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Ultimate Guide to Borrowing from Licensed Money Lender in Singapore

money lender guide
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Singapore has seen a rise in money lending as COVID-19 continues to impact businesses. Unfortunately, as the legal money lending industry is booming, so are the loan sharks.

A report from CNA reveals that over 500, aged 13-77, were arrested by the police for loan shark activities in the third quarter of 2020. There were also reports of loan sharks sending families hundreds of dollars worth of food deliveries, leaving them stuck with orders they didn’t make.

These illicit activities have raised some concerns: why are there still illegal lenders in a rich country like Singapore and why do they turn to loan sharks instead of legal lenders?

Residents of Singapore don’t have apparent concerns with access to financial services. However, it could be related to the fact that 2 in 3 working Singaporeans do not have enough savings to last six months if they lose their jobs.

Financial impact of Covid-19

Source: The Straits Times

While law enforcement is responsible for catching ah longs, the public must be aware of illegal practices that could help them make better decisions or identify them before they fall deeper into debts. Read on to be a more responsible borrower:

Who May Be the Target of Loan Sharks?

Although there is little public data on the characteristics of loan shark targets, it is reasonable to say that desperate, low-income earners with little savings may turn to ah longs for quick financial access. 

Loan sharks offer easy credit, hassle-free applications to lure unsuspecting victims with their promises of convenience. And loan sharking is also especially prevalent because of today’s internet-based lenders that disguise themselves as legitimate lenders. 

Furthermore, banks’ legal restrictions and rules on lending (credit score, collateral, among others) affect Singaporeans and foreigners’ borrowing limit and capability.

While moneylenders are an excellent option, they can only lend up to 6 times of the borrower’s monthly income, as The Moneylenders Act caps the amount of unsecured loans that can be loaned.

Rules and Regulations on Licensed Money Lending

How the law protects your rights when you are borrowing

1. Advertising Restrictions

Licensed money lenders in Singapore can only advertize on their business websites or just outside their offices, as well as in business directories. They cannot send you SMSes about their services or advertise in newspapers/social media platforms. It’s assured that a licensed money lender cannot invite you to take a loan or grant you with it without applying for it as well

2. Requirements when Granting a Loan

Before granting you a loan, licensed money lenders must,

  • Explain the terms of your loan contract in a language that you can understand;
  • Give you a signed copy of the deal which include the terms in writing; 
  • Give you a separate cautionary statement in writing; 
  • Issue you a receipt for every payment made towards the loan; and
  • Provide the borrower with a statement of accounts once every half in July or January.

3. Money Lender Caps on Loan Charges and Fees

The maximum interest rate money lenders can charge is 4% per month. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one.

If a borrower fails to repay the loan on time, the maximum rate of late interest a moneylender can charge is 4% per month for each month the loan is repaid late.

All money lenders are only permitted to impose the following charges and expenses:

  • a fee not exceeding S$60 for each month of late interest repayment;
  • a fee (processing fees) not exceeding 10% of the principal loan amount when a loan is granted; and
  • legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan.

4. Money Lender Caps on the Loan Amount

The maximum amount you can borrow from all licensed money lenders combined for unsecured loans is:

Borrower’s Annual Income Singapore Citizens and PRs Foreigners residing in Singapore
Less than S$10,000 S$3,000 S$500
At least S$10,000 and less than S$20,000 S$3,000 S$3,000
At least S$20,000  Six times monthly income Six times monthly income

5. Licensed Money Lenders Debt Collection

A licensed money lender can take steps to recover their debts from you. They may engage debt collectors to help them. However, violent threatening, or harassing behavior is not allowed. 

This includes: stalking you or your family members; sending unenclosed notices of demand to your workplace, openly displaying notices of demand outside of your residence, and/or calling you repeatedly at unreasonable hours, as well as disturbing you around affecting your neighbors.

What to Do if You Accidentally Borrowed From Unlicensed Money Lenders

What to do if you accidentally borrowed from loan sharks

If you accidentally borrowed from an illegal money lender, here are Loan Advisor’s steps you must keep in mind:

  • Keep calm.
  • Don’t make any or additional payment to the unlicensed money lender.
  • Contact the Police at ‘999’ or the X-Ah Long hotline over at 1800-924-5664.
  • You can easily check the list of money lenders in Singapore that are under the Ministry of Law online to avoid potential problems in the future.

Advantages of Taking a Loan From a Legal Money Lender

Borrow from legal lenders

1. Reasonable Eates

Licensed money lenders cannot charge your loans with rates over what the guidelines set.

2. Fast Approval

Unlike banks, with most licensed money lenders, you can quickly get what you have applied for. More often than not, you can easily have your loan approved within 30 minutes.

3. Safe and Transparent

Licensed money lenders in Singapore only do their business according to the law and regulations set by the Ministry of Law. This ensures all transactions are secured and transparent with written terms.

4. Flexible Requirement

Unlike other institutions, one can be conveniently offered service with enough information from your personal supporting documents for the loan application process.

Types of Loans: Secured Vs Unsecured

The types of loans you can borrow from licensed money lenders are secured and unsecured. 

Secured loans typically have a lower interest rate than the rates for an unsecured loan, but in order to be eligible for this type of loan, borrowers need collateral such as real estate with equity value on them that will act as security against losses if they fail to repay their debt. 

Unsecurable loans may not require much more documentation before approval, unlike secure ones does. However, these usually come at higher interest because there is no guarantee that any payment will ever get made back by those borrowing it.

Loan Options You Can Borrow From Licensed Money Lenders in Singapore

Types of loan you can borrow

1. Personal Loan & Foreigner Loan

Unsecured personal loans for citizens, PR, and foreigners are approved based on creditworthiness, monthly or annual income, repayment history, employer reputation, etc. 

A personal loan can be used for multiple purposes, like meeting expenses of a medical emergency, travel, house renovation, as well as debt consolidation, etc which comes with flexible tenure either for the short term or long term.

Features Banks Moneylenders
Loan amount Up to 10x monthly salary Up to 6x monthly salary 
Interest rate From nearly 4% p.a. Up to 4% per month
Repayment period Up to 5 years Up to 12 months subject to the terms & conditions of the agreement
Application approval A few days Within 30 minutes 
Eligibility Must be 21 years old and have a minimum annual income of S$30,000 for citizens and permanent residents and S$40,000 for foreigners Must be 21 years old with a minimum annual income of S$24,000 for citizens and permanent residents and S$36,000 for foreigners
Typical requirements
  • For citizens and PR: NRIC, proof of income, and proof of residence.
  • For foreigners: Passport, work permit, proof of residence, income, and employment letter.
  • In general, banks have higher requirements for you to qualify.

2. Payday Loan 

Payday loans are short-term loans that can help you cover immediate cash needs until you get your next paycheck. These are typically due within the month—or close to your next payday.

As the name indicates, in a payday loan, you can borrow up to one month’s worth of your salary from a licensed money lender to help with your short-term financial issues and repay it back on your next paycheck.

Features Moneylenders
Loan amount Up to 1 month of your salary
Interest rate Up to 4% per month
Repayment period Within a month or on next payday
Application approval Within 30 minutes 
Eligibility Must be 21 years old with a minimum annual income of S$24,000 for citizens and permanent residents and S$36,000 for foreigners
Typical requirements
  • For citizens and PR: NRIC, proof of income, and proof of residence.
  • For foreigners: Passport, work permit, proof of residence, income, and employment letter.

3. Monthly loan

Similar to payday loans, this type of deal is on a term basis. If you want to find a way to pay for your home improvements, vacations, or even pay back your car loans, a monthly loan from a licensed money lender can still be the right service for you. 

Monthly loans are likely to offer you stability when you have a tight budget.

Features Moneylenders
Loan amount Up to 6x monthly salary
Interest rate Up to 4% per month
Repayment period Up to 12 months subject to the terms and conditions of the agreement
Application approval Within 30 minutes 
Eligibility Must be 21 years old with a minimum annual income of S$24,000 for citizens and permanent residents and S$36,000 for foreigners
Typical requirements
  • For citizens and PR: NRIC, proof of income, and proof of residence.
  • For foreigners: Passport, work permit, proof of residence, income, and employment letter.

4. Business Loan

This type of package is something you can avail of in meeting urgent needs for your growing business or ventures. These are welcome for start-ups and small businesses are corporate entities. 

If their commercial activities indicate their earning and growth potential, banks will quickly rally behind them. On the other hand, CEOs and sole proprietors with bad credit can always seek help from a licensed money lender, who can then offer them up to S$200,000 payable up to 2 years.

Features Banks Moneylenders
Loan amount Up to S$500,000 Up to S$200,000
Interest rate From nearly 12% p.a. Up to 15% per month
Repayment period Up to 5 years Up to 2 years subject to the terms & conditions of the agreement
Application approval A few days Within 30 minutes
  • Company must be registered in Singapore
  • 30% of shareholders have to be Singaporean PRs or citizens
  • Business must be operational for at least 2-3 years
  • No more than 10 employees aor annual turnover not exceeding S$1 million
  • Company must be registered in Singapore
  • Operational for at least 1 year
  • Has a minimum turnover of S$60,000
Typical requirements
  • NRIC of all business partners, profile, income tax notice, financial statement, utility bills, tenancy agreement, etc.
  • Banks may require a guarantor.

5. Bridging Loan

Bridging loans are specially designed for Singaporeans who want to purchase a new property, like a house or flat, but need to borrow additional capital to fund the purchase. 

Bridging loans from licensed money lenders can help you bridge a financial or working capital gap when upgrading or moving home.

Features Banks Moneylenders
Loan amount 15- 20% of the purchase price of your new home Up to 6x monthly salary
Interest rate 5-6% p.a. Up to 4% per month
Repayment period Up to 6 months Until your house completion date
Application approval A few days Within 30 minutes 
Eligibility N/A
  • At least 21 years old
  • Exercised the option to purchase OTP
  • No minimum salary required
Typical requirements NRIC, copy of the OTP, proof of residence, and income

Licensed Money Lenders vs Banks

Typically, the process of borrowing money from a licensed money lender is much faster and easier than going through the bank. 

Licensed money lenders’ personal loans usually come with smaller loan, short repayment periods, fair interest capped at 4% per month, and have less stringent eligibility criteria and requirements. 

Banks, on the other hand, offer higher loan, longer loan tenures, low interest from nearly 4% per year (nearly 8% effective interest rates), and require a good credit score to qualify.

To help you decide on what’s best for your financial situation, check out this comparison table:

  Banks Moneylenders
Amount Up to 10x your monthly salary Up to 6x your monthly salary
Interest rates Nearly 4% (nearly 8% effective interest rates) per year 1-4% per month
Repayment period Up to 7 years Up to 12 months
Minimum income required S$30,000 S$18,000
Application approval Within a few days Within an hour

You may think you’re getting a good deal when borrowing for the same amount of money and paying it back over a longer period of time, however, this is not always true. When considering how much interest will be paid in total, more often than not, longer loan tenures mean higher rates and more accumulated debt as well.

Do your sums and compare what you can afford by requesting loan quotes through Loan Advisor.

Things to Consider Before Borrowing From a Money Lender

Things to consider before borrowing

Like in many other things, there are a variety of factors to keep in mind before availing of your much-awaited fast cash loans from a money lender. We’ve listed them down to help you:

1. Self Affordability

Remember to never borrow to pay off another debt. As much as possible, do not apply for loans from a money lender to cover up an existing one. If you can afford to pay off your debts reasonably simply by being dedicated and financially responsible, then that’s what you can do. Note that most strategies in paying down debt off new loans do not work for everyone.

2. Loan Purpose

Ask yourself if you really need the fast cash loan and what is your purpose behind it. Before anything else, it is ideal to double-check whether your goal in getting a loan is reasonable. As it is urged, you shouldn’t take a cash loan from a money lender in order to live a lifestyle you cannot afford. Better yet, never borrow a cash loan that you cannot repay. Some purchases that seem necessary for your goals might also come with higher-end options that are not justifiable.

3. Loan Amount

Can you afford it? Understand the term of personal loan, from its repayment schedule, interest, loan amount, and other fees. Even when borrowing, working out on a budget is necessary. Practice in calculating the amount you will be repaying including all the payments and extra costs. You can easily compare that with what you earn to balance your current and future expenses. Take note that personal loans should be within a borrower’s means. Avoid overspending and control your cashouts

4. Licensed Money Lending

Verify if a money lender is licensed by the Ministry of Law. Singapore law requires licensed money lenders to explain the terms of your loan contract in a language clients can easily understand. If one hands you a loan contract and refuses to explain the terms in the language that you understand, it’s very likely that you are dealing with a loan shark

5. Loan Contract

Licensed money lenders also always have you sign a loan agreement. It must be printed copy and include information on the interest rate, late payment fees, the repayment period, and other necessary details.

Shop around to find the best rates and customized instant loan plan for you. To find the best deal that suits your financial worries, there is no harm in shopping around to get the ideal rates. This allows you to select from a variety of licensed money lenders that meet your demands. Consider all the contributing factors that may affect your account, credit score, as well as your future purchases and transactions.

Other Questions You May Still Be Looking for Answers

1. Is it Safe to Borrow from a Licensed Money Lender?

The short answer is yes, it’s safe to take a loan from a legal money lender

But only deal with licensed money lenders. These are legitimate financial institutions in Singapore that are administered by government agencies.

2. What is the Moneylenders Act?

This regulation was enacted in 2008. The Act aims to protect both licensed money lenders and borrowers. Under this Act, all credible money lenders are listed in a resource found on the Ministry of Law‘s website. This resource includes these details:

  • The licensed money lender ‘s license number
  • Business name
  • Place of business
  • Key contact information

Most importantly, a licensed money lender is forbidden to practice any of the following:

  • Use of threatening or abusive language and behavior
  • Requesting details of the borrower’s SingPass ID and password
  • Withholding important identification documents, such as NRIC or passport
  • Applying pressure towards the borrower to sign a blank or incomplete loan contract
  • Approving a loan without performing due diligence
  • Approving a loan without a thorough explanation of the loan terms and conditions
  • Withholding any portion of the principal loan amount for any reason

Money lenders who are guilty of any of the activities listed above must be reported to the Ministry of Law.

3. How do I Find Licensed Money Lenders in Singapore?

When looking for licensed money lenders in Singapore, you must first verify their credibility. Check out the list of licensed money lenders found on the Ministry of Law’s website. Additionally, be wary of these activities:

  • Licensed money lenders are not allowed to advertise via text messages, phone calls, or social media platforms.
  • Licensed lenders are required by law to meet the borrower for face-to-face verification of their identity.
  • Licensed money lenders must have an approved place of business.
  • Conducting the loan transactions only through an online process is prohibited.

4. How to Differentiate Between a Licensed Money Lender and an Unlicensed Money Lender?

In a nutshell, unlicensed money lenders are more likely to charge high-interest rates and have stricter repayment terms that could make you fall into deeper debts.

Licensed money lenders, on the other hand, must obey certain laws which protect consumers from these practices by providing them with clear information about their loan contract beforehand. 

In addition, you will not be asked for excessive fees when dealing with licensed lenders as they only offer reasonable payment timeframes, making repayments manageable.

If you’re not sure about your situation and need more information, report these unlicensed money lenders to the Registry at 1800-2255-529 or via MinLaw’s website.

Final Word

Unexpected financial challenges are inevitable. If you find yourself in dire need of money, it’s important that you know how to protect your rights as a borrower to avoid falling into deeper debts.

It is also important to find a suitable loan package for your financial situation to make your monthly repayments manageable. 

To find the best and trustworthy legal money lender, you can start by comparing loans through Loan Advisor or check out Loan Advisor best moneylender list in Singapore to avail your loan. Request for free quotes and get the best options with the most favorable terms!

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