The government has been in the talks with the people recently and after so many protests finally they have taken their decision to put a capping on the interest level of the money lending and that is 4% a month. The decision has already been announced and will be processed by the July of this year that is 2015. This news, which has already reached the ears of the money lending companies have created quite a mixing in the industry and the people have started murmuring around the plight of the money lending companies from there on.
As this can be a memorable decision for some people while for the others, it can be a destroying as well, the decision undoubtedly is taken to protect the interest of moneylenders and the people too. There can be havoc or lots of companies can be at stake due to their concerned policies. But we in the Empire Global were prepared for this day for a long time as we were already ready to accept these recommendations. The total 15 recommendations were made by the committee through which 12 of them were accepted. The 2 of the recommendations were to lift the various moratorium on granting new licenses to the money lenders and to regulate various debt collection behaviour and they will be reviewed by the passing time as the industry of money lending could able to adapt to the new changes.
How the 4% Interest rates will affect everybody:
To protect the interest rate of borrowers, the advanced changes in the regulations will place a cap on interest rates. As of now, there is no capping on interest and late interest rate for the borrowers who are earning 30,000$ on an annual basis. Some of the licensed moneylenders have been examined to change the borrowers the additional fees for being subjected to dishonoured cheques or when repayments fail.
Today there have been no restrictions in the borrowings various costs by the moneylenders.
With the advanced measures and regulations coming in the various moneylenders with license will also be restricted to the maximum rate that is being capped by the government. They will not be able to charge the interest rates that are more than 4% of any of the borrowers per month, in addition to the same the money charged needs to be on the basis of reducing the balance. If any of the borrowers is late in repaying the amount then the licensed moneylenders can charge the borrowers extra. The extra charges will be for the late fees, but then to the charges will not be more than 4%. Similarly, the late fees cannot be in any case exceed by 60$ a month.
In the long run with the new regulations the total amount that can be borrowed will be capped by the regulatory bodies at 100 % of the various original loans so that the debts can keep spiraling over. Additional fees like we can say the unsuccessful GIRO and early loan redemption will not be possible and allowed by any moneylenders. Moreover, the total cost needs to be heard by the borrower will not exceed by 100% in any case of the principal loan which will be a remarkable measure to prevent the debt going out of control.
How the new regulations of money lending will affect the moneylenders?
Mr. Manu Bhaskaran, have made the statement that the industry will surely become the commercially feasible with the new capping for the moneylenders.
In the 4 % capping, the moneylenders are allowed to charge the borrowers with some additional fees. These additional fees can be like administration upfront fees, which is capped up to 10 percent of the principal amount. The other various legitimate costs like securing various credit reports can also be asked to pay by the borrowers too.
As per the borrowers who are earning more than 20,000$ on an annual basis, the various new rules will be levied on them. They are said to come under the loan amount which is approximately 6 times of their salary. And these measures are said to be followed by all the licensed moneylenders. These kinds of borrowers can opt for the loans that can be four times of their monthly salary. These are some of the vague calculations to give the investors an idea of their loan worth, but the majorly you will only come to know once you are with any of the companies. The money lenders also act as a consultant to identify your needs and propose you with the best solution they have for you.So, do consultant and take the advice not only one, but multiple money lenders and then decide to go with your best interest only.
Let’s discuss the measures that are not included in the recommendations:
The government did not approve for the moneylenders that they can advertise in the newspaper by using templates. According to them, these kinds of publicity will definitely increase the borrower’s numbers in the industry.
The new Moneylending credit bureau, which will form will be having a centralized data of the borrowers. The data they will maintain will be off, who is using the licensed money lending services from the established players.
The new regulations will start with the announcement of 4% of interest caps for the borrowers and are said to be rolling out the same in within a month by the Ministry of Law. Centennial Group International director and chairman, Mr. Manu Bhaskaran, have already said that the committee has taken the decision to help, the money lenders to cover up the various administrations and the resources cost of the loans and the repayment fees. In their report, they will surely put the measures to cover up all the cost so that the moneylenders don’t end up in vain.