So, you are in need of money and fast. You cannot wait for the process of submitting documents and waiting for approval from the banks. Worse still, you have bad credit ratings. So, you turn to the loan sharks otherwise known as Ah Long.
Big, grave mistake!
You get attracted by ads that say ‘Fast Money Guaranteed’ and ‘Low Interest’, thinking it is fine to borrow money from Ah Longs. But did you know that these are illegal activities? Do you know that you could be jailed for doing so? And they come with crazy sky-high interests (even if they advertise otherwise)?
Ah Long only interested in making money
Ah Longs are not interested to know why you need the money for. They don’t care if you need it for medical or education for your child. Their only objective is to make money from those who are desperate, like yourself. That is why the same person who was so nice to you when he lent you the money can become violent when you cannot pay.
Just pay your loan!
Why is it so difficult to pay your loan to the Ah Longs? The issue is not that you cannot pay the loan but when they charge interest by the day (or in some situations, hour), it is impossible to stay on track! As a guide, the common practice with Ah Longs is they charge interest between 0.5% – 1% per day! This means that it can go up to 30% per month. On top of that, they will charge 5-10% interest if you default on a payment.
Are there no laws?
Yes, there are laws in Malaysia. Some Ah Longs are registered (licensed) moneylenders. If you are borrowing money from a legitimate moneylender, the law states that there must be a proper contract signed between both parties.
Moneylenders can only charge up to 18% interest per year. Nothing more than that!
Should you go to Ah Longs?
In any case, it is advised that you try to go through the proper channels if you need to borrow money before resorting to moneylenders. If you have no other options, then you should check whether the moneylender is registered through:
Difference between Licensed and Unlicensed moneylenders
The idea of borrowing money is common especially among people from the lower-income group. That is where moneylenders operate and that is where a lot of people are mistaken because they do not know what and where the differences are.
Why do they turn to moneylenders?
People who use the services of moneylenders are usually those who are either unable or choose not to get a loan from the banks. There are several reasons for this.
- Not eligible – Borrowers who are below a certain pay level will be ineligible to obtain a loan from the banks or formal financial institutions. As such, they will have to use other means.
- Time – Certain borrowers are in need of urgent cash. They do not have the time to wait for the approval process from banks which usually take about 7 to 14 days.
- Credit rating – Borrowers who have poor credit ratings will not be able to get loans approved from banks.
Turning to alternative financial services
Because of the situations mentioned above, borrowers run out of options when they need extra money. This is where they turn to moneylenders. The biggest problem here is that there are times when they are unsure if the moneylenders are legitimate (licensed or unlicensed). The distinction is very simple.
- Licensed moneylenders – These are registered firms that operate under the Malaysian Moneylenders Act 1951. They provide loan services for anyone who needs it and in most cases, some form of collateral will be required.
- Unlicensed moneylenders – They are otherwise known as ‘Ah Longs’. These firms are not registered with the authorities. They are not governed by any law and can impose any interest rate and the payback period of their liking.
Besides the 2, there are bogus ones. This can be a licensed moneylender that uses loan shark tactics. They approach a borrower as a legitimate moneylender but do not go through the proper process.
Law that protects borrowers
While borrowers are not advised to acquire the services of moneylenders, the law is set to protect them against any illegal acts. It states that a contract must be signed between the borrower and the lender. This means that the borrower must have a copy of the contract signed in case of any disputes. The lender meanwhile can only charge up to 18% interest per annum. In other words, any moneylender who charges more than that is a bogus one.