Have you ever thought about how much money you owe someone else? In fact, owing money can cause stress and anxiety. And if you don’t pay back the debt, you might even get into trouble.
Whatever the reason, owing money is never fun, especially when you don’t have enough cash to cover the debts.
You can try to negotiate with creditors to reduce the interest rate or extend repayment terms. Or you can consider bankruptcy. But before you take these steps, you need to know what happens when you fail to pay off your debts.
Licensed moneylenders are easy to come across in Singapore. They offer fast cash advances and help people meet short-term financial needs such as paying off credit card bills or buying essentials like groceries. But borrowing money from licensed moneylenders isn’t always a smart move if you cannot repay back in time. Here’s why.
Consequences On Future Loans
If you default on your loan payments, lenders may report this information to credit bureaus. This will negatively impact your credit score and make it harder for you to borrow money in the future. If you already have bad credit score, this could be devastating.
There will be a record of your credit history because each loan application must pass through the Moneylender Credit Bureau (MLCB), which houses data on your borrowing limit, past due loans, and repayment history with other licensed moneylenders. Therefore, based on it, the lender may likely reject your loan application.
What could be the worst-case scenario? Your future borrowing limit will be largely impacted.
Lawsuit May Arise When Things Go South
In addition, lenders may use legal actions to recover their loans. For example, they may sue you for breach of contract. This could mean that they would ask the court as legal proceeding to order you to pay them back.
In some cases such as certain secured loans, such as mortgage loans, car loans, and business loans, lenders may also seize your personal assets as well as your property. If you own real estate, they may sell it at auction to recoup their losses.
If you fail to repay the money lent to you, you may lose the pledge of the property given as security for the debt. This is because lenders can take possession of the property for repayment of the debt. This is so that lenders can recover their losses by taking possession of the collateral for a loan, which is legal.
Even if you do not own any properties, there is still a chance that your employer may deduct money from your salary to compensate for the unpaid loan losses.
The Bottom Line
So, if you want to avoid getting sued by your creditors, you should not ignore your existing debts. Instead, you should work out a plan to repay all outstanding debts.
This way, you won’t face any consequences when you fail to pay back your loans.
Licensed Moneylender's Compliance
Code Of Conduct And Good Practices
Understand that there are regulations and laws under the Moneylenders Act Singapore that every moneylender has to abide by including debt collection agencies or else they will face consequences due to illegal activity of making money.
Under the Act, anyone wishing to engage in the business of providing loans and financial products must obtain a moneylending license. Only those who hold such licenses may provide loans and financial products under the Act.
In addition to the licensing requirements, the Act sets out the following provisions to safeguard consumers:
• Consumers cannot enter into any loan agreement unless they have received written disclosure about the terms and conditions of the loan.
• Loan agreements must be displayed prominently in writing and signed by both parties.
• All charges levied must be clearly stated in the loan agreement.
The code of conduct and best practices that they must follow are summarized here.
They are not allowed to:
- Afflicting harm
- Harassing, threatening, or intimidating their borrowers and/or the members of their families
- Follow-up on borrowers
- Vandalizing or causing damage to personal property
Here are some actions you can do if you experience this type of harassment:
- Inform the law enforcer about the moneylender.
- Send a complaint to the Credit Association of Singapore regarding the lender.
- Send an official complaint to the Ministry of Law's Registry of Moneylenders.
What Can Moneylender Do?
Moneylenders in Singapore will often make an effort to collect the debt using these methods if you are unable to pay them:
- Send you a demand letter via mail
- Visit your home to deliver a letter of demand (or, last resort, your office)
- Try to reach you by phone and text at reasonable hours
- File a lawsuit against you
Guide To Things You Can Do If You Cannot Provide Loan Repayments
Renegotiating Loan Contract With Your Moneylender
If you are facing difficulties paying off your loans, it might be time to renegotiate the terms with your moneylender.
You can ask your moneylender to reduce the interest rate, extend the term of the loan, or waive certain fees.
However, you need to understand that most moneylenders are reluctant to offer concessions since they earn more money through higher interest rates.
In order for you to get a better deal from your moneylender, you need to be persistent and negotiate with them.
It is important to know what you can expect from your moneylender before you start negotiating.
Seeking Assistance From Credit Counselling Singapore
It is a service provided by credit counsellors to help people manage their finances.
A credit counsellor helps you with debt counselling by identifying areas where you could improve your spending habits so that you can save money and avoid incurring further debts.
He or she also provides guidance on how to handle difficult situations when faced with financial problems.
When you seek assistance from credit counsellors, you should be prepared to discuss your current situation and your future plans.
This way, he or she can assess your needs and suggest solutions that would work best for you. Learn more about Credit Counselling Singapore here.
Planning With Debt Repayment Scheme (DRS)
This plan allows you to consolidate all your outstanding debts into a single payment.
You can check out more on Debt Repayment Scheme here.
The total loan amounts cannot be greater than $150,000. If they are, you won't get any approval to the programme.
The DRS has a five-year payback period that is its maximum. In other words, at the end of that time, you will become debt-free.
Payments will depend on your current financial situation such as monthly income and expenses.
Once you get into the programme, you're prohibited by the DRS from having any lawsuits filed against you for unsecured loans.
Conclusion
To wrap up, you should avoid getting into debt and even filing for bankruptcy: it's crucial to understand the fundamentals of budgeting your expenses before taking out a loan.
Also, don't forget to repay your loans on time. This will not only prevent you from being sued but will also allow you to build good relationships with your creditors.
Remember to always keep track of your payments and ensure that you have enough funds to cover your bills.
If you find yourself struggling to pay off your debts, contact your moneylender immediately.
Read also: Who's Liable For Your Debt After You Pass On?
Read also: Recovering Your Debt: Turning to Debt Collectors VS Seeking Legal Recourse
Read also: The Pros and Cons of Debt Financing in The Early Phase of Business
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