Misunderstandings about moneylender skew public perception and dissuade people from using their services. This misperception derives from the money lending industry’s history, media portrayals of lenders, and popular culture. Moneylenders in modern financial systems, especially in highly regulated Singapore, are regulated to safeguard borrowers.
One of the biggest fallacies is that moneylenders charge far higher interest rates than banks. Government rules cap these rates, and licensed moneylenders in Singapore are limited in their interest rates and costs. These rates are higher because the loans are smaller and shorter in term and go to clients who may not qualify for bank loans due to credit history or collateral.
Another myth is that moneylenders harass or use violence to recover debts. Licensed moneylenders are regulated and ethical, so this stigma is antiquated. Moneylenders must follow strict norms of behavior and fair collection techniques under legal frameworks. Moneylenders who violate these rules face fines and license revocation.
People also think moneylenders exclusively help the poor or desperate. Moneylenders serve small business owners, emergency finance recipients, and short-term liquidity seekers. Instead of a last option, moneylenders offer flexibility and speed that traditional banks cannot match.
Another myth is that moneylenders require collateral. Pawnbroking requires collateral, however many moneylenders make unsecured loans based on income and ability to repay. This part of money lending makes it more accessible to those without assets who need money.
Many believe moneylending is a murky, uncontrolled operation like loan sharking. In Singapore, moneylenders are licensed and controlled, and strict restrictions must be followed. These restrictions ensure moneylenders operate clearly and equitably like other financial institutions.
Finally, dealing with moneylenders is complex and full of hidden words that can ensnare naive borrowers. In contrast, moneylenders must clearly explain all lending terms and conditions. Borrowers are entitled to a thorough contract that details the loan arrangement, including interest rates, repayment schedules, and late payment fines.
