Spurred by digital technology, loan scammers have become more sophisticated and adapted well to the changing times. In 2021 alone, Singapore police say victims lost at least S$633M to loan scams. Unsuspecting victims fall prey as scammers would appear legit and offer hard-to-resist deals.
Loan sharks or ah-longs practically look for those in dire need who are most likely to agree to an on-the-spot loan offer. Often, the scam starts with unsolicited text messages or emails offering loans. And before they knew it, they already gave out their Singpass details, passwords, and other important information.
Now, loan scammers have more options to look for bait, and borrowers should be more cautious and vigilant. So, read on and explore red flags and warning signs to protect yourself from falling victim to such.
How to Know if a Loan Company is Legitimate
While many money lenders in Singapore and legitimate financial institutions are registered, many remain to operate illegally. And if you are not careful, you might end up with loan sharks. So, if you are already looking at a possible lender, make sure you can find their name under the Ministry of Law’s list of licensed moneylenders.
Other ways to verify if a loan company is a legitimate lender include:
- Checking if the lender has a physical address, a website, and a phone number that you can search online.
- Looking at customer feedback and Google reviews.
- Using loan comparison site services.
How do Loan Scams in Singapore Work?
In Singapore, loan scammers pretend to be legitimate money lenders. Using technology, they can easily copy a licensed moneylender’s website and offer loan services to unsuspecting prey. They usually go for vulnerable people like low-income individuals or whose loan applications were recently turned down.
They would often offer attractive loan packages under pretenses to hook victims. Such that they would offer massive amounts and hide the actual cost. They will also use various tricks and tactics to achieve goals which include:
- Get your Singpass details
- Access credit card or bank account info
- Take hold of your personal property documents
- Charge high-interests and fees
How to Spot the Scam Signs?
Loan scammers often deploy the same tactics as other illegal lenders. The most common warning signs and red flags include:
1. Advertises through unauthorized channels
If you received a loan offer through SMS and other messaging apps, phone call, or door-to-door mail, it is very likely that you are dealing with an illegal moneylender. Avoid entertaining offers and transactions made through social media or outside their office or their official website.
2. Not having a physical office address
Before approving a loan, a licensed money lender asks their borrowers for a face-to-face verification of documents. All borrowers will undergo this face-to-face verification process whether a borrower applies on-site or online. So, if your loan is approved elsewhere or you skip this process, then perhaps your lender is operating illegally.
3. Rush processing
A licensed moneylender will allow you to take your time to consider their loan offer. Meanwhile, an illegal moneylender would often create a sense of urgency to convince you to act immediately. They might pressure you into agreeing and signing a contract by saying that the deal is offered only for a limited time.
4. Asking for up-front payment or advance fees
Licensed money lenders never ask you to transfer money or pay a fee until your loan request is approved. While they may charge a processing fee, this amount is deducted from the loan principal and not out of your pocket. Moreover, they will also not ask for a guarantee deposit or collateral such as a property document to secure your loan.
5. Instant loan approval
Licensed money lenders will never approve a loan without looking at and verifying submitted documents. While it is true that licensed moneylenders may grant loans to borrowers with bad credit scores.
While licensed lenders offer fuss-free loan approvals, they still need to assess documents. Thus, do not guarantee approval or offer pre-approved loans.
6. Non-disclosure of terms, rates, and fees
Another tactic used by illegal moneylenders is asking the borrower to sign a blank contract or one that is incomplete. By doing this, borrowers are left unaware of what they have signed into. This non-disclosure puts the loan scammer in a position to impose unjust terms and exorbitant interest fees.
How to Stay Safe and Avoid Loan Sharks?
To avoid being victimized by loan sharks, here are some crucial things you should do:
- Always check for the updated list of licensed moneylenders and legitimate financial institutions registered in Singapore from the Ministry of Law’s website.
- If transacting online, ensure that the site is secure and not a phishing site.
- Do not quickly provide sensitive information like your Singpass details and passwords without verifying that the lender is legit.
- Do not engage in loan offers you receive through unauthorized channels.
- Illegal moneylenders may also call using their personal numbers, so do not entertain such calls.
- Block and report scam messages and calls from suspected illegal lenders.
- If the loan amount offer is too good to be true, it probably is.
- Be keen and watch out for grammar, sentence structure, or misspellings as these errors may warn of an illegal lender.
- Shop around to compare offers, and don’t quickly sign up on the first loan offer you come across.
- Never let your guard down; with technology, you can install apps that can block potential fraudsters.
How to Deal with Loan Sharks?
If you’ve fallen victim to a loan shark, been scammed, or perhaps know someone who is troubled by a loan shark problem, here’s what you can do.
1. File a report
Report scammers and illegal moneylenders to authorities such as the Singapore police force via 999 or 1800-255-0000. You can also report to the Registry of Moneylenders directly through the website or contact the X-Ah-Long hotline at 1800-2255-529.
Make sure that you disclose all relevant information regarding your complaint. Keep a copy of the report as proof of the incident.
2. Do not pay the loan shark
You do not have a legal obligation to pay an illegal moneylender. If you have already made previous payments, discontinue paying and contact the authority immediately.
3. Contact your bank immediately
If your bank account or financial information is compromised, inform your bank. This step will prevent unauthorized activity from scammers from being successful.
4. Consult a financial advisor
A financial advisor may help you manage the situation and assist you with the next steps. They can also help you improve your finances and avoid resorting to loans that may put you into deep debt.
Licensed Moneylenders Vs. Unlicensed Moneylenders
Finding significant differences between licensed and unlicensed moneylenders is relatively easy to spot.
Here are some noticeable differences:
Only through the allowed advertising channels, which are:
Advertises and solicits loan offers anywhere and on popular social media platforms. They often find borrowers through cold calling, SMS, emails, and other messaging platforms.
Up to 4% per month
No fixed rate and may charge exorbitant fees
You can borrow up to 6x your monthly salary if your annual income is at least $20,000
They do not impose a limit on the loan amount that they can offer.
Can only charge the following fees:
Do not have specific rules on their fees and other charges. Some may also ask for advance payments on loans that are not yet granted.
May ask the borrower to sign a blank contract on one that has incomplete details.
Adheres to policies on proper debt collection and protects the privacy of its borrowers.
If you need a loan, there are many licensed moneylenders you can turn to. But while finding a loan provider in Singapore is easy, preventing loan scams takes diligence and vigilance on your part as a borrower. Study the market and do not rush into any deal without verifying the legitimacy of the lender.
- Borrowers with bad credit scores who won’t qualify for bank loans are easy prey for loan sharks.
- You may lose money to a loan scam if you rush into a loan deal with due diligence.
- If you are uncomfortable with a lender or their terms, it’s best to look for another one.
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