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How to Spot and Avoid Unlicensed Money Lender in Singapore

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Loanshark harassment has been prevalent. But unscrupulous and unlicensed moneylenders do not easily get away with their crimes.

On May 23, 2019, for instance,  a residential unit located in Bukit Batok East Avenue 5 was vandalized by two offenders, who splashed red paint and left debtor notes on the victim’s door. With the help of security cameras, the perpetrators were caught and fined. They served a jail term of 5 years, mandatory caning, and a fine between $5000 to $50,000.

If you are planning to consider borrowing for funding a project or paying your bills, it is essential that you know the difference between licensed moneylenders and unlicensed moneylenders. Learning how to spot and avoid unlicensed moneylenders will help ensure that you will get the best deal.

Licensed Money Lender vs Unlicensed Money Lender

A licensed money lender refers to a type of non-conventional loan that provides short-term loans. If you are a borrower who is in need of quick funds, a licensed loan company will be able to provide the money you need. There are also a variety of loans that a licensed money lender offers such as payday loan, business loan, foreigner loan, and personal loan.

Unlicensed moneylenders, in contrast, have a questionable reputation and one of the indicators that it is not worth considering them is their lack of proper documentation. As of 2017, Singapore Police Force (SPF) revealed that there was a sudden drop (21.8%) in unlicensed money moneylenders schemes due to the increase in security cameras and strong community partnerships.

Check out the Ultimate Guide about Licensed Money Lender in Singapore.

How to identify an unlicensed moneylender?

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Even though cracking down on unlicensed moneylenders had somehow put a lid on loan harassment, it still did not stop scammers from continuing to take advantage of people in need of cash. Since they are no longer allowed to confront borrowers with actual harassment or threats, they use the power of technology in sending unsolicited text messages or calls, harassment notices, or even online shaming.

One of the signs you are dealing with an unlicensed money lender is when you are getting any type of cold calls pressuring you to settle your debt. A licensed money lender will never do this.

1. Documentation with the Law

The best way to verify whether or not a money lender is licensed is by asking for legal documentation.

You have to remain vigilant and never fall victim to offers that are too good to be true. If you are offered a big loan without requiring you any form of identity verification or credit check, this is already a cause for alarm because you might be dealing with a scammer or loan shark. You will need to do thorough research by checking the Ministry of Law’s money lender database.

Since Freedom of Information law has already been implemented in Singapore, any borrower can gain access to the database to verify a moneylending company. With the Ministry of Law’s Registry of Moneylenders, you will be able to obtain all the necessary information that will help you make the right decision.

2. Debt Collection Method

Unlicensed moneylenders like to target the ones who are vulnerable and they use abusive language and threats when collecting fees. Licensed moneylenders are not allowed to threaten or abuse borrowers because this is considered as an illegal procedure.

3. Unrealistic Interest Rate

A licensed moneylender will always keep your best interest in mind. For unlicensed moneylenders, they will approve any amount you intend to borrow without taking your ability to pay into consideration. They do not follow any guidelines and when the time comes that you will need to repay your debt, you end up accumulating a huge amount in the process. The law in Singapore only allows up to 4% interest rate per month.

4. The contract looks too good to be true

Licensed money lenders will present their terms and conditions so borrowers will understand everything in detail. If the contract you are about to sign looks vague, then you might fall for a loan shark in Singapore scheme. Money lenders are responsible for explaining the contractual and financial terms to make sure that you have fully understood what you have signed up for. More often than not, some customers end up paying high-interest rates and penalty fees because of unclear conditions. Only legitimate money lenders would provide you with a clear and substantial answer.

5. No physical office or location

There are unsuspecting victims who easily put their trust in an unlicensed institution just because they have provided their physical address. Even though a registered office address is considered as one of the best ways to determine you are dealing with a legitimate company, you will still have to confirm with Singaporean Law Ministry that the address is associated with the company. In most cases, loan shark Singapore would use the license number, address, and name of a legal institu. A licensed moneylender will require you to go to the physical office during the contract signing.

How do licensed lenders operate?

Job interview concept

When it comes to legalities, licensed money lenders will never ask you large amounts of payment for processing fees. If you are forced to spend thousands of dollars on your loan application, then you need to report the company for fraudulent activity. There are also some requirements that you need to comply with before you can take out a loan and if a moneylender approves your application without going through your credit history, you should avoid the company by all means because they will not provide you with proper documentation of your loan.

Why should you take a loan from a licensed lender instead

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One of the advantages of borrowing from legallenders is that they are the Ministry of Law regulated. This means that once you borrow money from these licensed companies, you will not run the risk of shouldering unlawful high-interest rate because of the cap on interest rate and penalty fees, especially for late payments.

The moneylender regulation that was implemented on October 1, 2015, states that interest rate should not be more than 4% per month and the late interest should not also exceed 4% each month.

When it comes to the administrative fee, it should not be more than 10% of the loan principal. The late fee should not be more than $60 per month and the total borrowing cost including interest, late interest, and other fees should be 100% of the loan principal. Lenders are also prohibited from threatening or harassing a borrower.


How to deal with loan sharks?

It is advised not to transact with loan sharks in Singapore not only because of their very high-interest rates but also because of the way they pressure borrowers who are unable to repay their loans. While loan sharks are good at targeting people who need money the most, it is important to consider risk-free and licensed moneylenders.

Before you choose a moneylender to work with, it is essential that you research and read so you can easily identify whether or not the moneylender of your choice have suspicious actions. Consider it a red flag if a moneylender starts to ask your personal information, such as ID and password or any personal identification cards.

Who should you contact?

Wood block symbol telephone, mail, and address on desk

If you have lending concerns or if you feel that your personal information or data privacy is violated, you need to seek help from financial advisors as they will provide you with better options so you can manage your loan money well. You will also have to seize transactions with a money lender if the charge is more than the required interest rate as stipulated in the Ministry of Law Moneylenders Act. If you are a victim of loanshark Singapore or unlicensed lending, you may also reach out to authorities to avoid experiencing any type of harassment.

When reporting unlicensed moneylenders, be sure to provide their business name and contact number to any of the following hotline:

Credit Counselling Singapore


National Council on Problem Gambling




How to avoid it?

If you know how to spot an unlicensed lender’s tricky gameplay, you will be able to avoid becoming their next victim. A licensed lender will not transact with a client based on a false contract. If the lender is not clear on their terms and conditions and will offer you loans without taking your current income into consideration, then it is one of the moneylenders you should avoid. While there are loan scams that are good at presenting themselves as licensed lenders, conducting some investigation will help you identify a lender that is certified.

What should you do?

A Singapore loan shark must be reported to proper authorities and you have to provide all the information to speed up the investigation process. If you have experienced any continued threats or loan shark harassment, you have to report them to authorities immediately. Continued threats or pressure can be used as evidence against unlicensed lenders.

There are more secure ways of taking out a loan. Due diligence will play a major role in making an informed choice. Loan Advisor will help you search for reputable moneylenders with actual loan officers demonstrating utmost professionalism.

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