Can you renegotiate? It depends on the moneylender
Licensed moneylenders should always be willing to meet at the negotiating table, two moneylenders tell TNPS.
That is provided debtors have shown a willingness to pay up, they add.
A spokesman from Credit Assist, a licensed moneylender in Chinatown, says: "It will be unreasonable for a moneylender to refuse negotiations when the person has been paying for so many years."
His company has a practice to help borrowers repay their debts, even lowering the interest rate for the borrower if necessary.
"We do have a guide here that if the borrowers have paid over a certain amount, we will be more lenient with them. Some of our customers even had their rates lowered to 12 per cent annual interest, which is almost nothing," he says.
But there is no regulation to compel moneylenders to do this.
"It is purely based on each company's ethics," the spokesman added.
Last year, the Moneylenders Act was changed to cap nominal monthly interest rates at 4 per cent and an upfront administrative fee of not more than 10 per cent of the loan principal.
Previously, there was no such cap and moneylenders were free to set the interest rates based on a "willing lender, willing borrower" system.
LIKE LOAN SHARKS
Annual interest rates of 240 per cent are commonplace, leading people to compare these rates to unlicensed moneylenders or loan sharks, says the Credit Assist spokesman.
In comparison, banks currently charge an annual interest rate of between 5 and 20 per cent for personal, unsecured loans.
The actual rate depends on many factors, such as the size of the loan and one's credit rating.
Many contracts that are currently active were inked before these changes kicked in.
One licensed moneylender, who gave his name as Mr Lim, believes that some licensed moneylenders still refuse to budge because the old contracts are too profitable to give up.
"Perhaps for some of these moneylenders, they see it as a way to hang on to the old days, because the new rules are not sustainable to them," says Mr Lim.
He declines to be identified, adding that the community of licensed moneylenders is struggling with the 4 per cent cap.
Mr Lim, who is the sole proprietor of his firm, explains: "Customers come to us because they are not able to get a loan from the banks. These are usually people who are more likely to default.
"The bad debt ratio that we are dealing with is probably 10 times that of the banks. That is why interest rates have to be 10 times higher."
TNPS was unable to reach the Moneylenders' Association of Singapore for comment.