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Advantages & Risks of Borrowing from a Licensed Money Lender

Advantages of Borrowing from a Licensed Money Lender
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In recent years, the rising inflation and the expensive cost of living, such as the exorbitant rental fees, have exerted a lot of financial pressure on many Singaporeans. These economic challenges have led to a growing trend of individuals seeking relief through loans, such as personal loans, a viable option in the face of mounting financial strains.

But what if you don’t qualify for a traditional bank loan? One of the best alternatives is to borrow money from a licensed money lender in Singapore. These legal financial entities are regulated by the Ministry of Law and they adhere to the stipulated rules and standards stated in the Moneylenders Act. This ensures that the interests of borrowers are safeguarded.

However, choosing a lender requires caution, especially against loan sharks who can masquerade as licensed lenders. Here we will list the advantages and risks of borrowing from a licensed moneylender. Plus, a few tips on how to apply successfully.

What Is a Licensed Moneylender?

A licensed moneylender in Singapore is a financial entity that is legally authorized to provide loans to borrowers and is officially registered with the Ministry of Law.

A licensed money lender can provide instant cash loans to borrowers who may not qualify for loans from traditional financial institutions like banks, including those with poor credit ratings. Some of the types of loans they offer include:

Is it safe to borrow from legal money lenders?

Yes. These licensed money lenders adhere to the rules and regulations stipulated in the Moneylenders Act, ensuring that their practices adhere to the regulations set out by the Ministry.

These regulations include things like the maximum interest rates that can be charged – capped at 4% per month, the fees they can charge, and the practices they can employ to recover loans. Most importantly, all licensed moneylenders are required to explain the terms of a loan to a borrower in a language they understand and to provide a copy of the loan contract.


  • Quick and Easy Application Process: With less paperwork and faster approval times than traditional bank loans, borrowers can typically access funds within 30 minutes of application.. This is advantageous during emergencies.
  • Relaxed Requirements: Compared to banks that have stringent eligibility criteria, licensed moneylenders tend to have more relaxed requirements. This makes it easier for a wider range of individuals, including those with lower incomes or less stable employment, to secure a loan.
  • No Collateral Required: Legal lenders offer unsecured loans, which is beneficial if you don’t own assets like property or vehicles, or who don’t want to risk losing them.
  • No High Credit Score Requirement: Banks typically require a high credit score for loan approval. In contrast, licensed moneylenders often don’t put as much weight on credit scores, making it possible for those with less-than-perfect credit ratings to secure a loan.
  • Smaller Loan Amounts: Licensed moneylenders often provide smaller loan amounts than banks, making them a suitable option for individuals who only need a small sum of money. This can also help prevent over-borrowing and ensure that the loan remains manageable.


  • Late Payment Fees: Similar to banks, licensed moneylenders impose fees for late payment of loan installments. Failing to repay the loan can lead to significant late fees that can quickly add up, increasing the overall cost of the loan.
  • Smaller Loan Amounts: While small loans are beneficial for some, they can also be a limiting factor for those who need a large sum. If the loan amount offered by a licensed moneylender is not sufficient to meet your needs, you might have to take out multiple loans.
  • Higher Interest Rates: Licensed moneylenders typically charge higher interest rates than traditional banks, primarily because they are taking on higher risks. Note that legal money lenders in Singapore can only charge up to 4% interest rate per month.
  • Potential Debt Traps: Just like with any type of loan from other financial institutions, if a borrower struggles to make repayments and incurs late fees, the debt can quickly spiral out of control.

Moneylender and borrower shaking hands

Will Your Credit Score Be Affected by Borrowing Money From a Money Lender?

Yes, borrowing money from a licensed moneylender in Singapore can have an impact on your credit history and score, similar to borrowing from any other financial institution.

When you take a loan from a licensed moneylender, this information is typically reported to the Credit Bureau of Singapore (CBS). This agency collects and manages consumer credit data. When calculating your score, CBS focuses on your payment history, types of credit used, income, and recent credit applications.

However, if you repay your loan on time and in full, borrowing from a licensed moneylender could actually help improve your credit score. Doing so demonstrates that you are a responsible borrower. In contrast, any late payments and loan defaults can have a negative impact on your credit score.

Where to Apply?

When you need urgent cash, borrowing from a licensed money lender is a good alternative when traditional bank loans are not accessible to you. But before you start applying, you must first compare and evaluate which legal money lender can provide you with the best deals.

Loan Advisor, a one-stop loan comparison tool has curated some of the best licensed money lenders in Singapore. Don’t forget to check the credibility and license of the legal lender by checking out the complete list of licensed moneylenders on MinLaw’s website.

How to Apply


  • At least 18 years old
  • Minimum Salary:
    • Singaporean or Permanent Resident: S$2,000
    • Foreigner: S$3,000


For Local and Permanent Residents:

  • Identity card
  • Proof of residence (utility bill, a letter addressed to you, and or tenancy agreement)
  • Proof of employment (certificate of employment or recent 3 months’ worth of payslips)
  • SingPass ( to log into CPF, HDB, IRAS website)

For Foreigners

  • Passport
  • Work permit / S Pass / E Pass
  • Proof of residence (utility bill or tenancy agreement)
  • Proof of employment (certificate of employment or recent 3 months’ worth of payslips)
  • Recent 3 months’ worth of payslips
  • Proof of income (bank or account statement)
  • SingPass ( to log into IRAS website)

Step-by-Step Guide

  1. Compare loan plans: Use online loan comparison platforms to compare interest rates, loan tenure, and terms from different licensed moneylenders before applying.
  2. Prepare all the required documents: This ensures a fast and smooth application process.
  3. Call or apply online: Licensed money lenders now have official websites where you can request a quote. If you’re eligible for the loan, the loan officer will set an appointment at your convenience.
  4. Face-to-face appointment: Legal lenders are required to set up a face-to-face verification where they will discuss the terms and conditions of the loan. Once you agree with the loan plan, you will need to sign a loan contract.
  5. Receive cash: Once the contract is signed, you will receive your cash loan.

Red Flags to Watch Out For

Illegal moneylenders, also known as loan sharks, pose significant risks to borrowers. They are known to use unethical or illegal practices, such as sky-high interest rates, deceptive loan terms, and aggressive loan collection methods. That said, it is crucial to watch out for red flags that could indicate you’re dealing with an unlicensed money lender in Singapore:

  • Not Listed in the Registry of Moneylenders: Before dealing with any lender, make sure to check the complete list of licensed moneylenders on MinLaw’s website. If a lender is not listed, they are not licensed to operate.
  • Unsolicited Calls and Messages: Licensed moneylenders are not allowed to advertise or promote their services through phone calls, text messages, WhatsApp, or social media platforms.
  • No Physical Place of Business: Licensed moneylenders are required to operate from a physical office. If a lender doesn’t have a registered physical office or insists on conducting transactions online or over the phone, this is a red flag.
  • Refuses to Give Back Personal Identification Documents: Be cautious if a lender refuses to give back your NRIC card, passport, driver’s license, or other identification documents. Most importantly, do not provide your SingPass user ID and password over the phone or through email.
  • No Contract or Unclear Terms: Licensed moneylenders are required to explain the terms of the loan in a language you understand and provide a copy of the loan contract. If a lender doesn’t offer a contract or if the terms of the loan are unclear, consider this a red flag.
  • Exorbitant Interest Rates or Fees: Licensed moneylenders are subject to regulations that limit the interest rates and fees they can charge. If a lender is charging significantly higher rates or fees, he or she is likely a loan shark.

Loan sharks are also known to use threats and abusive behavior and language when collecting debt. Keep these red flags in mind to avoid falling prey to these illegal lenders.


Borrowing from a licensed moneylender in Singapore presents a viable financial solution for many, particularly those who struggle to meet the stringent requirements of traditional banks. With quick approval times and fast cash disbursement, licensed money lenders provide a much-needed financial lifeline in times of need.

Key Takeaways

  • Legal money lenders in Singapore are registered with the Ministry of Law, making them a safe and viable alternative to traditional bank loans.
  • However, the higher interest rates and late fees can put a borrower at risk of falling into a debt trap.
  • Borrowers must also remain vigilant against unregulated loan sharks masquerading as licensed lenders.
  • Always verify the lender’s credibility and legitimacy through the Registry of Moneylenders.

Need an instant cash loan? Loan Advisor allows you to quickly and easily compare the best loan packages from the top licensed money lenders. Request up to three loan quotes today – no obligation to apply!

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