Any private money lender in Singapore will be affected by shifts in the national economy. Monetary policies, economic growth, and other factors can affect the industry, as well as the demand for loans and credit products.
Here are three things to watch out for in the national economy that can affect money-lending businesses.
Interest rates
The Monetary Authority of Singapore (MAS) is responsible for setting interest rates across the country. The higher the interest rate, the more costly it becomes to take out loans. Higher interest rates favor banks and money lenders, as they stand to earn more from each loan.
Interest rates can vary depending on the demand for loans and other credit products. If more people apply for loans, the MAS may decide to raise interest rates to curb excessive borrowing. Conversely, if fewer people take out loans, the MAS may lower interest rates to encourage more borrowing.
To make the most out of your loans, try to time them right. Borrow from money lenders at times when interest rates are lower. This way, you can save money on interest payments. If interest rates are higher, avoid taking out loans as much as possible.
Inflation
Inflation is characterised by a general increase in prices and a decrease in the value of money. When inflation is higher, everything you buy tends to be more expensive. In turn, the cost of living goes up. Your salary may not have increased, though, so inflation can interfere with your budget. If you fall short, you may have to borrow money.
Inflation usually goes up as the economy grows. The more rapid the growth, the higher inflation tends to go. It’s a natural consequence of economic expansion. And if salaries go up to compensate for higher prices, inflation will increase as well.
During periods of high inflation, money lenders typically see an uptick in clients taking out loans. But once inflation dips, not as many people will need to borrow money.
The MAS can field various measures to control inflation, and one of them is adjusting interest rates. During periods of high inflation, the MAS would often increase interest rates. This way, the demand for loan products would fall. Consequently, the prices of other goods would go down as well.
Government spending
How much the government spends on various sectors of society can also affect moneylenders in many ways. For example, higher government expenditures on healthcare will cause fewer people to take out health-related loans. But if healthcare benefits are limited, more people will have to take out loans for hospitalisations, medications, doctors’ fees, and other related expenses.
Education is another major example. If the government subsidises larger sums for schooling, fewer parents will have to apply for education loans. But without these benefits, education can be a huge expense that many parents need help with financially. With that, more parents will have to take out education loans for their children.
Conclusion
Policies of the MAS and movements in the national economy definitely affect money-lending businesses in Singapore. It pays to watch for figures like interest rates, inflation, and government spending to find out if it’s a good time to take out a loan. Good timing is key so you can maximise your money.
