As inflation continues to take a huge bite out of many household budgets, managing your bills and keeping track of expenditures while remaining debt-free is becoming very challenging. Despite such adjustments, some Singaporean families still find themselves needing financial assistance. That’s when borrowing money from banks or licensed money lenders becomes really helpful.
But are licensed money lenders trustworthy? An approved money lender in Singapore carries out the business of money lending under certain laws and regulations. All legal money lenders in Singapore have to be registered with a license number provided by the Registry of Moneylenders.
Authorized money lenders are regulated by the Ministry of Law and must follow the rules stipulated in the Moneylenders Act to protect both the lender and the borrower.
First Things First, Understand the Moneylenders’ Do’s and Don’ts
Before you start shopping for the best loan packages from licensed money lenders, it’s best to be familiar with what they are allowed to do, the maximum loanable amount they can provide, and the cap on charges and fees. This will help you avoid falling prey to a loan scam by an unlicensed money lender.
Advertising Rules
Under advertising rules, all licensed money lenders are permitted to advertise only through three channels:
- Business or consumer directories – in print and online media
- Official websites of the licensed money lender
- Advertisements placed within or on the exterior of the moneylender’s place of business
All other channels are prohibited.
That said, if you receive flyers or unsolicited messages via SMS, emails, social media, or other platforms, you may be dealing with a loan shark. You are advised to ignore such advertisements or report them to the Registry at 1800-2255-529 or lodge a complaint via their website.
Cap on Interest Rates
The licensed money lenders’ allowed interest rate is capped at 4% per month. This limit is applied regardless of the borrower’s income, loan tenure, or whether the loan is secure or unsecured.
Additionally, if the borrower fails to repay the loan on time, the legal lender can only charge up to 4% late interest for each month the loan is repaid late.
If you encounter a lender that charges more than the stipulated cap, you may be dealing with a loan shark. Illegal money lenders are notorious for their sky-high interest rates, making it impossible to repay the loan.
Permitted Charges and Fees
Just like banks and other financial institutions, legal lenders are also allowed to charge certain fees, such as:
- Loan Approval Fee: Not more than 10% of the principal loan amount when the loan is granted
- Late Fee: Not exceeding S$60 for each month the loan is repaid late
- Legal Costs
Additionally, the total charges imposed by the licensed money lender on any loan, including the interest, late interest, late fee, and upfront processing fee, must not exceed the principal loan amount.
Now that you’re familiar with the stipulated caps on loan amounts, interest rates, and charges, it’s time to be familiar with what licensed money lenders cannot do:
- Ask for your SingPass ID and/or password
- Retain your personal documents, such as your NRIC card, passport, driver’s license, and more.
- Grant you a loan without verifying your identity or doing due diligence
- Ask you to sign a blank or incomplete loan contract
- Fail to explain the terms and conditions of the loan
- Does not have a place of business and conducts money lending business remotely
- Disburse your loan remotely and without giving you a copy of the loan contract
- Withhold a portion of your principal loan amount
How To Choose the Right Moneylender for You
- Verify if a money lender is licensed. Before you start dealing with any lender, check if they are included in the complete list of licensed moneylenders on the Ministry of Law’s website.
- Check the reviews on Google: Choose a credible legal money lender with a good track record.
- Find out if they have a physical office: Make sure to verify if their physical office has the same address as the one listed on the Ministry of Law’s website.
- Request a quote to compare your options. Use loan comparison tools to easily compare loan plans. Doing so will help you find a loan package with the lowest interest rates, flexible repayment, and the best terms.
- Read the fine print before signing your contract. Check the contractual terms which allow a money lender to lodge a caveat on the sales proceeds of your property in case you default on your loan. In such a case, you will not be able to sell your property without first repaying the money lender in full.
- Get your cash in person. Unlicensed money lenders are known to disburse cash remotely without a loan contract. To avoid such scams, make sure to sign a complete loan contract, get a copy of the contract, and receive your cash in person.
What’s the Legit Process?
Step 1: Submit your Loan Application Online
Visit the official website of your chosen licensed money lender and submit your loan application.
Step 2: Visit Their Office
Upon receiving and evaluating your application, a loan officer will reach out to you to schedule your appointment. Note that legal lenders are obligated to perform face-to-face verification and explain the terms of the loan in person.
Step 3: Sign the Contract
If you agree to the terms and conditions of the loan, the loan officer will print out the contract for you to sign. Make sure that the contract contains all details, including the loan amount, loan tenure, the interest charged, and the repayment schedule.
Step 4: Get your Cash Loan
After signing the loan contract, you will immediately receive the cash.
Commonly Required Eligibility
- Age: at least 18 years old and above
- Minimum monthly salary:
- Singaporean or Permanent Resident: S$1,500
- Foreigner: S$2,000
Most Common Requirements
- Copy of your NRIC card
- Copy of passport for foreigners
- Proof of residence such as a utility bill or tenancy agreement
- Proof of employment such as 3 months’ worth of recent payslip, certificate of employment
- Work Permit or Employment Pass for foreigners
- SingPass (to log into CPF, HDB, IRAS website)
Good To Know: Factors That Can Affect Your Loan Plan
- Debt-to-Income Ratio (DTI): Banks and other financial institutions use this ratio to determine your borrowing risk. To keep this ratio low, make sure to pay existing debts before opening a new credit line. While legal lenders do not put much focus on these criteria when evaluating your application, some lenders will still want to make sure that you don’t have too many debt payments relative to your income.
- Credit Score: Instead of a credit rating, legal lenders use the Moneylenders Credit Bureau (MLCB) to review your loans and repayment records. This will help them assess your creditworthiness.
Although licensed money lenders focus more on your income level, having a bad credit score will tag you as a risky borrower. This will make it harder for you to get your loan application approved in the future. Check your credit rating by purchasing it directly from Credit Bureau Singapore (CBS).
Closing
Don’t settle for the first licensed money lender you approach. First, you must verify their credibility and license with the Ministry of Law. Secondly, take your time in comparing loans to find the right money lender with the best terms. Lastly, you can negotiate and reduce your fees to get a loan package that is tailored to your needs.
Key Takeaways:
- Licensed money lenders are regulated and registered under the Ministry of Law and they abide by the strict rules set in the Moneylenders Act.
- They are not allowed to advertise through flyers or send unsolicited emails, SMS, or WhatsApp messages.
- The maximum loan amount they can provide is up to 6x your monthly income at up to 4% interest rate per month.
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