Merits and Demerits of money lending

There are various reasons for which a person needs to raise funds but for them, you can not go to money lenders to ask for a loan. Though money lending is a beneficial option for everyone when there is a need for money. Trustworthy money lenders are the only option to seek money from. Money lending has several advantages and disadvantages which are further discussed ahead in the article. You should be aware of the merits and demerits to make a rational decision effectively and efficiently.

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Here are the Merits of money lending are:

Offers flexibility and versatility

Flexibility is a key feature of money lending especially in terms of choosing tenure of repayment and fixed monthly installments. Major financial institutions and banks understand the requirement of funds well and then allow the borrowers to get the loan to fulfill their needs as per their convenience. But only by agreeing on certain terms and conditions which are the base for safe business.

Interest rates are low and borrowing limits are higher

Money lending institutions and banks often offer loans at lower interest rates than the people who do this loan giving business and charging a higher interest rate from the general public. When you get higher borrowing limits from money lenders then you are capable to cover your maximum monetary needs.


When Loans are raised from banks and money lending institutions it becomes easier to manage them well than a loan from some unauthorized sources which are not even safe to rely on.

Here are the Demerits of money lending are:

High penalties and fees

It is known to everyone that money lending institutions charge a high amount in the form of fees and penalties that won’t allow building the trust of borrowers. As a result, they opt for unauthorized sources to borrow money to avoid high fees and penalties.

Expensive payment than credit cards

Repayment of the loan amount is still a big issue than repayment of Credit card bills. On missing any installment, your credit score and market reputation get affected. The amount of loan is itself higher than the amount you can get as a credit card bill.

Increases liability

Fund borrowed from money lending source is itself a debt to the borrowers like other debt. A certain amount of money has to be paid as a fixed monthly installment along with the interest that can not be avoided. This results in not trusting over such borrowing options that raise a permanent nature expense.

Where can I find a licensed money lender?

A money lender is a person who lends small sums of money at a higher interest rate. The reason for the higher interest rates is that money lenders have a higher risk of default than traditional banks for a variety of reasons. Persons who are in severe need of money but do not have access to a bank account, people with poor credit histories, and those who are unable to obtain funds from friends or relatives turn to a moneylender for credit.

Licencing for money lending

The Revenue Department typically grants a money lender license within 3 to 4 months of the application being submitted. The application is valid for one year after it is received. However, there are a few variables that must be taken into account when issuing or renewing a license. Whether the application is qualified to conduct a money lending business and whether the applicant’s location is suitable for doing so.

Will require you to sign an agreement at all times

There must be documentation for any legally binding terms. The contract must include everything you need to know about your payday loan, including the amount of interest you’ll have to pay every month. Before authorizing and disbursing your fast cash loans, licensed moneylenders who are good at money lending in ang mo Kio must personally verify your identity.

They will not request any personal information from you

Your personal information will never be requested by a licensed moneylender. Instead, they’ll demand that you supply them with the relevant documentation, such as identification cards, driver’s licenses, and other government-issued identification cards, before proceeding.

They’ll demand security

A licensed loan provider would never provide you with a loan without requiring some type of collateral, such as ownership paperwork for your home or vehicle. If someone offers you a loan without this criterion, you should avoid doing business with them since you have no way of knowing if your funds will be safe and secure, or even if they will be returned at all.


Lastly, defend yourself by conducting research, which will protect your money from problematic individuals and businesses. So, always do your homework and double-check everything before signing anything so that you don’t have to worry about anything during your loan term. Plus, if you have any questions, you can always contact Loan Advisors for more information. Keep an eye out for loan sharks and always do your homework.