When faced with financial needs and borrowing from family and friends is not possible, a licensed money lender can be your valuable resource.
Usually, licensed money lenders can be your go-to option since they can offer quick cash without a tedious application process.
But, before you take that plunge, you must be aware of the strict regulations governing money lending operations. Also, it’s crucial to be mindful that these regulations do not relieve you of the roles you should play as a responsible borrower. The role is to ensure you are dealing with a licensed moneylender and that they are operating within the given legal parameters.
Why the New Rules?
The money lending industry always has some bad apples. Therefore, to weed out such unethical practices and protect borrowers from falling into debt traps, regulators introduced guidelines to ensure you can borrow money responsibly without being taken advantage of.
With the new regulations, you are safe, insofar as this is concerned, with borrowing from a licensed money lender.
But, while the rules aim to protect you as a borrower, you must ensure that you borrow for the right reasons and can comfortably repay the loan.
New Licensed Money Lender Rules
Below are some recent changes in the rules governing licensed money lenders that you need to know.
1. Interest Rate Cap
One of the major updates is the tighter capping of interest rates. This means a licensed money lender can not charge you exorbitant interest rates. In times past, before the capping, these rates surged up to such a level that repayment for some borrowers was well-nigh impossible.
Now, with more explicit restrictions in place, you know exactly what you are getting into before you sign the contract.
2. Stringent Limits to Loan Amount
Under the new rules, there’s a restriction on how one can borrow in line with their salary income. Although this may be limiting, it protects a consumer from more than consumers can afford to repay.
3. Clear Loan Terms
Today, licensed money lenders have to spell out all the terms of a loan in plain language so that you clearly understand exactly what you are signing up for. For instance, with the new rules, moneylenders cannot charge hidden fees or impose complicated terms buried deep in the fine print. Therefore, if something seems unclear, you can ask them since they are legally bound to provide full transparency.
4. Stricter Licensing Requirements
The new rules make obtaining a money lender’s license more complicated nowadays. This implies that only serious and responsible lenders exist in the market in such circumstances. Therefore, there is a minimal risk of cooperating with fraudsters camouflaging themselves as serious lenders.
Your Responsibility as a Borrower
Even with these strict regulations, you have a responsibility to ensure you are dealing with a legitimate money lender, and you can report them to authorities if you notice any illegal practices.
Therefore, before choosing a particular lender, ensure they are listed, registered, and licensed to practice. Usually, the Ministry of Law displays the list of recommended lenders.
Importantly, compare rates and terms against various lenders. This extra effort during the initial stages can save much money over a long period.
Conclusion
The new regulations on licensed money lenders are well-placed. They safeguard the borrower by ensuring that the lenders conduct ethical business.
Lastly, with guaranteed safety, borrowing more is very tempting because it’s safe. But remember, whatever amount you as a borrower get, you will finally have to pay back it with interest. Therefore, only borrow what is needed and never use loans to finance non-essential uses.