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Identify Loan Shark Vs. Licensed Money Lender in Singapore

What is the Difference Between Loan Shark and Licensed Money Lender?

Loan sharks can easily be mistaken as licensed moneylenders as the former projects itself to be one. Once credit has been transacted with loan sharks, it would feel like there’s no going back, and the cycle of borrowing money from one credit predator to another will go on and on. It’s easy to locate a loan shark from a legitimate one by knowing the following differences below.

1. Loan Amount

A licensed moneylender may lend any amount for a secured loan, but for an unsecured one, the money that can be borrowed depends on income, nationality, and residence. For example, a Singapore resident or citizen with a monthly income of less than $20,000 but more than $10,000 can loan up to $3,000, while someone with an income of at least $20,000 may loan 6 times his income. A Singapore loan shark can lend you as much as or even higher than their legal counterparts without the income requirement.

2. Interest rate

There is a massive difference in terms of interest rate that a loan shark and a licensed moneylender charge on clients. This is because the former, unlike the latter, operates underground and, therefore, is not legally obligated to comply with the government’s interest rate cap of 4%. Loan sharks can charge usurious interest rates of more than 10% up to 40% that makes total debt significantly higher than the principal amount of money borrowed. As a consequence, borrowers become unable to pay their credit.

3. Documentation

People usually need to undergo a thorough application process before credit is approved by the licensed lending institution or individual when borrowing money. This includes proving their capacity to pay by presenting proof of income or employment.

Documentation of credit is necessary for moneylenders to have a cause of action against the defaulting borrower. Loan sharks don’t require this documentation because they resort to illegal means when collecting loan payments.

4. Type of Fee Charge

Legal fees that moneylenders can lawfully charge include loan approval fees, administrative fees, late payment fees, and the legal nominal and late interest rates.

However, it’s important to note that these fees should not exceed the principal amount borrowed otherwise, that’s illegal. Loan sharks impose and charge fees that are not originally agreed upon. Borrowers have no choice but to pay for these unknown charges.

5. Physical Office

All licensed moneylenders in Singapore must have a physical office where they could meet with and assess their clients. A credit that is transacted via mobile phone or any social media platform is a scam.

Loan sharks cloth and presents themselves like a licensed moneylender by creating bogus websites where credit applications can be easily obtained or directly contacting clients through text messages, phone calls, or other messaging Apps.

6. Loan Term

The business of money-lending is primarily governed by the terms and conditions stipulated in the loan contract. Both borrowers and moneylenders have obligations with each other. Moneylenders can neither demand loan payment before the due date nor charge interest rates different from that stipulated in the loan agreement. Without loan terms, loan sharks quickly get away with their obligation from their clients. Worse, loan sharks often feel that their obligation to people who borrow money from them stops when they hand the money.

7. License Information

The website of the Ministry of Law gives a list of licensed moneylenders in Singapore. When checking a licensed moneylender’s website, it is smart to check its name on the list first.

8. Languages

The terms of the credit contract, specifically the interest rates charged, the applicable fees, mode of payment, and the repayment schedule, to mention a few, should be explained to debtors in a language that they would substantially understand. People borrowing money should at least be informed of these terms so they would know at once when the money-lending intermediary violated any provision of their contract.

However, when they rely on loan sharks to answer their financial needs, they should expect that their loan will always be subjected to the illegal moneylender’s ambiguous terms. This opens the door for more perpetuation of unfair money-lending practices by loan sharks in Singapore.

Singapore Skyline

How Do They Operate?

The number of shark loans has grown over the years as advances in technology allow the business of illegal money-lending to propagate itself much more comfortable. Contact details of potential victims are collected with ease from databases available on the internet.

Loan sharks go after those who intend to borrow money from banks and other financial intermediaries but lack the credit standing to be qualified. The most desperate people in need of cash are the ones who often fall victim to these credit predators, and they are also the ones who don’t get to pay on time.

Example of Real Case

Madam Tan (pseudonym), a mother of three, narrated how she had been indebted to more than 50 loan sharks in such a short amount of time. She said that at the time when she cannot pay up her credit card bills, a moneylender, claiming to be 100% authentic, sent her a text message offering an easy way to borrow money in exchange only for some information like her employment details and the school where her children attend.

She just realized that she loaned money from a loan shark only when the latter started harassing her by flooding her with threatening messages for being in default. Other loan sharks started sending unsolicited messages to her mobile phone and other messaging platforms. To pay up, she loaned money from one loan shark to another.

What Should You Do When Faced With Loan Sharks?

When faced with a loan shark in singapore, the public should and need to report it immediately to the police at ‘999

or the X-Ah Long hotline at 1800-924-5664. Provide a detailed description of the loan shark and its illegal activities to help the authority solve the case faster.

Why is It Better to Seek Financial Assistance From a Licensed Lender?

Because licensed moneylenders are regulated by the government, there are no ambiguity and other common complications with loan sharks. For example, when the borrower defaults in the repayment of a loan, the only penalty imposed on him by the licensed moneylender is a payment of late interest and nothing more.

However, when a borrower transacted his credit with a loan shark and subsequently defaulted. The latter can use scare tactics that amount to harassment, violence, or criminal acts in collecting loan payment with exorbitant rates. Want to know more about why a licensed lender is the best? Check out how illegal money lending can put your lives in danger.


In times of financial need, it is always best to seek legitimate money lenders. Availing the services of firms like Instant Loan is a sure way to prevent the most vicious loan sharks Singapore keeps in its every nook and cranny. The competitive nature of the financial world may be burdensome for a lot of individuals and businesses.

The looming economic crisis that may close down industries and close down enterprises may drive people to get loans from shady business entities. People may seek the services of a loan shark Singapore has nurtured and fed for a while.

However, as discussed above, the threat of illegitimate credit agencies is not worth the trouble that one may get like violence and unfair interest rates. A transaction with a loan shark might look like an easy solution initially, but the situation in the long-run also leads to long-term problems.
With agencies like Instant Loan, the interest rates are reasonable, and the types of loans that would be provided are tailor-fit to your needs and capacities. It is a sure way to not fall in the fangs of a loan shark Singapore residents ought to avoid.

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