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Banks vs. Moneylender vs. Pawnshop: Which is Best for You?

banks vs moneylender vs pawnshop
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Aside from banks, you can consider turning to licensed money lenders and credible pawn shops in Singapore. These three financial institutions have different credit criteria and offer different loan plans. You need to weigh your options carefully first to make a smart financial decision.

As such, before you sign the dotted line, you need to understand how these three credit institutions differ and how they will benefit you.

Banks vs. Moneylender vs. Pawnshop

When faced with serious money problems, you can turn to your family and friends to help you with some extra money. However, it’s not guaranteed that they will lend you the amount you require depending on your need.

The other option for you is the money lending organizations and institutions that you can contact for financial assistance. These are banks, pawnshops, and licensed moneylenders.

Below is a look at the differences between the three.



Licensed Money Lender

Pawn Shop

Type of Loan

Can be a secured or unsecured loan

Usually unsecured

Secured loan or collateral-based loan.

Repayment Term

Personal loans range between 1 year to 7 years

Typically 6-12 months; Indicated in the Note of contract

6 months or your pledge will be auctioned off

Repayment Schedule

Fixed repayment amount depending on your repayment schedule

Fixed repayment amount depending on your repayment schedule

Not fixed repayment; you can pay as much as you can for every partial payment

Loan Amount

  • With unsecured personal loans, you can borrow up to 4x your monthly income
  • With secured personal loans, it will depend on the value of your collateral

Up to 6x your monthly income if earning at least S$20,000 a year

Typically 60% to 80% of the market value of the pledge

Interest Rates

Average 3.5% to 6.36% p.a.

1%-4% per month

1% to 1.5% per month


Pay on time to avoid late interest and late fees. Failing to repay the loan will affect your creditworthiness

Pay on time to avoid late fees. 

No snowballing of debt but you might lose your pledge if you fail to make repayment

It’s best to choose traditional bank loans if you need larger loan amounts and a longer repayment period. While you should opt for licensed moneylender if you need urgent cash. Meanwhile, turn to pawn shops if you want to get cash out of your assets.


Banks have been for years regarded as reliable sources of credit. There are different ranges of services and products offered, but of importance regarding this type of organization is that you need to be eligible to access their services. They also do accept collateral for a special loan option they offer.


  • Since they strictly follow government policies and industry standards, banks require borrowers to meet these standards before getting a loan. 
  • Banks have a revolving credit facility with credit cards they issue. This lets you access extra funds when you need them without having to request new loan applications every time.
  • They offer bigger loans, and their interest rate is often lower compared to other lending institutions. This generally applies to specific loans that include education and housing loans. It’s also convenient for you to repay your loan in the bank. Other options are by mail, online, or through ATMs.


  • It isn’t easy to access a personal loan from banks without a good credit score
  • Getting a loan impacts your creditworthiness should you fail to repay the loan on time. 
  • Defaulting on a bank loan will automatically disqualify you from getting a loan from other banks.

Licensed Moneylenders

Are banks moneylenders?

Banks are categorized under the formal sector credit. As such, banking is a business that is separate from businesses that exclusively provide money lending services. Money lenders typically lend their own money, whereas banks function by accepting deposits, and withdrawals are controlled.

So What is a Licensed Money Lender in Singapore?

The licensed money lenders in Singapore are registered and regulated under the Ministry of Law. Licensed lenders abide by the strict rules and regulations listed in the Moneylenders Act. The Act protects both the legal lender and borrower from unfair moneylending practices.

How Much can You Borrow from a Money Lender?

For unsecured loans, you can borrow any amount. For unsecured loans, you can borrow up to 6x your monthly income if you’re earning at least S$20,000. Refer to the table below for a more detailed breakdown:

Borrower’s annual income

Singapore Citizens and Permanent Residents

Foreigners residing in Singapore

Less than $10,000



At least $10,000 and less than $20,000


At least $20,000

6 times monthly income

6 times monthly income

Note that the maximum loan amount that licensed money lenders can charge is 4% per month. This limit applies for both secured and unsecured loans regardless of your income level.

For loan repayments, a licensed moneylender generally requires a fixed monthly scheme for you to repay the loaned amount. The terms applicable are negotiable, as well.


  • Less stringent requirements and more relaxed eligibility. 
  • No high credit score is required.
  • They can assist and give your cash on the same day/ on the spot as long as your documents are complete.
  • You can pay your loan early and get a discount. Unlike banks that require extra charges when you settle your loan early.


  • Late repayment fees may snowball if you don’t pay on time.
  • The repayment period of 6-12 months may be short for you. In this case, contact the moneylender to adjust your repayment schedule.
Moneylender and borrower shaking hands


Pawnshops require you to put in a “pledge” something valuable you possess in exchange for the loan. That’s why you must bring a valuable item like jewelry to help you get a loan. The item is then left at the pawnshop, and you get the money borrowed.

When you are offered a loan, you will get a 6-month period to repay the principal amount taken out plus the interest. But, failing to do this, the “pledge” is sold off by the pawnshop broker.

Regarding the interest rates offered, it can grow to 1% in the first month. Then, reach 1.5% in the following month. This is much lower than the 2% interest you could get from a usual credit card. It’s important to make a note of the repayment option which is not fixed.

Every time you repay your loan, the pawnshop dealer will extend your deadline for auctioning the pledged item by an extra six months.


  • It’s easy to get a loan from a pawnshop since you only have to present your Identity card and your valuable item (the pledge). 
  • They don’t look at your credit record, any existing loans, or salary. The debt does not compound when you do not pay the loaned amount.


  • More often than not, you’ll get a low value on your items if you go to a pawn shop. Tip: If your item is luxury, you can then go to a dealer to get a higher offer.
  • You only qualify for the one-time loan, compared to the revolving credit facility on credit cards issued by the banks. 
  • The low interest rate of 1-1.15% pe rmonth only applies for the first few months. You can get charges up to 9% after six months.

Frequently Asked Questions

1. What Is the Difference Between Money Lenders and Pawn Brokers?

One of the key differences between licensed money lenders and pawn brokers is that the latter only provides secured loans. With a pawnbroker, you need to pledge a valuable item as collateral. The pawnbroker will evaluate the market value of your valuable item. You will receive between 60% and 80% of the market value of your pledge.

Licensed money lenders, on the other hand, offer both secured and unsecured loans. With unsecured loans, you don’t have to worry about putting your valuables as collateral. You can borrow up to 6x of your monthly income if your annual salary is at least S$20,000.

Note that if you fail to repay the loan with a pawnbroker, you will lose your pledge.

2. What Is the Difference Between Bank and Money Lender?

While banks generally offer lower rates compared to licensed money lenders, you also have to consider the loan terms. Banks offer loan tenures of up to 7 years. A longer repayment means more affordable monthly payments, but you’re paying interest for an extended period, leading to higher loan costs.

Licensed money lenders offer shorter payment terms between 6 and 12 months. Plus, licensed lenders have a less stringent loan process. As such, you can get approved in as fast as 30 minutes and get the loan proceeds within the same day of your application.

3. What Is the Major Difference Between Pawnshops to Banks?

When you borrow money from pawn shops, you will not damage your credit history. Pawning is not recorded in any official documents. Additionally, the interest rates charged by most pawnshops are between 1-1.5% which is lower than the 2% interest rates charged monthly by credit card loans with banks. Lastly, you will get fast cash on the spot as long as your pledge is valuable enough.

With banks, your loan will be recorded in your credit history. Failing to make repayments on time will affect your credit score, making it harder to get a loan in the future. Banks have strict eligibility criteria and will take longer to evaluate your loan application. As such, you may have to wait a few days to weeks to get approved.


In Singapore, you have plenty of financing options if you find yourself in a pickle. Banks, legal money lenders, and pawn shops can provide you with a meaningful cash amount. However, each credit facility has different interest rates, tenure, and terms.

Key Takeaway

  • Choose traditional bank loans if you need larger loan amounts and a longer repayment period. Before applying, make sure that you qualify for the loan you want.
  • Choose licensed money lenders if you need urgent cash. They are also a viable option for borrowers who cannot qualify for a bank loan.
  • Choose pawn shops if you want to get cash out of your assets. Make sure to pay off the loan before the 6-month period is up to avoid losing your pledge.

Loan Advisor makes loan comparison quick and convenient. They have the latest information about the top licensed moneylenders in Singapore. Request up to three loan quotes today to find the lowest interest rates and the best terms for your financial goals.

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