LEGAL LICENSED MONEY LENDER SINGAPORE: ULTIMATE BORROWING GUIDE (2023)
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This is the most complete and updated guide to understanding Legal Licensed Money Lenders in Singapore. Regardless of whether you are:
This is the perfect guide for you.
Here’s what we will be covering in this guide:
Before taking a loan
Understanding all about licensed money lenders
When applying for a loan
Requirements, processes and more
After taking a loan
Everything you need to know about loan repayment
Introduction to licensed money lenders in Singapore
What are legal licensed money lenders?
A licensed money lender in Singapore is a registered loan company that carries out the business of moneylending, in consideration of a larger sum being repaid, with the business authorised, licensed and regulated by Singapore’s Ministry of Law.
All licensed money lenders need to be registered with MinLaw’s Registry of money lenders, approved by MinLaw, follow MinLaw’s guidelines and regulations and adhere to the Moneylenders Act. These guidelines are regularly updated with new rules for licensed money lenders from time to time.
How are licensed money lenders different from banks?
There are a few ways to get a loan in Singapore, such as borrowing from the bank or from a licensed money lender. What’s the difference between taking a loan from a bank and from a licensed money lender?
Take a look at our comparison illustration below:
What are the pros and cons of taking a loan from licensed money lenders?
Borrowing from licensed money lenders often comes with its advantages and disadvantages. Some of you might know that licensed money lenders have less stringent loan application processes than banks but have higher interest rates.
What are the pros and cons? We summarise it for you:
What is the Money Lenders Act?
The Money Lenders Act is an Act for the regulation of moneylending, the designation and control of a credit bureau, the collection, use and disclosure of borrower information and data, and for related matters.
In short, it lists out all the legal confines within which authorised money lenders in Singapore are allowed to conduct their business activities.
According to MinLaw’s list, there are 154 money lenders in Singapore.
Comparing, choosing and verifying best licensed money lenders in Singapore
Here’s how you can verify and check the license of money lenders
Before you take a loan from a money lender, it is very important to check if they are legal and licensed, to avoid illegal money lending or money lender scams in Singapore.
How can you do so?
Call the landline of the licensed moneylender to verify. Illegal moneylenders or scammers might disguise themselves as licensed moneylenders, so besides checking if they are on MinLaw’s list, you should still call their office landline to confirm if you are really dealing with them.
Ensure they have a physical office. It’s not possible to complete the loan process entirely online. Borrowers will still need to go down to the office for a face-to-face verification during the loan application process.
Also, do take note of these red flags – you might be dealing with an illegal moneylender if you are encountering these signs.
Licensed money lenders near me: Where can you find the best money lenders in SG?
Searching for the top ten SG money lenders? Here’s a list of top licensed money lenders in the various regions in Singapore:
Make sure they are under MinLaw’s list of licensed money lenders in Singapore
If they are not, they might be illegal money lenders and we do not recommend using those as you may end up having to pay hefty fees and interests or get harassed by them if you are unable to repay your loan.
Check reviews of licensed money lenders in Singapore
Check the money lender’s reviews on Google and other sites, especially verified reviews to check its reputation and credibility. It is better to take a loan with a reliable money lender that has a higher number of positive ratings.
Compare money lenders’ fees and rates
Approach the licensed money lenders you are interested to take a loan from and ask about their fees. It’s always recommended to compare rates across different money lenders before deciding on one.
Check their loan contract terms and conditions
Before you sign the loan contract, remember to check their terms and conditions carefully to make sure that all the agreed terms are stated clearly in the contract. If there’s anything that’s unclear, clarify with them. If you feel uncomfortable with any terms that you have not agreed to, you can always walk away and choose another money lender.
Ensure they are a good fit and are polite when communicating with you
Make sure that the representatives of the licensed money lender are communicating with you politely at all times, regardless of whether you are speaking with them on the phone or meeting them at their office.
Check for recent news/stories on licensed money lenders
Sometimes, some money lenders might be in the news due to bad practices – there are a number of money lender horror stories recently! So remember to do your research and check if the money lender you are interested to take a loan from has good records and are not in the news for the wrong reasons.
Types of loans, interests and fees charged by licensed money lenders
What are the interest rates licensed money lenders in Singapore can charge?
Maximum interest rate licensed money lenders can charge: 4% per month
If you fail to repay your loan on time, the money lender can charge you a maximum rate of late interest of 4% per month for each month the loan is repaid late.
What are the other fees licensed money lenders can charge?
Licensed money lenders can only impose these additional charges:
Late repayment fee of not exceeding $60 for each month of late repayment
A fee not exceeding 10% of the principal of the loan when a loan is granted
Legal costs ordered by the court for a successful claim by the money lender for the recovery of the loan if the borrower has defaulted on the payment
The total fees charged by a money lender for any loan (including interest, late interest, upfront administrative and late fee) cannot exceed an amount equivalent to the principal of the loan. For example, if you take a loan of $8,000, the interest, late interest, 10% administrative fee and monthly $60 late fees cannot exceed $8,000.
How do licensed money lenders compute their interest rate?
Licensed money lenders’ interest rates are not flat, but are instead reducing. Personal loan interest rates are calculated based on the principal amount outstanding at the end of a specific period.
For example, if you borrowed $10,000 and have repaid $1507.62 of the principal loan amount (not including interest), interest for your next payment will be calculated based on the remaining balance of $8,492.38.
Find out more about the difference between flat and reducing interest rates.
How do money lenders calculate late charges: Late fees, compound interest and late interest?
If you don’t repay your loan on time, you will incur late payment charges from licensed money lenders. These can include late fees, late interest and compound interest.
A licensed money lender must not impose any late fee of more than an aggregate of $60 within a period of a calendar month. A period of a calendar month extends from a particular numbered day of a month up to the corresponding numbered day of the following month less one. Accordingly, the general rule is that the earliest date a money lender may impose the next late fee, if the repayment is still not made, would be the same corresponding date in the next month.
Late interest is accumulated on a daily basis based on an interest rate not exceeding 48% per annum on the overdue principal and/or interest.
Compound interest is accumulated on a daily basis based on an interest rate not exceeding 48% per annum on the overdue principal.
Both late and compound interest can only be charged on the amount that is repaid late, but not on the outstanding loan that is not yet due to be repaid.
What are the common market practices for loan tenure, loan amount, interest and other fees?
Most money lenders provide a repayment period of 1 to 6 months. Only good money lenders will provide a loan tenure of up to 12 months.
The loan amount approved is usually around 1-3 times of your monthly income, charged at 4% interest rate, with processing fees of 8-10% of your loan amount.
What are the different types of loans you can get from the best money lenders in Singapore?
Personal Loans are a form of credit that can help you make a large purchase or consolidate your other debts. Lenders will deliver a one-time cash payment to borrowers and borrowers will need to repay with interest over regular installments. There are many reasons why people take personal loans.
Check out our Beginner’s Guide to Personal Loans as well as the Dos and Don’ts for First Timers Applying for Personal Loans if you are making a personal loan for the first time.
These are the various types of personal loans:
Who can apply for a personal loan?
Most employed Singapore residents can apply for personal loans online, such as full-time employees, part-time employees, and self-employed people such as property agents, insurance agents, Grab/ Gojek/ taxi drivers, food delivery riders, etc.
Most foreigners in Singapore can also borrow from licensed moneylenders as long as they are residing in Singapore.
SME Business Loan
Often, to kickstart new businesses, you need capital injection or funding. And sometimes, unforeseen circumstances such as the Covid-19 pandemic might cause many small and medium businesses to run into financial difficulties.
During this time, a financial boost from an SME Business Loan would help to fuel the business operations and help the company tide through this difficult period.
Loan application requirements and processes
What is required when applying for a loan from licensed money lenders?
What is the maximum amount you can borrow?
For Secured Loans:
Secured loans are protected by an asset, such as a home or a car, which can be used as collateral. This means the lender will hold the title or deed until your loan has been repaid in full. If you default on the loan, the lender will be able to repossess the collateral and sell it to recoup their losses. Examples include Residential Property Loans and Motor Vehicle Loans.
So what are the legal loan limits?
The Total Debt Servicing Ratio (TDSR) framework applies to property loans. Your monthly housing loan repayments — after adding all your other debt obligations like credit card debts, car loan, personal loan, study loan, etc— cannot exceed 55% of your income. The borrower’s Mortgage Servicing Ratio (MSR), which shows the portion of a borrower’s gross monthly income that goes towards repaying all of their property loans for HDB flats and Executive Condominiums (ECs), is capped at 30%.
The maximum Loan-To-Value (LTV) for car loans, which refers to the amount of loan expressed as a percentage of the purchase price (including taxes and COE price) of the motor vehicle, is 60-70% depending on the open market value (OMV) of your vehicle.
For Unsecured Loans:
Unsecured loans don’t require collateral from the borrower, which means the lender is taking a higher risk to loan money to the borrower. Hence, unsecured loans tend to have higher interest rates and a certain maximum amount you can borrow.
Is your personal information secure with a licensed money lender?
As you will need to submit your personal information and documents when you apply for a loan, some of you might be concerned about whether your information is secure with a licensed money lender.
Tips you should take note of when taking a loan from money lenders
When encountering financial difficulties, taking a loan from licensed money lenders can help you with cash flow problems and help you to ease your financial worries in the short term.
However, it does not mean your financial troubles would be solved in the long run. You still need to do careful financial planning to ensure that you are able to repay your loan on time to avoid accumulation of late fees and additional interests.
Remember to consider very carefully before you take a personal loan with private money lenders in Singapore.
Here are some tips you need to take note of before you get down to borrowing:
1. Make sure you are able to repay the loan on time
When taking a loan from a licensed money lender, it is important to repay your loan on time. Late repayment will cause you to incur late fees and additional interest for late repayment, which can cause your debt to accumulate. So make sure to do your financial planning and budgeting well.
2. Make sure you fully understand the contractual terms
Before you sign the loan contract, it is crucial that you read the contract carefully before you sign. Ensure that the agreed terms are stated correctly in the contract, which should include:
- Your particulars
- The amount you are borrowing
- Interest rate and fees
- Repayment terms and schedule
- Money lender’s details such as license number, business registration number, etc.
Your contract should be similar to this sample form on MinLaw’s website.
3. Qualifying for loan
4. Be careful of taking multiple loans
If you have an existing loan, you can still take a second loan, subject to approval.
You can loan up to the total maximum borrowing amount, regardless of the number of licensed money lenders you borrow from. However, this is not recommended as it can be stressful to manage multiple loans.
You can opt for a Debt Consolidation Plan from a money lender which helps you save money by reducing the amount of interests you have to pay.
5. Take note of your credit score
Although licensed money lenders will generally allow you to take a loan even if you have a bad credit score, as borrowing from some private money lenders often involves no credit check, some may still check your credit score with Credit Bureau Singapore (CBS), which will reflect your outstanding loan(s) with banks and other financial institutions, not including licensed money lenders.
If you have a bad credit score and are in a lot of debt, we highly recommend you to seek help with relevant organisations before taking another loan and adding to your debt. If you are unable to pay your debt to the bank, here’s what you can do.
6. Beware of illegal money lenders in Singapore
Licensed money lenders have strict protocol to adhere to and are not allowed to finalise the loan without meeting you face to face and signing a loan contract. If they are not in MinLaw’s list of licensed money lenders in Singapore and don’t want to meet you physically, they are likely illegal money lenders or scammers.
Also, licensed money lenders are usually not 24-hour money lenders. If you find a 24-hour money lender in Singapore, they are usually illegal. However, Singapore has many online money lenders, meaning you can apply for your loan anytime on online licensed money lender loan portals anytime, such as on LoanHere.
Searching for the best online money lenders? Apply for your loan online with us now.
When you are at the licensed money lender’s office, be sure to look for and check their money lender license certificate. Every licensed money lender will need to display their license certificate in a conspicuous place.
7. Consider financial assistance schemes by government agencies
If you are facing financial difficulties due to loss of income or employment and are struggling to make ends meet, it may be better to consider financial assistance schemes by government agencies before considering taking a loan from a licensed money lender, as taking a loan can add to your debt.
Some resources where you can find and apply for financial assistance schemes:
8. Take a loan from licensed money lenders only when you don’t qualify for a bank loan
As bank loans generally offer longer repayment periods, lower interest rates and lower late charges than licensed money lenders, it is better to apply for a bank loan first.
Taking a loan from a licensed money lender can be your second option if you don’t qualify for a bank loan. Some money lenders may have low interest rates depending on your loan and loan tenure. You will need to compare between various money lenders and check.
How to borrow from licensed money lenders (Procedure)
What is the Money Lenders Credit Bureau (MLCB)?
The MLCB is a platform that shows borrowers’ existing outstanding loan principal amount with other money lenders, total payable amount, repayment records and borrowers’ borrowing limit.
When you apply for a loan with licensed money lenders, they will need to submit relevant information to the MLCB to check your borrowing limit at that time.
Possible reasons why your loan is rejected
Although loan applications with licensed money lenders are usually approved easily, there might still be a chance that your loan might be rejected due to the following reasons:
You don’t have a Singapore home address
Only Singapore Citizens, Permanent Residents and foreigners residing in Singapore can borrow from licensed money lenders.
You defaulted loan repayment from money lenders recently
This might mean there might be a risk of you defaulting on your loan with your next money lender, so they may decide not to approve your loan application.
Money lenders will need to check your loan details with other money lenders through MLCB, so they will be able to know your current loan status and debt before they decide if they should approve your loan.
You have ongoing litigation
If other licensed money lenders or banks are taking legal action against you for defaulting on loans or if you have other ongoing litigation, it is likely that money lenders may decide not to approve your loan.
You are bankrupt or under Debt Repayment Scheme (DRS)
Usually, when borrowers have accumulated so much debt that they are unable to repay them, they might declare bankruptcy as a last resort or be placed on a Debt Repayment Scheme. In this case, you will not be allowed to take up another loan.
Inaccurate or insufficient documentation provided
When applying for your loan, do ensure that all your particulars and details are accurate and that you’ve submitted all the relevant documentation.
Regarding showing proof of income, even if you don’t have a payslip or CPF Contribution Statement, you can still get a personal loan if you can show your income proof through other documentation.
You are unemployed
If you are unemployed and do not have a stable source of income, there is a risk that you may not be able to repay your loan. So money lenders may decide not to approve your application.
You had applied for multiple new loans recently
This can mean you might have difficulties repaying all your debt. Also, if you have reached the maximum borrowing limit, you will not be able to take up any more loans.
You have multiple loans and your salary cannot sustain
If your salary is insufficient to repay all your current multiple loans, it may be tough for the next money lender to approve your application.
Things to note when repaying your loan
Loan Repayment Tips
How do you settle your loan with your licensed money lender? When repaying your loan, remember to check these details carefully:
The loan repayment frequency may be different for different money lenders. It can be a weekly, bi-weekly, a single-payment payday loan or monthly loan with moneylenders depending on your loan contract and agreement.
When your payment is due, most of them will send out a payment reminder. But it’s recommended to set your own personal reminder just in case. Late repayment will incur late fees and late interest. This can cause your debt to add up.
Available repayment methods to licensed money lenders include cash, interbank transfer and cheque.
Send proof of repayment every time you make payment
Every time you make payment for your loan (such as every month, etc, depending on your repayment cycle), remember to keep the payment receipt and send it to the licensed money lender as proof that you have paid.
Receipt needs to be issued within 7 days
Every time your repayment has been made, the money lender also needs to send you a receipt either by mail or digitally (such as through SMS, email or WhatsApp) within 7 days after the loan repayment has been made.
The receipt will show the outstanding amount until the loan has been repaid in full.
If you did not receive the receipt after you made the repayment, remember to request for one.
To check outstanding loan amount, request for a Statement of Accounts (SOA)
You can request for an SOA to check your outstanding loan amount and outstanding repayment sum. A licensed money lender will also send you an SOA every 6 months.
Take note of outstanding payment
Usually, the outstanding payment would be included in the receipt after you have made your monthly repayment. Some money lenders allow you to access it through their portal online. Alternatively, you can check with them directly.
After you have repaid your loan in full, and if you have no more arrangements with the money lender, you will no longer receive any calls, emails, mails, SMS or any other form of communication from them regarding your fully paid loan.
What can you do if you are unable to repay moneylenders in Singapore?
Taking a loan may help you with better cash flow in the short term, but it does not mean solving your financial problems in the long run. Even after taking a loan, it is important to manage your cash flow to ensure that you are able to make repayment on time and that your debt does not accumulate.
Here’s some tips on how you can stay on budget while managing your loan. Remember to manage your finances wisely.
If you really can’t repay your loan, you can do the following:
Request for payment extension
It is best to approach your licensed money lender and negotiate with them a realistic payment extension deadline that you can meet. Make sure you do your budgeting and financial planning well to ensure that you can really make the payments on time by the new deadline.
Seek help from social service agencies:
If you are struggling to manage your finances and debt, and if these are causing you a lot of distress, please seek help from these social service agencies here for credit counselling and debt management.
File for bankruptcy
If your debt has amounted to at least $15,000 and if you are still unable to repay your loan despite payment extensions, filing for bankruptcy may be an option for you.
When you file for bankruptcy, the accumulation of loan interest stops and money lenders would also not be able to carry out legal proceedings against you.
However, filing for bankruptcy comes with serious consequences (such as having your assets sold to repay your debt) and it should be your last resort.
Licensed money lenders debt collection
What can licensed money lenders do if you default the loan?
Usually, when borrowers default on their loans, licensed money lenders would hire debt collection agencies to collect the debt from borrowers.
Although there are currently no laws in Singapore that regulate debt collection, licensed money lenders and debt collectors need to adhere to the code of conduct and good practices set by MinLaw.
Money lenders will also need to bear the consequences if debt collection agencies use illegal means to collect debt from borrowers, such as using violence, harassment, etc.
They will usually try to collect the debt through these methods:
Send Letter of Demand (LOD) to you by post to your residential or employer address.
Visit your home or office to recover the debt (either directly or sending debt collection agencies to do so).
File for litigation against you (yes, money lenders can file a case in court)
How can you settle disputes with licensed moneylenders?
Sometimes, when the moneylender or debt collector turns up at our doorstep or calls us due to late repayment, some borrowers might panic or get upset.
Here’s some tips on how you can settle conflicts with money lenders:
Try to resolve the conflict by empathising with the debt collector or moneylender and react in a calm, non-defensive and respectful manner.
Try to negotiate for a compromise – an extension of the repayment deadline that is reasonable to you as well as to the moneylender.
If you are unable to control your emotions or are having difficulties negotiating, get someone else (a family member or friend) to help mediate or negotiate for you.
If negotiations fail or if the situation gets ugly, call the police.
What can you do if you encounter licensed money lenders’ harassment?
Licensed money lenders need to adhere to the code of conduct and good practices implemented by MinLaw and are not allowed to use violence, harassment or intimidation to collect the money owed from borrowers.
What are some common illegal acts of harassment by moneylenders?
- Harassing borrowers with multiple SMS/calls.
- Making multiple calls to the borrower’s home and office, causing distress to their family and colleagues.
- Contacting borrowers during unusual hours.
- Visiting the borrower’s home and workplace multiple times or during unusual hours.
- Loitering around the borrower’s home and office to wait for the borrower.
Common threats moneylenders might use to get you to pay up
Are the money lenders threatening you? Here are some common tactics they use:
- Warn borrowers they can make them lose their job if they don’t pay up.
- Tell borrowers they would be going to their home or office to seek payment from their family members or colleagues.
- Tell borrowers they would inform their family members or colleagues that they defaulted on their payment.
- Warn borrowers that if they don’t pay up, something bad would happen to them or their loved ones.
- Threaten to beat the borrower up.
If you encounter harassment or disputes by money lenders, you can seek help in the following ways:
Call the police
Make a complaint with the relevant social service agencies:
However, if you encounter unlicensed money lenders’ harassment, call the police immediately.
Getting a loan from a legal money lender can help to ease your cash flow, especially during emergencies. However, remember to do your due diligence to check that the money lender you are borrowing from is legal and licensed, and do your budgeting well to avoid incurring late fees and charges.
If you are experiencing difficulties, we can assist you with your financial planning and help you to find the best money lenders that provide loans suitable for your needs.