How To Choose A Licensed Money Lender In Singapore

Written by 1AP Credit on September 8, 2022

Are you cash-strapped and wondering where to access a quick loan? You’re not alone.

Growing up is hard. With all the bills and responsibilities that come with adulthood, chances are you’ll probably be short on cash at certain times.

Due to the uncertain economy, money lenders have become a viable option.

But borrowers must first understand the rules, terms, and policies of these money lenders – no matter their financial situation.

This article explains everything you need to know about how to choose a licensed money lender in Singapore.

What Is A Licensed Money Lender?

Legal money lenders are licensed individuals or financial institutions that lend money to groups of individuals.

The government regulates money lenders in Singapore, specifically the Ministry of Law. This arrangement is beneficial to both lenders and borrowers.

The rules and regulations ensure that lenders don’t exploit borrowers. Therefore, you must deal with a licensed money lender to ensure the set regulations protect you.

It’s important to note that loan sharks or “Ah Longs” do not follow the rules given by the law.

This means they can resort to unorthodox methods to recover their funds if you’re late in paying or defaulting.

Such methods include unsolicited calls or messages, harassment, and in some instances, violence.

This is why the Singapore police advocates that borrowers choose licensed money lenders instead of loan sharks.

You can access a list of all the licensed money lenders by checking the Registry of Moneylenders, which is updated monthly by the Ministry of Law.

Which Are The Licensed Money Lenders In Singapore?

There has been a proliferation of scammers and unlicensed money lenders posing as licensed money lenders to prey on unsuspecting victims looking for quick loans.

They use deceptive tactics such as unsolicited texts, WhatsApp messages, calls, and social media accounts and websites, mimicking licensed money lenders.

All these methods aim to solicit a victim’s personal information, such as an address, contact number, and NRIC number, which can be used in illegal activities.

Borrowers need to be aware that licensed money lenders are prohibited from soliciting loans via social media platforms, text messages, or phone calls.

A licensed money lender must have a face-to-face meeting with a borrower at its business premises to verify his or her identity before offering any loan.

A loan transaction that is conducted entirely online is prohibited.

Before visiting a lender’s website, it’s advisable to verify the website address by visiting the Ministry of Law website for the updated list of licensed money lenders.

Are Licensed Money Lenders Allowed To Advertise?

Unlike loan sharks and unlicensed money lenders, licensed money lenders are only allowed to advertise through the following three avenues:

Websites belonging to the money lenders
Consumer or business directories
Adverts placed on or within the exterior or interior of the money lender’s business premises

All other avenues are disallowed. Following these criteria, you can differentiate between licensed and unlicensed money lenders.

For instance, if you receive an SMS, email, flyer, or other forms of advertisement disallowed under regulations, this is done by either a licensed money lender violating the rules or a loan shark.

In such a case, you should report the lender to the Registry via its website or at 1800-2255-529.

The Registry will investigate the rogue licensed money lenders, while the police will investigate the unlicensed ones.

In addition, it’s important to clarify the specific loan terms on the agreement before engaging with a licensed money lender. Do not rely solely on the contents of its advertisement.

Fees And Rates Charged By Licensed Money Lenders

Under the law, licensed money lenders are only allowed to charge the following fees and expenses:

A fee below $60 monthly for late repayments
A fee that is not more than 10% of the principal amount when the loan is given
A maximum of 4% interest rate monthly, regardless of the borrower’s income or whether the loan is secured
Legal fees ordered by the court after a successful claim by the money lender to recover the loan

The charges, including the late interest, interest, late fee, and upfront administration fees by a money lender, should not be equal to or surpass the loan principal.

For instance, if you take out a loan of $10,000, the late interest, total interest, 10% administrative fee, and $60 monthly late fees cannot be equal to or more than $10,000.

How To Check If A Money Lender Is Licensed

The sure way to check if a money lender is licensed in Singapore is to refer to MinLaw’s list of licensed money lenders.

The Registry of Moneylenders updates this list to ensure that borrowers are dealing with legit lenders.

In the list, you can also view the blacklisted money lenders that you can avoid when taking your loan.

You can also look for reviews of the lender online.

How To Know If It’s A Loan Scam

As stated earlier, there are several ways you can know if a loan is a scam or not.

For instance, it is a red flag if you receive unsolicited messages, phone calls, emails, and social media adverts promising you a tantalising loan.

Licensed money lenders are only permitted to promote themselves through the avenues mentioned earlier.

Another major red flag is a promise of a 24-hour loan. There are no 24-hour money lenders in Singapore; if you come across one, it’s likely a loan shark or an illegal money lender.

Other tell-tale signs include:

Being offered a loan amount that exceeds what’s allowed
Higher interest rates of over 4%
Skipped or zero documentation
Unnecessary, additional or exorbitant fees
Lack of a physical office

Before dealing with a money lender in Singapore, ensure you understand the laws regarding the terms, interests, and payment terms.

Also, do your due diligence to visit the lender’s physical address for a face-to-face verification of your identity and loan contract.

Avoid verbal agreements or loans that you’ll have to sign entirely online.

To ensure you’re dealing with a licensed money lender, make an effort to confirm its license through MinLaw’s list of licensed money lenders in Singapore.

What To Do Before Taking A Loan

Before taking a loan from a licensed money lender, several factors must be considered.

The first thing is to identify that the money lender is licensed to avoid loan scams and sharks.

Above, we’ve identified ways of differentiating between licensed and unlicensed money lenders. Now, we look at what to do before taking a loan from a licensed money lender.

Check whether you have other alternatives, such as banks and financial assistance programmes from different government agencies.

You’re taking the loan probably because you have an emergency, you’re short of cash, or you don’t have enough savings.

Therefore, you must be careful with the loan terms you’ll take, considering the repayment terms, interests, and other charges.

Understand that you’re fully and legally obliged to honor the loan contract you sign with a licensed money lender.

Confirm that you can abide by the terms considering your financial and income obligations.

Always borrow what you need, and you can repay, because there will be consequences in the event of a late payment or a default.

You don’t want other financial burdens such as high interest rates and late penalties.

Once you’ve settled on your preferred licensed money lender in Singapore, be sure that it informs you in writing about the entire agreement loan terms such as:

Late interest charges
Nominal interest rate
Installment details
Loan terms
Other fees that are allowed to be charged

The law requires that all licensed money lenders provide borrowers with a written cautionary statement before granting a loan.

In addition, you must be informed where to lodge a formal complaint if it comes to that.

Before signing on the dotted line, check if there’s a term that permits the money lender to lodge a caveat on the sale revenues of your property upon default.

If a caveat is lodged against your property, you won’t be able to sell it before repaying the money lender in full first.

If the money lender takes his amount from the proceeds, this can eradicate all or a large portion of the proceeds.

Always compare different money lenders to find the one with the best and most favourable terms.

Despite your emergency, never rush to commit yourself until you’re fully satisfied with the loan terms and conditions.

What To Do After Loan Is Granted

Verify that the legal money lender has given you the exact loan principal amount. It can only deduct the upfront loan approval fee up to 10% of the principal sum.

Make your payments on time to avoid late payment penalties and late interest. Request a receipt from the lender every time you make payment, and make sure the details are correct.

Ensure you receive a statement of account for your loans every six months at least, and double-check that all the information is correct.

Keep the statements of accounts and payment receipts in a safe place as proof of payments.

Where To Get Help

In some instances, things do not always go as planned. You might find yourself defaulting on your payments and unable to repay your money lender.

In most cases, licensed money lenders usually hire debt collection agencies to recover their debts.

These debt collectors are advised to adhere to the code of ethics stipulated by the Credit Collection Association of Singapore.

Therefore, they are prohibited from using harassment, intimidation, or violence when collecting debts.

So if a debt collector violates these laws, you can report them to the Registry or the police. It is, therefore, important to learn how to settle a licensed money lender.

Instead of playing cat-and-mouse games with your money lender and inviting more problems, you can negotiate for an extension if you really can’t make your repayments.

You can also go to social services to get help with debt management and credit counselling.

In cases where your debt amount is at least $15,000, you can file for bankruptcy. This stops the accumulation of interest and prevents the money lender from suing you.

Remember that filing for bankruptcy should be your last resort.

In fact, there are several organisations in Singapore that you can approach for help. These include:

Credit Counselling Singapore (CCS)

CCS is a non-profit organisation that helps individuals with debt management via financial education and counselling.

So if you’re looking for assistance in drawing up a debt repayment plan to repay your loan, CCS is your best bet. You can also check the Moneylenders Credit Bureau.

Registry Of Moneylenders

This organisation regulates the money lenders of Singapore.

So before taking a loan from a money lender in Singapore, verify if it’s licensed by confirming if it is on the Registry’s list of licensed money lenders.

You can also get more information concerning borrowing from licensed money lenders from its website.

Credit Collection Association Of Singapore (CCAS)

CCAS represents all the credit associations and agencies in Singapore.

It is responsible for ensuring all the credit agencies and associations adhere to their code of conduct.

It also offers dispute resolution services for both clients and agencies. So if you find yourself in a dispute with your money lender, you can approach CCAS for a solution.

National Council On Problem Gambling (NCPG)

Gambling is an addiction for many people. With the sweet promise of quick money, many people tend to take out loans for gambling.

As you might imagine, bets hardly go well. If you have a gambling addiction that has thrown you into the default pit, you can approach NCPG to help you manage the gambling problem.

Credit Association Of Singapore (CAS)

This is the association for all licensed money lenders in Singapore. You can contact it for more information on borrowing and licensed lenders.

ComCare (MSF)

This fund is managed by the Ministry of Social and Family Development (MSF).

Its main role is to empower low-income groups and individuals to become more self-reliant. You can get different information and assistance from it, including emergency financial help.

It goes without saying that to be safe when getting an emergency personal loan, you need to acquire it from a licensed money lender in Singapore.

In this case, 1AP Capital is your best bet for the best and most favourable loan terms. Over the years, we have assisted many Singaporeans with quick loans at the market’s best interest rates and fees.