Most people will find themselves in need of borrowing money at some point in their lives – financing your home or car, education loans or even for medical emergencies. Now, this is where personal loans come in handy, but for some people, they may not have access to this avenue due to a poor credit rating.
Desperate times call for desperate measures. When people are desperate to raise money urgently and are unable to do so through legitimate financial institutions with strict regulations, they will usually borrow other sources. But before you decide to take up the loan from these sources, there are some types of loans that you should be wary of lest you land yourself in even greater debts than before.
1. Predatory Lending – Loan Sharks
This group of moneylenders, typically known to Singaporeans as “Ah Long”, is loan sharks that use unfair, deceptive or fraudulent practices to entice borrowers in desperate need of cash. Loans sharks usually target people who are ineligible for loans from legitimate sources, such as banks, due to their bad credit rating.
In an attempt to find ways to get in touch with borrowers, they will advertise aggressively through ads on public transport, and even online platforms. They will usually try to be friendly with you at the first meeting. But once you accept a loan from them, their behavior will change drastically, and they will start hounding you for repayment. Since loan sharks do not follow the law, they will charge you exorbitant interest rates that will leave you in a much larger debt at the end of the day. The best advice for dealing with loan sharks is: Don't.
2. Guaranteed Online Personal Loans
These are also known as payday loans or bad credit loans. They are typically given out on a short-term loan basis, and are extremely convenient to borrow, which make them attractive to most. Guarantees that offer you a loan before evaluating your income, credit score or other personal information are probably a scam. Some of these online companies are simply trying to gain access to your personal information for deceitful purposes. In identifying which companies are legitimate, you should probably take into account some of these basic indicators:
- Presence of brick and mortar stores in addition to the online platform
- Has a physical address to the business
- Presence of a customer service line
The best way to ensure that you are dealing with a legitimate company is to do your research by finding out more about the company from reliable sources.
3. High Volume of Uninitiated Contact
These lenders will send multiple emails and make phone calls to you from time to time. Legitimate lenders will never resort to such attempts in order to source for potential customers since they do not want to disturb you unnecessarily. It is thus best to ignore these spams or report them to the relevant authorities.
4. Imposter "Legal" Moneylenders
These so-called "licensed" moneylenders act as legal parties by using a legitimate registration number issued by the Monetary Authority of Singapore (MAS) and posting advertisements by borrowing the names of legitimate companies. They would usually appear to you in the form of random emails and even social media posts. Before you decide to borrow from these moneylenders, ensure that they are whom they claim to be by validating their company information (e.g. website and hotline). Most of the time, the actual companies are unaware of such imposters going around to scam potential borrowers.
5. Asking for Upfront Fees
Upfront payment scams usually require you to pay an upfront application fee prior to providing the loan to you. They will justify the fee by claiming that it is a mandatory processing fee for all borrowers, or even classify it as collateral required due to your bad credit. You will then be asked to provide your bank account details to the moneylender or do an online transfer to them in exchange for a promised loan. Once you have made the transfer, the moneylender will take off with your money. Don’t be surprised if they refuse to answer your responses by cutting off all contact with you. Bear this in mind - legitimate lenders will never ask you to pay anything before you receive your loan.
6. Scare Tactics
The threats and harassment can come before you make the loan, and immediately after you borrow from these moneylenders. Legitimate lenders would never pressurise you into making a deal since it is ultimately a personal decision made by you. Even after you have made the loan, these scammers will even resort to threatening you with legal action for unpaid loans, or intimidate you by mentioning names of your relatives whom they may bring harm to if the repayment is not made in due time. Such moneylenders are usually bold and take advantage of the fear of borrowers through such scare tactics, which makes them vulnerable and easy to prey on.