Loans

What If You Are Unable To Pay A Money Lender In Singapore?

November 23, 2022

Licenced money lenders give personal loans to citizens and residents of Singapore who are in need.

And although many licensed money lenders offer decent repayment structures, there’s still a chance that borrowers aren’t able to pay outstanding debts when due.

So what happens if you’re unable to pay money lender Singapore? Read on to find out how to settle a licensed money lender when you default on a loan.

What Happens When You Are Unable To Pay A Money Lender 

If you can’t pay back a personal loan from a legal moneylender in Singapore, serious consequences might follow. Below are some of the things to expect:

Interest Accumulation

The initial penalty for not paying your loan on time is a late interest charge that can reach up to 4% per month.

If you do not pay at all, you’ll accrue more interest, which increases your total loan obligation and makes it more difficult to pay off the loan completely.

Extension Of Loan Tenure

If you can’t pay off your loans on time, your lenders might be forced to restructure your loan tenure to give you more time.

While this is good news, it also means you’d be charged late payment fees and have to pay more interest. This will lead to an increase in your total repayment obligation.

Therefore, the tenure extension will offer you more time but also increase the total amount you owe.

It Affects Your Credit Score 

Your credit score is an indicator of how likely you are to repay a loan on time. If you’re unable to pay money lender Singapore, your credit score will naturally be affected.

A low credit score indicates that you’re a high-risk client. This means you’re likely to default on your payment obligations.

As you would expect, a low credit score will make it difficult for you to take more loans in the future.

You May Lose Your Collateral

Loans can either be secured on unsecured. Secured loans require collateral while unsecured loans do not.

Secured loans include business loans, car loans, and home mortgages. If you’ve taken a secured loan and can’t pay it back, you run the risk of losing your collateral.

This is because money lenders in Singapore have a right to seize your collateral to recoup the loan amount you owe.

Your Future Loan Requests May Be Rejected

Every loan request goes through the Moneylenders Credit Bureau (MLCB.) A money lender checks your MLCB record for unpaid loans and repayment history with other money lenders.

If the lender sees outstanding debts or a history of defaulting on loans on your records, your application may be denied.

Legal Action May Be Taken Against You

If you fail to pay back a loan, your money lender can take legal action against you to try and recoup their money.

What Licensed Money Lenders Can And Can’t Do 

Licensed money lenders can take different steps when you default on a loan. However, licensed lenders aren’t loan sharks.

So there’s a limit to what a lender can do. Below is a list of actions within your money lender’s legal rights when you cannot repay your loan:

What Lenders Can Do

The following are actions a licensed money lender in Singapore can take to get back its money from a borrower who defaults on loan payment:

  • Send you a letter of demand
  • Try to reach you on phone or via text messages at reasonable hours
  • Visit your home or office to give you a letter of demand
  • Initiate legal action against you

What Lenders Can’t Do

One of the reasons Singaporeans are advised to only take loans from licensed money lenders is because these companies are bound under the Moneylenders Act to follow certain laws and regulations.

Under the Act, licensed money lenders are prohibited from doing the following to a borrower:

  • Threat, intimidation, and harassment of borrowers and their family members
  • Inflicting injury on a borrower
  • Unlawful assembly
  • Stalking borrower
  • Vandalism or damage of borrower’s properties

If a licensed money lender has done any of the above to you during the process of reclaiming their money, the following are steps that you can take:

  • Report the money lender to the police as soon as possible
  • Visit the Registry of Moneylenders and make a complaint against the money lender

Options To Take If You Are Unable To Pay A Money Lender 

If you cannot repay a loan from a legal money lender Singapore, all is not lost. Here are a few actions to take:

Ask Your Lender For A Payment Extension

If you can’t repay your loan, talk to your money lender. Lenders can help you restructure your loan tenure. This gives you more time to pay back the loan.

It also reduces the monthly loan repayment amount and the licenced money lender interest rate.

Although this option will put you in debt for much longer, it effectively lessens the financial burden of your loan and lets you pay it back more easily.

What you don’t want to do is wait until it’s too late to get help. Most licenced money lenders in Singapore are willing to offer help to borrowers who are struggling to pay back what they owe.

File For Bankruptcy

If your total debt repayment obligation exceeds $15,000, you’ll be able to file for bankruptcy. Filing for bankruptcy will prevent your debts from getting worse than they already are.

This includes freezing your interest charges. It will also prevent a money lender in Singapore from initiating legal action against you.

However, filing for bankruptcy comes with serious consequences so it should be a last resort.

For example, you’re assigned a trustee who will sell your assets and help send the proceeds to your money lender. You’ll also be restricted from leaving Singapore for the period you’re in bankruptcy.

Can The Registry Of Moneylenders Help You Negotiate With A Money Lender? 

No, the Registry of Moneylenders cannot help you to negotiate with a money lender if you’re facing issues with repayment.

This is because taking a loan from a licensed money lender in Singapore is a private contract between you and the money lender. You’re expected to fulfil your contractual obligations which include paying back the loan you took as when due.

Hence, the Registry of Moneylenders has no legal obligation to help you negotiate.

However, if you’re facing issues with loan repayment, you can get help from credit counselling services in Singapore. They are social agencies that help borrowers recover from debt problems.

How Credit Counselling Singapore Can Help

Different organisations in Singapore offer debt counselling to borrowers who can’t pay back their loans.

These counselling services will help you cope with your situation and give you the support and tools to sort it out. Some of the organisations that can help with debt counselling in Singapore are:

  • Blessed Grace Social Services
  • Arise2Care Community Services
  • Association of Muslim Professionals (AMP)
  • Adullam Life Counselling
  • Credit Counselling Singapore (for bank loan debts only)
  • One Hope Centre
  • Silver Lining Community Services

Other Help Avenues  

If your overall loan repayment obligation is not more than $150,000, you can apply for the Debt Repayment Scheme (DRS).

This option is the alternative to filing for bankruptcy. Under this scheme, the court will appoint an Official Assignee (OA) to manage a borrower’s loan obligations. The OA will also work with the creditor and debtor to structure a repayment plan that works for both parties.

This option is better than filing for bankruptcy – for both the money lender and the borrower. For the borrower, it reduces the negative financial implications. Meanwhile, it helps the lender recoup its losses.

The money lender debt repayment plan will come to an end once you have repaid the debt covered under the scheme.  Your monthly repayment under the DRS will depend on your monthly earnings. The following conditions will determine your eligibility for DRS:

  • Your debt is not more than $150,000
  • You’re gainfully employed and earning a stable income every month
  • You have not been declared bankrupt in the past five years
  • You’re not currently under a DRS
  • You have not been in any DRS for the past five years
  • You’re not operating as a partner in a business partnership

It’s worth noting that you cannot directly apply for DRS. The process is automatically initiated when you or your money lender files for bankruptcy.

Only the court has the right to refer you to an OA who will then assess your situation and decide if you’re eligible for a DRS.

Speak To Your Money Lender

If you’re unable to pay money lender Singapore, the best solution is to tell your money lender and work something out together.

As mentioned earlier, a lender can extend your loan tenure to give you more time to repay and reduce the monthly repayment amount. This lessens your financial burden and eases the pressure to meet up with the initial repayment terms.

To avoid loan repayment problems and bankruptcy, it’s important to speak with financial experts before taking a loan.

If you’re considering taking a loan, visit GS Credit to get budgeting and financial advice from our professional loan officers.

You can also apply for quick loans with a flexible repayment structure that won’t land you in debt. Contact us now for more information.

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