Life in Singapore moves fast, and for many, applying for a loan from a licensed money lender can be a practical way to keep up with evolving financial needs and handle unexpected circumstances. But what happens when you’re unable to pay a money lender on time? Are there repercussions for licensed money lender late payments? Can a money lender file a case in court?
Perhaps it’s a sudden retrenchment, a medical emergency, or simply a misstep in budgeting — falling behind on payments is more common than you think, and it certainly can bring on a lot of emotional and financial stress.
If you find yourself in this tough spot, know that you’re not alone and there are ways to navigate this situation. Keep reading to find out what you can do if you are unable to pay a money lender in Singapore.
What Happens When You’re Unable to Pay a Money Lender on Time?
It is completely normal to feel worried when you miss a repayment, or make a late payment to a licensed money lender. While licensed lenders operate under strict regulations, there are indeed consequences associated with licensed money lender late payments, and understanding them is the first step to addressing the situation.
Here’s what usually happens when you’re unable to pay a money lender:
- Late interest and fees accumulate. When you’re unable to make a timely repayment, a licensed lender is allowed to charge a maximum of 4% interest per month on the overdue loan amount. Additionally, licensed money lender late payment fees, capped at $60 for each month of late repayment, can kick in. While these interest rates and fees do not sound exorbitant, the truth is that they can add up quickly, leading your debt to magnify, hence making it tougher to pay off your loan completely.
- Your credit profile will be affected. Apart from snowballing debt, failing to make a timely repayment to a licensed lender will result in late payment records in your Loan Information Report. This may negatively impact your creditworthiness and ability to qualify for future loans.
- You will receive payment reminders. When you’re unable to pay a money lender in Singapore, you can expect to receive payment reminders via text messages or phone calls at reasonable times of the day. A Letter of Demand (LOD) may also be delivered to you at your residential address or workplace.
- Legal action may be taken against you. If the issue persists and you’re still unable to pay your money lender after multiple payment reminders, the money lender has the right to initiate legal proceedings for debt recovery. Note that you may be liable for the legal fees if the licensed money lender decides to file a case against you in court.
With all that being said, understand that licensed lenders are only allowed to recover debt through legal means. If you find yourself subjected to any of the actions described below, you may be dealing with a blacklisted money lender and should lodge a complaint with the Registry of Moneylendersimmediately:
- Using abusive language, threatening violence, or engaging in any form of harassment, including locking your gates, splashing paint, or sending threatening messages to you
- Seizing your property without obtaining a formal court order
- Charging hidden and excessive fees that were not agreed upon at the point of contract signing
Can a Money Lender File a Case in Court?
As mentioned above, legal action can be taken by the licensed lender if you’re unable to pay your dues. However, most lenders will only opt for this only as a last resort.
The first step of the debt recovery process entails the money lender sending the borrower a Letter of Demand (LOD), a formal legal notice specifying the amount owed and the potential consequences of non-payment.
There are two possible outcomes following the issuance of the Letter of Demand:
- The borrower responds to the Letter of Demand: Negotiations between the lender and borrower will commence, and if a favourable settlement can be reached between both parties, it will not be necessary for the money lender to file a case in court.
- The borrower does not respond to the Letter of Demand, or both parties are unable to reach a settlement: As a next step, the money lender may file a case in court. Depending on the amount owed, the claims may be filed with the Small Claims Tribunal (SCT) or the civil court.
Options to Consider if You Are Unable to Pay a Money Lender
If you struggle to make timely repayments to your money lender, do not ignore the issue and pray that it resolves on its own. Much as being unable to pay your money lender can be overwhelming, choosing to ignore the problem will only complicate matters. Here are some constructive steps you can take to make the best of your circumstances:
- Speak to your lender to renegotiate the terms. As daunting as it may seem, approaching your lender as soon as you anticipate financial issues or immediately after missing a payment may be the most effective solution. Be candid about your situation and come prepared with a realistic proposal for what you can reasonably afford. For example, you might suggest extending the loan tenure or request a temporary suspension of payments.
- Seek professional help. Financial hardship can be just as stressful as any other life challenge, and getting professional help from social service agencies can help you better navigate this rough patch. From facilitating discussions with your money lender to developing a Debt Management Plan (DMP), credit counsellors offer invaluable guidance and support to help you regain control of your finances.
- File for bankruptcy as a last resort. If all other options for managing debt have been exhausted, you might want to consider filing for bankruptcy. It’s essential to note that bankruptcy can have severe and long-lasting consequences on your credit history and overall financial freedom. Hence, it is advisable to seek professional legal and credit counselling advice to fully understand its implications before considering bankruptcy as an option.
Help is Always Available
Being unable to pay a money lender in Singapore can be a distressing experience, but remember that it is not the end of the world — stay calm, know your rights as a borrower, and seek help.
If you’re looking for a reliable partner for your financing journey, 1-Cash is a licensed lender committed to providing transparent and flexible monthly instalment loans — including loans for bad credit in Singapore — tailored to your financial situation. Speak to our experienced loan consultants to learn more about how we can assist in your financial journey.
