The need for personal loans has increased significantly due to the raging pandemic. About 928,000 people took personal loans in 2020. These personal loans can be obtained either from licensedor unlicensed money lenders. Anyone would want to go with an unlicensed money lender because they do not qualify for a loan with a licensed lender, the turnaround time is less, or the interest rates are attractive.
Going with a licensed lender over an unlicensed one has many benefits. If you, too, want to get a personal loan and are looking for a licensed money lender, these are the six ways you can differentiate between them.
Will Legalize the Transaction
A licensed lender will make sure that all the loan terms are put on paper in the form of a contract. It will include the amount of loan, interest charged, the monthly payments, and any other conditions that may apply. It is legally binding to both you and the lender. When a lender is reluctant to sign a contract, you can be sure that they are most likely not licensed to give out loans. Stay away from such lenders.
Usually, a genuine lender will have a standard procedure that needs to be followed to approve your loan application. The process is transparent, indicating why your application has been rejected. An unlicensed money lender will not provide clear guidelines and may stall the process.
Will Not Charge Too Many Fees
A licensed financer will charge only a service fee to process the loan, a late payment fee in case of delayed payments, and legal fees to formalize the agreement. The interest rates are pegged to the market and licensed lenders will not charge more. If you find that the lender is charging additional fees and higher than market rates, you can expect them to be unlicensed.
A loan shark will use extreme measures to collect payments in case of delays. An authentic lender will follow the collection protocol by calling you and mailing you about delayed payment. They may even threaten and harass you if your payments are late. They will also add penalties that were not part of the loan agreement.
Has a Registered Office
According to the Ministry of Law guidelines, a lender should have a registered office. A loan shark will usually have a chopshop for an office that may not be there the next day.
Will Grant Loan Based on Your Income
A banker can give you a loan of up to six times your monthly income according to lending rules. It is subject to the annual income being at least $20,000. A Shylock will grant you a loan for any amount you need without verifying your income. Also, a licensed money lender will check documents such as ID proof, income proof, and NRIC before granting your loan. When that happens, the warning bells should go off in your head.
No matter your reason for getting a personal loan, it is always better to get it from a licensed lender to safeguard your interests. An unlicensed money lender will grant you the loan without trouble but will make life miserable later.