What To Know About Moneylender Rules

What Should You Know About Moneylender Rules?

Written by 1AP Credit on December 8, 2022

Moneylenders in Singapore are governed by strict regulations, but there are still agencies breaking the law and loan sharks operating illegally. That is why it is wise to get ahead of the game.

Learn the moneylender rules outlined in the Moneylenders Act to make informed decisions about your finances.

This article discusses important details such as maximum sums, eligibility requirements, supporting documents, how to settle licensed money lenders, and more.

Keep reading below.

How To Know If A Money Lender Is Licensed

A licensed money lender is supposed to have a moneylending license from the state of Singapore. You can easily find them on this list.

Note: Some legal money lenders in Singapore are allowed to operate without a license. You can find them on the exempted list.

Remember: These lists are correct, comprehensive, and updated in real time. If an agency tells you otherwise, it is either operating illegally or a loan shark.

So always check if your money lender is on one of those lists before agreeing to anything.

How Much Can You Borrow?

According to the Moneylenders Act in Singapore, you can borrow up to $250,000 for unsecured personal loans. However, moneylender rules dictate that the maximum amount you are eligible for depends on your income as follows:

Up to six times their monthly income: Singaporeans, permanent residents, and foreigners earning an annual income of $20,000 and above
Up to $3,000:
- Singaporeans and permanent residents earning between $10,000 and less than $20,000 per year
- Foreigners earning less than $20,000 per year
Up to $500: Foreigners with an annual income below the $10,000 mark

Note: The Moneylenders Act Singapore enforces these limits only for personal loans. Other types of loans have different conditions.

For example, a renovation loan is restricted at $30,000, whereas a home loan is capped at 75% of your property’s value or retail price (the lower of the two figures).

Pro tip: Secured personal loans do not have a maximum cap. Therefore, a Singapore legal money lender can legally offer you more than six times your monthly income if you opt for a collateral-based loan.

But these moneylender rules are not the only ones dictating the maximum amount you are eligible for.

Your credit score and overall trustworthiness are pivotal to how much your money lender decides to lend you.
The government imposes two other restrictions related to:
- Your overall debt: This variable is quantified through the Total Debt Servicing Ratio (TDSR), representing the proportion of your debts over your income. Currently, the TDSR in Singapore must be kept below 55%, meaning you cannot spend over 55% of your monthly income on other debts and loan installments.
- Your mortgage related-debt: This variable is measured through the Mortgage Servicing Ratio (MSR). It represents the proportion of your mortgage-related debts over your income. The current MSR in Singapore is 30%, so your home loans cannot represent over 30% of your monthly earnings. Luckily, this MSR applies only to HDB flat purchases, not private properties.
- Your income: Moneylender rules in Singapore state that a licensed money lender or bank cannot offer you more than 12 times your monthly income.

Requirements And Considerations

The first requirement to borrow from a money lender in Singapore is to be 18 years old. That is a more lenient eligibility condition compared to banks, which usually set an age limit between 21 and 65 years old.

Other requirements include:

Filling in your application correctly and completely with your:
- Full name
- Date of birth
- NRIC number
- Nationality
- Residential address
- Email address
- Contact number
- Amount of loan applied for
Submit these supporting documents:
- Proof of identity: NRIC or passport
- Proof of income: Last three months’ computerised payslips, CPF statements, bank statements, employment contract (if you are a new employee) or Notice of Assessment (if you are freelancing or own a company)
- Proof of address: Utility bills or official letters

Pro tip: Many legal money lenders in Singapore allow you to submit online applications that connect to your Singpass. Therefore, your data is uploaded automatically.

Warning: Although you can apply online, moneylender rules in Singapore still state that licensed money lenders must check your supporting documents in person at their headquarters. As such, granting loans outside their official place of business or remotely is considered an illegal practice.

Money Lender Interest Rates And Fees

There are four main fees a money lender can charge:

Admin fee: This sum is a maximum of 10% of your principal amount and does not constitute a loan downpayment. Therefore, moneylender rules clearly state that your legal money lender should only withhold this admin fee upon loan transfer.
Monthly interest rate: A licensed money lender’s interest rate is a maximum of 4% per month. The interest is calculated based on your outstanding balance, not the principal amount.
Late interest: The agency can also impose a maximum late interest rate of 4% from the payment(s) you have missed.
Late penalty fee: This charge is a maximum of $60, regardless of other considerations, such as your delay or principal amount.

What Should Happen Before And After Loan Approval

According to moneylender rules, the first thing that should happen before loan approval is that you should contact the money lender and not vice-versa.

Why is that important?

Legal money lenders in Singapore are not allowed to advertise their business other than in business or consumer directories, their websites, or official premises.

Therefore, they are not allowed to contact you directly via texts, calls, or emails. They are not even allowed to spread flyers or post online ads.

Pro tip: Conduct thorough research before contacting the money lender to ensure you get the best offer.

After that:

Check MinLaw’s list of licensed money lenders to ensure they operate legally.
Submit an online loan application.
Wait for approval.
Make sure the contacting agent sets a due diligence meeting at their headquarters.
Once you meet for due diligence, check all the paperwork, ensuring the contract follows the legal requirements about maximum sums, rates, and charges.
Ask any questions about the loan, your rights, and your obligations.
Sign the required paperwork and get a signed copy of the contract.

After receiving the loan:

Pay your installments in full each month.
Keep a folder that contains all your loan-related documents.

What If You Cannot Pay The Loan?

If you are unable to pay a money lender in Singapore, do not despair. The worst you can do is make rash decisions. Instead:

Contact your money lender if anything prevents you from following through with your financial obligations.
Try to negotiate a new repayment plan.
Ask for help from a social service agency such as:
- Adullam Life Counselling: admin@adullam.org.sg
- Association of Muslim Professionals (AMP): corporate@amp.org.sg
- Arise2Care Community Services: admin@arise2care.sg
- Blessed Grace Social Services: billy.lee@blessedgrace.org
- Credit Counselling Singapore: enquiry@ccs.org.sg
- One Hope Centre: help@onehopecentre.org
- Silver Lining Community Services: admin@silverlining.com.sg

How To Get The Best Money Lender

Almost all licensed agencies in Singapore respect these moneylender rules, but they are not created equal.

At 1AP Capital, we abide by the regulations the Registry of Moneylenders set forth. We also offer competitive interest rates and flexible repayment terms to get the cash you need without breaking your budget.