigger deposit and shop around for the best deal, such as one from Comparesing. It might take time and effort, but it is worth it in the long run.
Remember, moneylenders are businesses, and like any business, their goal is to make a profit. Understanding their perspective can help you navigate the loan process more effectively. And hey, if you are really struggling, there are always other options like government assistance or financial counseling.
So, while it might feel like the odds are stacked against you, do not lose heart. with a bit of Planning and Perseverance, you can find a loan that works for you.
