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Unlicensed Moneylender vs Licensed Moneylender: What To Look Out For

unlicensed moneylender vs licensedmoneylender
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With the rising prices on everyday items, it’s no surprise that our budgets are taking a hit. If you find yourself in need of quick cash, you may want to consider taking a personal loan. Aside from a traditional bank loan, you can also borrow from a licensed money lender in Singapore.

The process of obtaining a loan can be faster and hassle-free with a legal money lender. But before you deal with the first lender who offers you a loan, you must first learn to differentiate a licensed moneylender from an unlicensed moneylender.

Keep in mind that borrowing from loan sharks can lead to disastrous consequences. For example, there was a recent incident involving a 42-year-old woman whose car was set on fire by loan sharks. Another incident involves a family being harassed because their helper borrowed from a loan shark.

See Also: List of Money Lenders and Moneylender Guide

What Is a Licensed Money Lender in Singapore?

A licensed money lender in Singapore is a person or entity who is authorized to carry on the business of money lending in Singapore. They are regulated and registered under the Ministry of Law. These legal lenders abide by the rules and regulations set in the Moneylenders Act which protects both the lender and the borrower.

They provide instant loans to Singapore Citizens, Permanent Residents, and Foreigners with valid Employment Pass. However, there is a cap on the amount they can lend as well as the interest rates they can charge.

Unlicensed Moneylender vs Licensed Moneylender

Unfortunately, unlicensed money lenders sometimes cosplay as legal lenders. They will try to approach you in various ways, including fishy websites, unsolicited SMS messaging, social media accounts, and more. That said, you need to know what to look out for to avoid falling prey to such scams.

  Licensed Moneylender Loan Shark


Legal; Regulated and registered under the Ministry of Law


Loan amount

6 times your monthly income if earning an annual income of at least $20,000

More than what is legally allowed

Interest rates

Capped at 4%, regardless of your income level and whether the loan is secured or unsecured

Sky-high interest rates; typically more than 4%

Loan term and Documentation

Usually up to 12 months; Indicated in the Note of contract

None; often only verbally

Type of Fee charge

Late payment fees of not more than $60, an administrative fee of not more than 10% of the principal loan

Exorbitant fees, unnecessary additional fees


Can only advertise through three channels: business consumer directories, official website, and business premises

Sends unsolicited emails, spam messages, social media ads, and other platforms


1. Legality

All licensed money lenders in Singapore are registered with the Ministry of Law. You can verify the license and credibility of a lender by checking the complete list of licensed moneylenders on the Ministry of Law’s website.

Unlicensed moneylenders are operating without a license. As such, they are not found on the list. All loan transactions with a loan shark are done illegally.

From the said list, you will find the license number, physical address, contact number, and official website of the legal money lender. Make sure to verify the physical and website address using only the list of licensed money lenders.

2. Loan Amount

If you’re borrowing a secured loan, you can borrow any amount from a licensed money lender. However, for unsecured loans, there is a cap on how much you can borrow. The amount will depend on your annual income.

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

In contrast, unlicensed moneylenders do not have any limit to how much you can borrow. But it comes with several dangerous caveats, including hidden fees and exorbitant interest rates. This makes it almost impossible to pay off the loan.

3. Interest Rates

Licensed money lenders are regulated by the Ministry of Law. As such, the interest rate they can charge is capped at 4% per month. This cap applies regardless of your annual income and whether the loan is secured or unsecured.

Additionally, legal lenders can only charge a late interest rate of up to 4% for each month of late repayment. This is only applicable to the amount that is repaid late.

Unlicensed money lenders, on the other hand, charge a ridiculously high interest rate – typically well above 4% per month.

4. Loan Terms and Documentation

With a licensed money lender, you have up to 12 months to repay the loan. However, most legal lenders offer flexible repayment terms to make it easier for borrowers. As such, all loan details, including the loan amount, the interest charged, and the repayment schedule are all indicated in the loan contract.

Note that a licensed money lender is legally obligated to provide you with a copy of a complete loan contract.

Unlicensed money lenders will not discuss the loan terms with their victims. They will simply disburse the loan, typically remotely and without meeting in person. As such, their victims do not have any loan documentation.

Man showing has no money by turning out pocket

5. Type of Fees

Licensed money lenders in Singapore are only permitted to impose the following fees:

  • Late fee: Not more than S$60 for each month the loan is repaid late
  • Processing fees: Not more than 10% of the principal loan amount when a loan is granted
  • Granted legal costs ordered by the court

Most importantly, the total fees and charges must not exceed the principal loan amount. For example, if you were to take up a personal loan of S$20,000, then the interest, late fees, late interest, and processing fee must not go beyond S$20,000.

On the contrary, unlicensed money lenders are not only notorious for their sky-high interest rates but also for their hidden fees. In fact, some loan sharks ask their victims to pay a deposit amount and GST for the loan processing fee even before the loan is granted.

6. Advertisements

Under the advertising rules, licensed money lender advertisements are limited to three channels:

  • Business or consumer directories (in print or online media)
  • Official website
  • Advertisements placed within or on the exterior of the legal lender’s business premises

As such, if the advertisement is from flyers, emails, social media posts, and unsolicited text messages, these are from unlicensed lenders. Advertising through these channels is not permitted under advertising rules.

How Do I Report an Unlicensed Money Lender in Singapore?

The best way to protect yourself from loan sharks is to never deal with them. Ignore any loan advertisements from flyers, social media, unsolicited emails, or text messages.

Report such advertisements to the Registry of Moneylenders at 1800-2255-529. If you suspect a person or entity is involved in unlicensed moneylending, you can call the Police at 999 or the X-Ah Long hotline at 1800-924-5664.

A Few Important Things To Remember

Before dealing with any lender, make sure to check if they are registered with the Ministry of Law. Additionally, all licensed moneylenders are obligated to perform face-to-face identity verification. They will also perform due diligence before granting a loan.

Here are a few things to remember:

  • Never sign an incomplete or blank note of contract.
  • The loan contract must include all the loan details, including the interest rate charged, loan amount, tenure, and repayment schedule.
  • The legal lender must not retain your NRIC card, passport, employment pass, and other identification documents.
  • Never disclose your SingPass ID or password.
  • The lender must not disburse loans remotely.
  • The lender must not withhold any part of the loan amount for any reason.
  • The moneylender must never use threats, bad language, or harassment when communicating with you.


Seeking financial assistance from a licensed money lender is a viable choice if you need quick cash for emergency expenses. Shop around different money lenders to find the one with the most favorable terms that suit your needs. But be wary of loan sharks cosplaying as licensed moneylenders.

Key Takeaways

  • Licensed money lenders provide instant loans to Singapore Citizens, Permanent Residents, and Foreigners with valid Employment Pass.
  • You can borrow up to 6x your monthly income if your annual income is at least S$20,000.
  • The maximum interest rate that a licensed money lender can charge is 4% per month.
  • Loan advertisements from flyers, social media, and SMS messages are from loan sharks. You are advised to ignore them or report them to the Registry.

Looking for the best loan plan that suits your needs? Make smart financial decisions with Loan Advisor. A one-stop loan comparison directory, Loan Advisor makes it possible to compare the best loans from the top licensed money lenders in Singapore in the comfort of your home. Request up to three loan quotes for free today!

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