Protecting borrowers and money lenders is the top priority for the Singapore government. The protection and the rights of both borrowers and lenders are well stipulated in a legal document, known as the Moneylenders Act.
The money lenders act specifies how a moneylending business should operate in Singapore, who can operate one, the requirements, and how money lenders should act. The Act also lists out the conditions for collecting, using, and sharing borrowers’ data.
The essence of the money lenders act is to spread awareness to borrowers and lenders as they make financial transactions.
It therefore protects Singapore borrowers from scams and forgery, which could cause them to lose money. Read on to learn more.
What Are Licensed Money Lenders?
In Singapore, the Moneylenders Act states a money lender is an individual or company that carries out the business of lending money to borrowers, whether as a principal lender or an agent. The law states that no one should operate a moneylending business unless permitted through a moneylending license Singapore or as an exempted money lender under the Moneylenders Act.
Exempt money lenders are exempted from obtaining a money lender’s license under the government’s discretion.
However, under the law, they must apply for exemption to lend money and can only do so after approval.
How To Know If A Money Lender Is Licensed
In Singapore, it is not uncommon to run into an illegal money lender. Therefore, it is crucial to know how to ascertain whether a money lender is licensed. Otherwise, you may lose your assets (and peace of mind) or get a loan with sky-high interest charges.
A simple way to confirm if a lender is licensed is to check with the Ministry of Law. It has an exclusive list of all licensed money lenders operating in Singapore. Check back frequently, as the list is regularly updated.
Another way to identify a legal money lender in Singapore is to check how it advertises its packages. The Act prohibits a money lender in Singapore to advertise its business using unsolicited calls, emails, and text or WhatsApp messages.
Thus, if you get a phone message prompting you to take a loan, it is from an unlicensed money lender.
Licensed money lenders may advertise their business any one of the following ways:
- Consumer or business directories in online or print media
- Their own websites
- Advertisements and posters placed within their approved places of business
How Much Can Borrowers Get From Money Lenders?
The amount you can get from licensed money lenders varies based on whether it is a secured or unsecured loan. Your nationality also determines the amount given.
Borrowers who are Singapore residents are entitled to higher loan limits than foreigners.
Secured loans have no limitations as they are secured by collateral. This means you can borrow any amount you wish, provided the money lender has the capacity to lend the money.
There are different categories for unsecured loans based on the borrower’s annual income. Singaporeans and permanent residents of Singapore with a yearly income of less than $20,000 are limited to a loan limit of up to $3,000. This amount applies to loans from all money lenders combined.
Foreigners earning an annual income of less than $20,000 but more than $10,000 can borrow up to $3,000 from all lenders combined.
However, foreigners earning less than $10,000 annually can only borrow up to $500 from all money lenders combined. Singapore citizens and permanent residents earning less than $10,000 annually who may borrow up to $3,000 from all money lenders combined.
If you earn more than $20,000 yearly, you can borrow up to six times your salary from all money lenders combined. This applies to Singaporeans, permanent residents, and foreigners living in Singapore.
What Interest Rates Do Money Lenders Charge?
The maximum licensed money lender interest rate in Singapore is 4% per month for the principal amount. This same interest rate is also charged for each month if the loan is paid late.
The interest is calculated on the outstanding monthly balance (remaining principal after some payments have already been made).
For instance, if you took a loan of $10,000 and have already paid $5,000, the monthly interest charge will be 4% of $5,000.
The late interest is calculated from the overdue amount. Let’s say you were supposed to pay $1,000 per month, and you failed to pay on time. Then the late interest will be 4% of $1,000.
There may be other fees you may need to pay.
They are as follows:
- Loan approval fees: 10% of the principal, charged upon loan approval
- Late payment fees: $60 per month
- Legal costs incurred by a licensed money lender during recovery of the loan
Note that all interest, late payment fees, charges, and legal fees should not exceed the principal amount awarded to the borrower.
Prohibited Practices For Money Lenders
The money lenders act Singapore also sets out clearly the various things a moneylender is prohibited from doing. Under the Moneylenders Act, the following practices are unfair and unacceptable to a borrower:
- Use of an incomplete or blank Note of Contract for the loan
- Involving a borrower in a loan transaction without stating the terms and conditions clearly
- Using threatening and abusive language
- Failure to return personal documents to borrowers, including but not limited to, ATM cards, NRICs, and passports.
- Demanding of Singpass details from borrowers.
- Issuing loans to borrowers without giving them the loan contract copy
- Giving a less loan amount than the granted principal amount
- Engaging in loan transactions without exercising due diligence – for example, granting a loan via SMS without receiving your application and related documents
Unfortunately, you might encounter a situation where a licensed money lender fails to abide by these provisions.
If that happens, report the money lender to the Registry of Moneylenders immediately.
What A Licensed Money Lender Should Do For Borrowers
The money lenders rules aim to guide the conduct of money lenders. Some of the regulations are as follows.
- A licensed money lender should provide you with detailed information before and after taking the loan. The same applies when issuing subsequent loans.
- The money lender should disclose the total repayments you owe if you have more than one loan with the same money lender.
- The money lender should check your documents before granting you a loan.
- The money lender should not approve a new loan immediately when you repay the owed loan amounts.
- A money lender should flag the high cost of its loans to borrowers.
- The adverts posed by money lenders should prompt borrowers to consider other money lenders as alternative options.
Caveats Of Money Lenders To Take Note Of
Most legal moneylending in Singapore includes caveats. Caveats are clauses under the terms of your loan that may grant persimmon to the lender to sell or enjoy proceeds of your property to repay your loan if you default.
You should beware of such caveats because agreeing to add one into the terms of your loans may cause you to lose your property.
If the property’s value is equal to or less than the loan you owe, all proceeds from the sale will be used to repay the loan. This means you won’t get anything from selling your property.
What A Money Lender Can Do If You Can’t Pay The Loan
You may fail to pay the loan on time, which is quite common, or fail to pay the loan ultimately. There are different ways you can handle this situation.
You may negotiate with your lender to modify the payment terms, extend the repayment period, or refinance. One thing you should keep in mind is that such solutions come with an extra fee.
However, there are cases where borrowers may continuously fail to meet their obligations to repay the loan. In such cases, the Moneylenders Act provides the legal rights for the lender to sue the borrower. This is common if you pledged an asset to secure your loan with.
Lenders need to know that the borrower may file for bankruptcy, especially if their debts amount to more than $15,000.
When this happens, the lender cannot proceed to file a case against the borrower. Besides, interest charges will cease accumulating, meaning a lower return to the lender. The lender can only report the borrower once he or she is discharged from bankruptcy.
However, if borrowers fail to pay a debt of less than $150,000, they may resort to the Debt Repayment Scheme (DRS) as an alternative to bankruptcy.
The Official Assignee from the Ministry of Law’s Insolvency Office will act in place of the borrower to establish a workable repayment plan extended over a fixed period.
This practice will deny money lenders of unsecured loans the opportunity to file a case against the borrower unless the court states so.
Choose The Right Licensed Money Lender For Your Needs
It is far easier to make an informed decision once you know what the money lenders act is all about.
U Credit is one of Singapore’s top moneylending institutions. We are licensed under the Moneylenders Act to carry out legal moneylending in Singapore.
Our years of serving you and our established reputation have helped us understand and prioritise our customers’ needs.
Our loans have friendly terms and workable repayment plans for all income levels. Get the financial help you need by applying for a loan with us today.
Contact us on +65 6337 1768 to find out more.
