What Is A Moneylender And What Should You Take Note Of?

Let’s face it. We all get cash strapped at one point in life when emergencies arise.

When push comes to shove, you may need a quick fix from a licensed money lender in Singapore.

Unlike conventional financial institutions such as banks, these money lenders usually give out funds quickly and with minimal to no hard credit checks.

In instances when you’re not financially sound or without ample savings, there are several options you can take to get the funds required to shell out.

If you don’t want to borrow from family and friends, you can always borrow from a licensed money lender in Singapore.

It’s important to note the difference between unlicensed money lenders, commonly known as “Ah Longs” or loan sharks, and licensed money lenders.

The former is known for their harassment tactics and high interest rates.

On the other hand, licensed money lenders are restricted by the fees they can charge, the amount they can lend, and the interest rate they are allowed to charge.

In this guide, we’ll look into what is a money lender and everything you need to take note of.

What Is A Licensed Money Lender?

A money lender is a person or group that typically lends reasonably small amounts of money at high interest rates.

It usually charges higher than traditional financial institutions due to its riskier lending. This means that people without bank accounts, those with too much debt, those with bad credit histories, or those without friends or relatives can get a loan from money lenders.

Money lenders have existed throughout history and have been known to prey on vulnerable individuals, compulsive shoppers, and gamblers with significant debts.

In most countries, such as Singapore, rules and regulations limit how much licensed money lenders can charge. You can find these licensed money lenders under the Registry of Moneylenders in Singapore.

Under the law, no one is permitted to become a money lender unless he or she is authorised by the license under the Moneylenders Act.

What To Consider Before Taking Up A Loan

It is essential to take note of a few things before taking up a loan from a money lender. These factors include:

Decide On The Type Of Loan You Need

Before taking out a personal loan from a money lender in Singapore, assess your finances to determine the loan type you need.

Identify if you’re dealing with a major or a minor emergency. Personal loans are a perfect option in the case of the latter requiring a small sum of money.

Moreover, they’re ideal for paying off credit card debts or consolidating debts.

Research On The Loan Type You’re Planning To Take

Once you’ve settled on the loan type you wish to take, it’s time to do your due diligence on the loan’s repayment terms.

First, get your credit report from the Moneylenders Credit Bureau (MLCB) or the Credit Bureau Singapore to understand your credit rating.

Though some licensed money lenders in Singapore may overlook your credit report, many tend to deny loans to borrowers with bad credit scores.

So suppose you discover you have a bad credit rating. In that case, it’s advisable to improve it to increase your chances of loan approval.

Prepare All The Required Documents

Once you’re familiar with all the fine details, it’s time to gather all the required documents before applying for your loan. These documents include:

• NRIC
• Proof of employment and income
• Residency proof
• Past CPF statements and current credit score

If you’re a foreigner living in Singapore, prepare your:

• Tenancy agreement
• Employment letter
• Employment pass
• Bank statements

How Much Can You Borrow?

Ensure you check your suitability for the loan type you’re taking.

Remember that the maximum loan amount in Singapore depends on your yearly income.

The table below shows the maximum loan you can take from licensed money lenders in Singapore based on your citizenship and income.

This table shows that money lenders are perfect for your small, urgent funds, such as paying a hospital bill, paying a budget plane ticket, or getting your car fixed.

Licensed money lenders are, therefore, not an ideal solution for renovation and large business loans.

Interest Rates Charged By Money Lenders

You’ve probably heard of the exorbitant interest rates charged by loan sharks and the lengths they can go to harass your family and friends.

This is one reason most people avoid money lenders as much as possible. However, the good thing is that licensed money lenders in Singapore are not permitted to do that.

Legal licensed money lender harassment is a crime on its own, and you should always check with the Registry of Money Lenders before signing the dotted line.

For instance, the maximum interest rate that a licensed money lender in Singapore can charge is 4% monthly for the principal amount. This cap applies to all loan types, regardless of the type of loan and your income.

It’s also important to note the late repayment charges. If you’re late in payments, licensed money lenders in Singapore are only allowed to charge a minimum of 4% monthly for every month of late repayment.

Most borrowers are unaware that late interest can only be charged on the amount repaid late, not the whole loan amount.

Moreover, money lenders can also charge extra fees such as late interest, late fees, and administrative fees, among others.

However, the total charges, including upfront administrative fees, interest, and late fees, should never exceed the principal loan amount.

How To Know If A Money Lender Is Licensed

Learning to differentiate between a licensed money lender and scammers such as loan sharks is key. So how do you go about this?

Confirm with the MinLaw’s Registry

The first thing to do is to confirm if the licensed money lender is listed on the Ministry of Law’s Registry.

The Registry of Moneylenders updates the list of licensed money lenders monthly. This allows you to avoid the blacklisted money lenders in Singapore when taking out a personal loan.

You can also check the list of licensed money lenders in Singapore to ensure their licenses are valid.

Take Note Of The Money Lender’s Advertisements

Another method is taking note of the licensed money lender’s adverts.

Suppose it is offering you loans through text messages or phone calls. In that case, you could be dealing with a loan shark violating the regulations.

According to MinLaw’s website, a licensed money lender in Singapore can only advertise through the following avenues:

• Websites owned by the licensed money lender
• Consumer or business directories
• Adverts placed within their exterior or interior such as the window, wall, and gate, and shutter of its business premises

It’s advisable to clarify and understand the terms of the loan and contract before borrowing.

Check The Fees And Interest Rates Offered

As previously mentioned, licensed money lenders follow the stipulated fees and interest rates outlined by the Registry of Moneylenders.

If you’ve come across the following, it’s wise to steer clear of:

• Late interest rates beyond 4% for every late repayment
• Monthly interest rates beyond 4%
• Administrative fees of over 10% of the given personal loan
• Late fees of over $60
• Other hidden interest rates and fees

These are the major red flags that you’re about to go into business with a loan shark.

Check For A Physical Address

As earlier mentioned, the Registry of Moneylenders updates its list of licensed money lenders in Singapore monthly.

You can identify a licensed money lender if it has a physical address. Therefore, you could be dealing with a loan shark if you’ve not confirmed the physical address with your money lender.

Another red flag is getting your loan in an unknown place such as a carpark.

Request A Face-To-Face Verification

With the advent of the internet, it’s now common for money lenders to offer online applications.

However, it’s still essential to visit their offices for face-to-face confirmation. Suppose you’re just getting a text message or an email from your money lender approving your loan.

In that case, it’s advisable to verify its authenticity. Avoid unsolicited calls promising your tantalising personal loans.

According to Singapore’s regulations, licensed money lenders in Singapore are prohibited from making and sending unsolicited text messages, emails, and calls.

Also, ensure that you have precise details about the loan agreement before signing it.

Confirm You’re Given The Relevant Documents

A licensed money lender will always return your NRIC and other personal identification documents after the evaluation.

It will also give you a clear and detailed loan contract.

Also, before signing the loan agreement, a licensed money lender will explain all the outlined terms.

The loan agreement must also include all the relevant details, such as repayment terms, the repayment period, and the interest rates.

Lodging A Complaint Against A Money Lender

When dealing with a licensed money lender, it must not do any of the following:

• Using abusive language or acting in a threatening way
• Asking for your Singpass ID or password
• Retaining your NRIC or other personal identification documents such as your driver’s license, work permit, passport, ATM card, or employment pass
• Asking for your signature in an incomplete or blank Note of Contract
• Not providing a copy of your Note of Contract after granting you the loan
• Not clearly explaining the loan’s terms and conditions
• Granting the loan without following the correct procedure, such as approving the loan via text or over the phone
• Withholding any part of your principal loan without a clear explanation or reason

Always keep in mind that the above practices are not allowed.

If you come across any of the above practices, report the culprit to the Registry of Moneylenders and provide its business name, contact number, and license.

Likewise, you can lodge a complaint against a licensed money lender in Singapore that you find involved in such practices to the Registry of Moneylenders.

You can reach them at 1800-2255-529, and they’ll take it from there. Another alternative to this matter is pursuing it through a Small Claims Tribunal or the court under the Consumer Protection Act (Fair Trading).

What To Do After The Loan Is Granted

Once your loan has been approved and the lender has given you the principal amount, ensure you’ve been charged the correct amount for the approval fee.

A licensed or legal money lender in Singapore will only charge up to 10% of the principal loan amount for administrative fees. Some of the documents to have ready and keep in a safe place include:

• Receipts for every payment made towards the loan
• A copy of the loan contract
• Copies of all receipts, accounts, and other relevant documents
• A statement of account for all the loans

Pay Your Repayments On Time

It’s important to learn how to settle a licensed money lender. You must pay all your installments by the due date.

Defaulting or paying late will cause your installments and incur late interest and late fees to accumulate.

You’ll be required to pay a late interest of below 4%, and debt accumulation can lead to default, which is a significant problem. If you find yourself unable to repay the loan in the worst case, you have some legal options.

Licensed money lenders will usually hire debt collection personnel to collect their debts.

Although there are no laws regulating debt collection in Singapore, debt collectors and licensed money lenders are encouraged to adhere to the code of ethics stipulated by the Credit Collection Association of Singapore.

Money lenders and debt collectors should not use harassment, intimidation, or violence to collect their debts. In case you face such a scenario, ensure to report to the police or the relevant authorities.

Where To Get Help

Alternatives you can take when you find yourself unable to pay your loan is to request an extension or as a last resort, file for bankruptcy.

Filing for bankruptcy prevents money lenders from pressing charges against the borrower, especially when the debt amounts to at least $15,000.

There are some organisations that you can approach for help. These include Credit Counselling Singapore (CSS), where you can help with financial advice and education, and the Registry of Moneylenders.

Others include the Credit Collection Association of Singapore (CCAS), the Credit Association of Singapore (CAS), ComCare under the Ministry of Social and Family Development (MSF), and the National Council on Problem Gambling (NCPG).

If you need a loan urgently, our friendly and experienced loan advisors at 1AP Capital are always on standby to help you. Contact us now.