Advisory for Borrowers on Licensed Moneylending

Advisory for Borrowers on Licensed Moneylending

Borrowing from a licensed money lender in Singapore can sometimes feel daunting, complex and confusing. This is especially true if it’s your first time taking out a loan and you are unsure what the borrowing process should look like. 

First and foremost, it’s important to distinguish the difference between licensed moneylenders you can trust, and greedy loan sharks who don’t play by the rules. You can do this by checking with the Ministry of Law’s list of properly licensed moneylenders here before choosing a loan provider.

Borrowing from a licensed moneylender grants you important protections under Singaporean Law in terms of interest rate caps, fair collection procedures and overall cost limitations, which we’ll explore in this article. In contrast, borrowing from a loan shark could see you significantly overcharged or unfairly threatened – so be careful. Let’s explore the key things you need to know before borrowing money in Singapore.

Things to Consider Before Borrowing 

The licensed moneylender market might seem like a minefield at first glance, but it’s actually more straightforward than it looks. The key things you should consider before borrowing, are:

1. Remember never to borrow to pay off another debt 

Taking out a new loan to cover the cost of an existing debt could cause your debts to snowball. Avoid borrowing purely for the purpose of trying to keep up payments elsewhere.

2. Ask yourself what your purpose is, and if you really need a loan

From purchasing a new car to helping your business expand, there are many reasons people take out loans. But what is your purpose or end-goal? And can it be achieved via other means? Always think carefully about this.

3. Make sure you can realistically afford it

Every loan comes with its own repayment schedule, interest rates and other fees, meaning you’ll need to pay off more than just the original loan amount. Calculate the total cost of the loan and use affordability checkers to make sure it’s 100% suitable for you.

4. Verify if a moneylender is licensed with the Ministry of Law

The Ministry of Law’s list of licensed moneylenders can help you double-check whether a lender is properly licensed. This is the easiest way to avoid borrowing from dubious loan sharks.

5. Shop around to find the best rates and a customized loan plan 

Interest rates, eligibility and overall costs will always differ from lender to lender. That’s why it’s wise to compare the market with Instant Loan to find the best deals that can be fully tailored to suit your needs.

What Types of Loan Do Licensed Money Lenders Offer? 

When taking out a loan, the first decision you will usually need to make is whether you want a secured or unsecured loan. Put simply, secured loans are linked or “secured” to some kind of collateral, such as your home, which a lender can potentially seize if you fail to repay. In contrast, unsecured loans require no collateral, and are granted based on an assessment of your repayment potential and credit history. 

Most lenders offer both secured and unsecured loans in various categories. These range from personal and business loans, to foreigner-specific loans and fast-cash payday loans. Let’s take a closer look at these.

1. Personal Loan 

Personal loans require no collateral and have varying loan amount caps depending on your income. These loans are often flexible in length and can be used for any purpose you desire.

Loan Amount (How much can you borrow?)

  • Up to $3,000 for Singapore citizens earning less than $20,000
  • Up to 6 times’ monthly income for those earning $20,000 or more

Eligibility and Requirements

  • No collateral required 
  • You must be a Singapore citizen or permanent resident over 18
  • NRIC
  • Credit score
  • CPF payment history 
  • Proof of residency
  • Proof of employment or employment pass
  • Bank statements 

2. Payday Loan 

Payday Loans are aimed at borrowers who need a quick cash advance. They are short-term loans that are usually a little more lenient when it comes to credit checks.

Loan Amount (How much can you borrow?) 

  • Up to 1 months’ salary for Singapore citizens earning $1,500 or more ($2,000 for foreigners)

Eligibility and Requirements 

  • Collateral sometimes required
  • Borrowers with bad credit are usually still accepted 
  • You must be over 18
  • NRIC (or passport for foreigners)
  • Proof of residency
  • Proof of employment or employment pass
  • Evidence of 3 months’ payslips
  • SingPass
  • Bank statements 

3. Foreigner Loan 

Foreigner loans are essentially the same as standard personal loans, but with different eligibility requirements aimed specifically at foreigners. 

Loan Amount (How much can you borrow?) 

  • Up to $500 for foreigners earning less than $10,000
  • Up to $3,000 for foreigners earning between $10,000 and $20,000
  • Up to 6 times’ monthly income for those earning $20,000 or more

Eligibility and Requirements 

  • You must be over 18
  • Work permits
  • NRIC
  • Credit score
  • CPF payment history 
  • Proof of residency in Singapore
  • Proof of employment or employment pass
  • Bank statements 

4. Business Loan 

Business loans are mainly targeted at small and medium-sized enterprises (SMEs) with cash flow issues and/or growing companies with expansion plans.

Loan Amount (How much can you borrow?) 

  • Up to $200,000 over 24 months, depending on terms and conditions of the lender

Eligibility and Requirements 

  • Your business must be registered in Singapore
  • You must have been trading for at least 1 year
  • Most lenders have a minimum turnover requirement of $60,000 per annum
  • NRIC
  • Recent ACRA information report or business profile
  • Recent financial statements, invoices and business contracts
  • 6 months’ worth of bank statements
  • An office/premises tenancy agreement
  • List of assets owned by company, directors and partners

5. Bridging Loan

Bridging loans are aimed at people who are moving home but need to borrow some additional capital to fund the purchase of their new place.

Loan Amount (How much can you borrow?) 

  • Up to 6 times’ monthly income 

Eligibility and Requirements 

  • You must have exercised the Option to Purchase (OTP) on your new property
  • You must be over 18
  • Minimum monthly salary of $1,500
  • NRIC
  • Credit score
  • Proof of residence
  • Proof of employment
  • Recent 3 months’ payslips
  • SingPass details
  • Copy of the OTP

6. Monthly Loan 

Monthly instalment loans are available to Singaporeans, foreigners and people with bad credit. You’ll pay a short-term monthly rate with added interest.

Loan Amount (How much can you borrow?) 

  • Up to $500 for foreigners earning less than $10,000
  • Up to $3,000 for anyone earning between £10,000 and $20,000
  • Up to 6 times’ monthly income for anyone earning $20,000 or more

Eligibility and Requirements

  • No collateral usually required
  • Borrowers with bad credit are sometimes still accepted 
  • You must be over 18
  • NRIC (or passport/work permit for foreigners)
  • Proof of residency
  • Proof of employment or employment pass
  • Minimum salary of $2,000 sometimes required for foreigners
  • Evidence of 3 months’ payslips
  • SingPass
  • Bank statements 

What Assurances Do I Get When Borrowing From Legal Lenders? 

As we’ve already mentioned, borrowing from a licensed moneylender entitles you to important protections. These include:

Reasonable rate 

Licensed moneylenders cannot charge any higher than 4% per month interest as of 1 October 2015. They are also prohibited from charging any more than 4% per month for late payments.

Fast Approval 

Licensed moneylenders typically approve loans online within 30 minutes or less – which is much faster than banks and other financial institutions. However, you will need to pay your lender a visit to sign your paperwork.

Safe and Transparent 

Under Ministry of Law requirements, licensed moneylenders’ approval fees are capped at 10% of the loan principal, late payment fees cannot exceed $60 and the borrowing process is completely safe and transparent.

Flexible requirement 

If you have unique borrowing needs, require a longer tenure or a specific loan amount, licensed money lenders can usually offer fully customizable loan products.

How Do Laws Protect My Rights When Borrowing From Licensed Lenders?

Here’s a handful of ways your rights will be fully protected should you choose to borrow from a licensed moneylender: 

1. Advertising restrictions

As of 1 November 2011, licensed moneylenders can only advertise via:

  • Business or consumer directories (print or online)
  • Their own websites
  • Advertisements placed outside or within their own premises

Conversely, they are not allowed to advertise via:

  • Flyers
  • SMS messages
  • Emails

This makes it that bit easier to spot loan sharks from legitimate, licensed lenders – and to ignore any spam emails and texts that sound too good to be true.

2. Requirements when granting a loan 

When granting you a loan, all licensed moneylenders must:

  • Fully explain the terms of the loan
  • Issue a signed copy of the loan contract
  • Provide you with a separate cautionary statement in writing
  • Issue receipts for every single repayment
  • Send you a Statement of Account (SOA) twice annually (in January and July)

3. Caps on loan costs 

Licensed moneylenders are only permitted to charge:

  • A one-time admin or approval fee of 10% of the loan amount
  • Interest rates of 4% or less
  • Late fees or penalties of no more than $60 per month

In addition, lenders are prohibited from:

  • Deliberately structuring loans in ways that are more likely to incur late fees 
  • Forcing borrowers to repay more than double the loan principal amount

4. Caps on loan amount 

Loan typeCaps on loan amount
Personal loanUp to $3,000 for Singapore citizens earning less than $20,000Up to 6 times’ monthly income for those earning $20,000 or more
Payday loan Up to 1 month’s salary for Singapore citizens earning $1,500 or more ($2,000 for foreigners)
Foreigner loanUp to $500 for foreigners earning less than $10,000Up to $3,000 for foreigners earning between $10,000 and $20,000Up to 6 times’ monthly income for those earning $20,000 or more
Business loan Up to $200,000 over 24 months, depending on terms and conditions of the lender
Bridging loan Up to 6 times’ monthly income 
Monthly loan Up to $500 for foreigners earning less than $10,000Up to $3,000 for anyone earning between £10,000 and $20,000Up to 6 times’ monthly income for anyone earning $20,000 or more

5. Debt collection 

Legally, debt collectors in Singapore can:

  • Contact your family and friends when trying to reach you
  • Try to mediate debts and negotiate repayment plans

However, they are not permitted to:

  • Threaten or harass you
  • Vandalize your property
  • Stalk you unlawfully
  • Inflict injury
  • Unlawful assembly

These rules make borrowing from a licensed moneylender in Singapore that bit less stressful and help you to easily determine when a lender has stepped out of line.

How to Report Unlicensed Moneylending 

If you encounter any licensed moneylenders breaking the rules we have outlined above, you should report them to the Registry of Moneylenders. This can be done either online here or by calling 1800-2255-529.

If doing so, be sure to provide:

  • The moneylender’s business name
  • Their licence number
  • Their contact details

What to Do if You Encounter Loan Sharks 

If you accidentally borrow from loan sharks or “ah longs”, as they are sometimes called in Singapore, you should report them to the authorities immediately. Here’s what you should do: 

  • Keep calm 
  • Don’t make any payments (or additional payments) demanded of you

There are a number of social service agencies, such as Credit Counselling Singapore (CCS), that can help you recover from serious debt problems. These organizations include: 

  • Adullam Life Counselling

Contact via www.adullam.org.sg or 6659 7844

  • Blessed Grace Social Services 

Contact via www.bgss.org.sg or 8428 6377

  • Arise2Care Community Services

Contact via www.arise2care.sg or 6909 0628

  • Centre for Domestic Employees

Contact via www.cde.org.sg or 1800 2255 233

  • Association of Muslim Professionals

Contact via www.amp.org.sg or 6416 3960

  • One Hope Centre 

Contact via www.onehopecentre.org or 6547 1011

Find a Safe and Secure Licensed Moneylender With Instant Loan

When you’re taking out a loan, it’s absolutely vital that you choose a moneylender that’s properly licensed and regulated by the Ministry of Law. Borrowing from loan sharks can have drastic consequences and lead to serious problems, whereas with a licensed moneylender, you will always be properly protected.

Try out Instant Loan’s trusted loan comparison service today to compare the best loan deals from top licensed moneylenders in Singapore. Get loan quotes that suit your needs in a matter of minutes – then simply select the best deal!

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