Licensed Money Lenders Singapore 101: Read This Guide Before Taking a Loan

Money lenders are important players of Singapore’s financial industry, impacting and helping a diverse group of people – from the everyday person to small business owners.

Equally compelling and fascinating is the history of money lender Singapore, which supposedly began in the 1820s. Singapore’s first financiers were the Chettiars, a subgroup of the Tamil community who hailed from Chettinad in Tamil Nadu, India.

At that time, they peddled their business mainly in the quaint shophouses of Market Street. However, in the 1970s, these pioneers slowly lost ground to banks, and the entire Chettiar settlement was gone by 1977.

Over time, legal money lenders flourished again. Today, legal money lenders in Singapore can be found all over Singapore and continue to provide legal and fair money lending services to those in need.

But what exactly are licensed money lenders?

Licensed money lenders provide loans to Singapore citizens, permanent residents, and foreigners residing in Singapore with valid Employment Passes. They are registered companies that are approved by the Ministry of Law, and are required to follow the rules and regulations dictated by the Ministry, as well as adhere to the Moneylenders Act.

Why borrow from licensed money lenders?

There are many reasons to borrow from private money lenders. To understand them, let’s first take a look at the differences between bank and money lenders.

Firstly, the best licensed money lenders have more lenient requirements than banks. For instance, banks will deny your loan application if you have subpar credit history or a low income of less than $20,000 per annum.

On the other hand, most SG money lenders only require you to have a regular source of income and not have a history of defaulting on repayments to other money lenders.

Furthermore, quick money lenders have a faster approval process than banks, which is crucial if your need for cash is urgent.

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How to check if a money lender is licensed and not an illegal money lender in Singapore?

Before you start borrowing from money lenders, make sure they are legitimate. Illegal money lenders in Singapore exhibit several telltale signs that they are not legitimate.

Here’s a checklist on how to determine if the company you are looking at is an approved money lender in Singapore:

Check the list of legal money lenders in Singapore

The first thing you should do is to ensure that the money lender is registered with the Ministry of Law. To do this, check your money lender against the complete list of licensed money lenders on MinLaw’s website, which the ministry updates regularly.

Make sure that the names of companies, addresses, license numbers, websites and phone numbers tally to ensure the authenticity of the money lender.

Illegal advertisements

Illegal money lenders might put up illegal advertisements. Licensed money lenders are not permitted to solicit loans by calling or texting, or through any social media outlets. They are only allowed to advertise through business or consumer directories, or place advertisements in the interior or exterior of their registered place of business, or on their own website.

Overly-high interest rates

Take note of overly-high interest rates. Remember that the maximum interest rate as dictated by the Ministry of Law is 48% per annum or 4% per month. This limit applies to both the nominal interest (loan amount) and the late interest rates. Take note that the late interest rates can only be applied to the overdue amount, and not the total outstanding amount not yet due.

Lack of money lender license display

Remember to check for the money lender’s license. When visiting their office, you should see their license certificate displayed clearly. If absent, they may not be licensed.

Here’s some tips on how you can determine if you are dealing with a lender with a money lender license.

Approving loan without checking income

Be wary when the money lender offers you a large loan without first certifying your income. There are limits to how much legal money lenders can loan, and that amount is pegged to your income. In general, licensed money lenders can only loan a maximum amount of up to 6 times the borrower’s monthly income.

Asking for a fee before approving your loan

Legal money lenders will never ask for an upfront fee just to process or advance your loan application. In fact, licensed money lenders can only charge a 10% processing fee only after the loan is granted. So if a money lender asks for an upfront fee, be careful as they could be illegal.

Do you get to visit the money lender’s office?

Face-to-face verification is compulsory in order for licensed money lenders to process and approve your loan applications. This means that the money lender must have a legitimate physical office address, and you will need to visit the lender’s registered place of business for the loan contract signing and collection.

If the money lender is conducting the entire process via email, SMS or phone calls without documentation, it is a scam or illegal money lending.

Are there dubious terms in the loan contract?

Be sure to read the fine print of the loan contract carefully. If they are incomplete or misaligned with what they have promised you verbally, these are red flags. Things like 0% interest rate or 100% approval rate are also signs of scams, so if you see that in the contract or otherwise, head the other way.

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Pros and cons of borrowing from licensed money lenders

Borrowing from licensed money lenders is a popular choice among borrowers thanks to the advantages money lenders offer. However, it is important to take into account the other side of the coin too.

Here are the pros and cons of borrowing from licensed money lenders:

Pros

Cons

Less demanding minimum income requirement

High interest rates (maximum 48% p.a.)

Possible to get a loan approved even with bad credit history

Costly late charges (maximum 48% p.a. on overdue principal and/or interest)

Fast loan approval within 20 minutes

Expensive processing fees (maximum 10%)

Loans of up to 6 times monthly income

Shorter time to repay loan (maximum 12 months)

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Who usually borrows from licensed money lenders instead of banks?

As banks and licensed money lenders offer their own advantages, borrowers usually borrow from either one of these two depending on their situation.

These are generally the types of borrowers who take loans from banks versus money lenders:

People who borrow from banks

People who borrow from licensed money lenders

Have excellent credit history

May have bad credit history

Have a full-time job which provides stable income

Have regular income (not necessarily from a full-time job)

May not need cash immediately

Needs urgent cash

Needs a loan amount higher than 6 times the borrower’s monthly salary

Needs a loan amount that is lower or equal to 6 times the borrower’s monthly salary

Find out more about the differences between banks and money lenders here.

What are the types of loans licensed money lenders offer?

The most popular type of loan is a personal loan. Personal loans are flexible and used for large purchases such as weddings or medical bills, or for consolidation of other debts. These can be various types of cash loans. Borrowers usually repay personal loans through several installments that come with interest.

Depending on your situation, you may apply for a personal loan that is unsecured. When a loan is unsecured, it means that you won’t have to put up any collateral or assets to get the loan. This means that the risk for you as a borrower is lower, but in return, the interest rate may be higher when compared to secured loans.

Here are the generally the different types of personal loans offered by licensed money lenders:

The next type of loan that licensed money lenders offer are business loans.

If you are an owner of an SME, times may be hard but things will get better. Right now, you may need a capital injection to keep the business afloat or to pay your employees. A business loan can help you do just that.

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What are the documents required to apply for a loan with personal loan money lenders in Singapore?

To get your personal loan application processed, the following documents are required:

For Singaporean/PRs:

  1. NRIC
  2. CPF statements (for employed) or Notice of Assessment (for self-employed) to be accessed using SingPass
  3. Proof of income such as payslips, bank statements or invoices (for the self-employed) from the last 3 months

For foreigners residing in Singapore:

  1. Work pass such as S-Pass or E-Pass
  2. Proof of home address such as tenancy agreement, recent handphone bill address or others
  3. Payslips from the last 3 months

UK Credit is one of the best licensed money lenders that is both trusted and well-reviewed. If you have more questions about applying for a loan, our loan officers will be more than happy to assist you.

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What is the maximum amount you can borrow?

Your loan limits would differ depending on whether the loan is secured or unsecured, as well as your nationality and income.

Secured loans

For secured loans, we have to take into account the type of loan.

 

Type of loan

Maximum amount

 

Property and car loans

55% of the borrower’s Total Debt Servicing Ratio (TDSR). TDSR is the portion of the borrower’s gross monthly income that is taken to repay all his or her loans

 

HDB or Executive Condominium (EC) loans

30% of the Mortgage Servicing Ratio (MSR). MSR is the portion of the borrower’s gross monthly income that is taken to repay all of his or her property loans for HDBs and ECs

 

Car loans

Not more than 60% to 70% of the Loan-To-Value (LTV). LTV is the amount of loan divided by the purchase price of the vehicle. This figure depends on the vehicle’s open market value (OMV).

Unsecured loans

As for unsecured loans, the maximum amount is $3,000 for borrowers who are Singaporeans and PRs with an annual income of less than $20,000.

For foreigners residing in Singapore, the maximum amount is $500 if their annual income is less than $10,000, and $3,000 if their income is at least $10,000 but less than $20,000.

The maximum amount is further increased to 6 times their monthly income for Singaporeans, PRs and foreigners if they have an annual income of more than $20,000.

Loan application process

  1. Go to the money lender’s website and fill up the loan application form. You can also walk in to the money lender’s office to apply.
  2. Wait for a call from the loan officer. You will be informed to drop by their office for verification and a short interview. Bring all required documents. If all is good, your loan should be approved in 10-20 minutes.
  3. The loan officer will go through the loan terms and contract with you. Make sure you understand the terms.
  4. After you sign the loan contract, the loan amount will be deposited to your bank account or disbursed to you via cash.

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What are licensed money lenders’ interest rates in Singapore?

Private money lenders’ interest rates are regulated by the Ministry of Law.

The maximum interest rate for monthly loans that money lenders can charge is no higher than 4% per month or 48% per annum. Another important thing to note is that money lenders’ interest rates are calculated based on a reducing interest rate, which means interest is only calculated based on the outstanding loan amount.

For example, if you borrowed $1,000 to be repaid over 5 months, with a monthly interest rate of 4%. The first month’s interest will be 4% of the $1000, which is $40. The second month’s interest will be 4% of the outstanding amount, which is $32.61, and so on.

Take a look at this table for better illusatration:

Month

Payment

Interest

Principal

Balance

1

224.63

40.00

184.63

815.37

2

224.63

32.61

192.02

623.35

3

224.63

24.93

199.70

423.66

4

224.63

16.95

207.68

215.98

5

224.61

8.64

215.98

0.00

This means that you will pay less in the absolute amount of interest every month, as compared to a loan with a flat interest rate.

What are the types of fees you need to pay money lenders?

Be sure to get acquainted with the types of fees that you would need to pay. A processing fee of a maximum of 10% of the loan amount needs to be paid when the loan is granted, as well as late fees of not more than $60 a month.

Lastly, if there is a legal dispute to recover the loan (if you default on the loan) and the money lender manages to make a successful claim, you would bear the legal costs as determined by the court.

What should you do after your loan is approved?

Keep relevant proof of payments

Keep all receipts as they are proof of payments. Also, they indicate how much of the loan is yet to be repaid, and that can help you plan your finances.

Options if you can’t repay your loan

If you are unable to repay a loan, speak to your loan officer. Explain your situation honestly so that a feasible extended plan of payment can be drafted.

Do make sure that this new deadline can be met. You can also seek help from this list of welfare services (point 11) approved by the Ministry of Law.

The last resort is to file for bankruptcy should your debt exceed $15,000, but do note that this comes with serious consequences. Your assets will be sold to repay the debt and you will not be able to apply for another loan.

Looking for a loan with a good licensed money lender?

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