Transparency When Borrowing Money: Reasons Why It Matters

Borrowing money is a part of many people’s lives because life must carry on and occasionally does not match expectations. Imagine: What if you have to cover unexpected medical bills and you choose an untrustworthy lender? Sure, they quickly provided you with much-needed money, but they’re not transparent about it.

As a result of the loan uncertainty, things that should be straightforward become more complicated. The point here is that transparency is a significant consideration that should not be disregarded, particularly when dealing with financial institutions. This article will provide you with more information and reasons why transparency is vital to borrowers.

What is transparency when borrowing money?

According to the Cambridge Dictionary, transparency refers to a situation in which commercial and financial activities are conducted openly, transparently, and with no secrets, so that people may believe that they are fair and honest.

In terms of borrowing money, transparency gives borrowers straightforward disclosure of information about interest rates, fees, payback terms, and loan conditions. Transparency, or the act of openness, always lets the borrower make informed judgements and choose the loans that best meet their needs.

Why should moneylenders implement transparency?

Transparency in every business, institution, and individual plays an important part in developing trust and credibility. And the borrowing of money is between money lenders and borrowers. 

If the trust is successfully formed, it is hoped that it will foster long-term relationships and mutual benefit for both sides. For example, the Singaporean government requires SG money lenders to be transparent to demonstrate their integrity and dedication to providing ethical loans. 

How can transparency empower borrowers?

Consider borrowers who are already financially literate being given a loan by an untrustworthy money lender without providing a clear explanation of the positives and cons they will confront and viable alternatives. Of course, they will reject it right away. 

Even for new borrowers these days, transparency has become an important aspect for them, as it gives them the knowledge and understanding needed to navigate their borrowing process.

Trusted lenders will never tire of educating and explaining accurate facts to prospective borrowers, whether it is their product, the terms and circumstances, fees, or charges. This is because they know that this will allow borrowers to make decisions that are appropriate for their financial situation.

Is there any linkage between transparency to legal and ethical consideration?

Singaporean governments truly defend borrowers’ rights, which is why SG money lenders must adhere to legal criteria and industry norms.

That is why maintaining transparency to ensure fairness, honesty, and integrity is a legal requirement for lending institutions, as this sustains the financial ecosystem. This also allows SG money lenders to mitigate legal risks and avoid potential penalties from the government.

What is the most tangible benefit if money lenders implement transparency?

Perhaps some of you are already wondering what genuine and immediate benefits they might expect if they stick to trustworthy money lenders who value transparency.

Well, think of it as a friendship. If you want the friendship to overcome any challenges in the future, you and your best friend should be honest with one another to maintain a healthy friendship.

The same is true for both lenders and borrowers. Money lenders who do not hesitate to explain recommended practices for borrowing money, the risks they may encounter, and the alternatives they may take from the start will ultimately improve the integrity of their relationship with their borrowers.

Transparency is something that every money lender does

Transparency is a fundamental principle and therefore non-negotiable in financial institutions. Every activity should be founded on trust, and borrowers need to be aware of this so they won’t be afraid of money lenders.