If you need quick cash in Singapore, you can apply for loans from a licensed money lender. These are legal financial institutions that offer personal loans to people.
Unlike banks, getting a loan from a money lender is quick and straightforward. This makes it a good option to apply for loans in case of emergencies.
However, moneylender rules govern moneylending operations in Singapore that you should know about before applying for a loan.
Read on to find out about moneylender rules in Singapore and how they affect you as a borrower.
How To Know If A Money Lender Is Licensed
There are many money lenders in Singapore. Some are licensed, and others are unlicensed and operated illegally.
While Singapore laws regulate licensed money lenders, non-licensed institutions don’t have to abide with any moneylender rules. They are usually called loan sharks or “Ah Longs”, and their operations are illegal.
These illegal individuals or institutions usually resort to harassment and other dangerous means to recover loans. Hence, Singaporeans and residents in Singapore are advised to only borrow from licensed money lenders.
If you want to know if a particular individual or institution is authorised to borrow money in Singapore, check the Registry of Moneylenders’ website, which is under the Ministry of Law.
The Registry of Moneylenders publishes the list of legal money lenders in Singapore on its website. This list is regularly updated.
You can check it to see if the money lender you’re dealing with is licensed to operate in Singapore.
Legal money lenders are not allowed to advertise via phone calls, text messages, flyers, or WhatsApp. Those that do so are most likely loan sharks.
They can only advertise on print or online business or consumer directories, their office premises, and their own websites.
Another dead giveaway is money lenders that do not have an office or a loan contract for you to sign – they are most likely loan sharks. Licensed money lenders have offices and always offer loan contracts for you to sign.
How Much Can You Borrow?
The main factor that determines how much money you can borrow from money lenders in Singapore is the type of loan you’re applying for.
There are two major types of loans that money lenders offer. They are secured and unsecured loans.
For secured loans, there’s no limit to the amount of money you can borrow from legal money lenders. But when it comes to unsecured loans, there’s a limit to how much you can get.
Citizens, permanent residents, and foreigners in Singapore who earn a yearly income between $10,000 to $20,000 can only borrow a maximum amount of $3,000.
Foreigners who earn less than $10,000 annually can only borrow $500. Singaporeans and permanent residents earning less than $10,000 can borrow a maximum of $3,000.
However, if you make more than $20,000 every year, you’re allowed to borrow up to six times your monthly income, regardless of your citizenship status.
The Moneylenders Act in Singapore also regulates the amount you can borrow.
Requirements And Considerations
Below are some of the things to consider before approaching a licensed money lender for a loan:
- Consider other alternatives: Before you borrow money from a money lender, you may want to consider other alternatives. There are several government support or assistance schemes you can choose from.
- It’s a legally binding contract: If you default on your loan repayment, Singapore legal money lenders reserve the right to take you to court to recover their money. Hence, it’s paramount that you borrow only what you can pay back.
- Look at what other money lenders are offering: Some money lenders provide better terms than others. You may want to look around a bit to ensure you’re choosing the right money lender. Only work with a licensed money lender.
- Read the terms carefully: Don’t just sign off on any loan terms presented to you because you need the money. Some contractual terms allow a money lender to lodge a caveat on the proceeds of your property if you default on loan repayment. When this happens, you’ll be unable to sell your property until you’ve paid your debt in full.
Money Lender Interest Rates And Fees
Licensed money lenders are required by law to charge up to 4% interest monthly on the loan balance.
Hence, if you borrow $30,000 but manage to pay back $10,000, the interest rate will be charged on your $20,000 balance instead of the principal amount.
If you make a late repayment, the same licensed money lender interest rate applies to your monthly repayment amount.
Hence, if you’re repaying $4,000 every month, you will be required to pay up to 4% late interest on the amount if you make a late payment.
Another fee you need to pay to money lenders is the loan approval fee. Money lenders charge a loan approval fee or loan processing fee on every loan. This fee is usually 10% of the principal amount.
What Should Happen Before And After Loan Approval
Before your loan is approved, the moneylender rules compel lenders to inform you about their operations, and the applicable fees or charges. This includes the nominal interest rate, late interest charges, and the details of their loan repayment structure.
The Moneylenders Act in Singapore also requires licensed money lenders to give a cautionary statement about abusive conduct by some lenders and how or where borrowers can complain.
Here are the documents you’ll need:
- Proof of employment and income
- Credit score
- CPF statements
- Proof of residence
Foreigners should prepare:
- A lease
- A letter of employment
- Work pass or permit
- Bank records
When the money lender has approved your loan, you’ll be informed about the loan’s correct principal amount.
You will also be given a copy of the loan agreement. After getting the loan, you’re expected to fulfil your own part of the contractual obligations. This includes making a timely repayment every month.
Whenever you make a payment, you’ll be issued a receipt. Be sure to hold on to your receipt as evidence of payment.
What If You Cannot Pay The Loan?
If you can no longer meet your monthly repayment obligation, you should talk to your money lender.
When you cannot pay a money lender in Singapore, it can help you restructure your payment plan and give you more time to pay back. Although this means you’ll be paying more interest, it’s the best way to buy yourself more time to repay your loan.
Note that if you cannot pay back what you owe, money lenders have the right to sue you. But if your debts amount to $15,000, you can file for bankruptcy as a last resort. Your credit score will take a big hit.
When you file for bankruptcy, money lenders will no longer be able to charge you additional interest. It will also prevent them from suing you in court.
Alternatively, you can solve your repayment problems using the Debt Repayment Scheme (DRS) if your debt does not exceed $150,000.
The DRS also prevents money lenders from suing you. A suitable repayment schedule will also be arranged for you.
Any form of licensed money lender harassment is unacceptable. If your lender abuses, harasses or threatens you and your family, report it to the Registry of Moneylenders.
Familiarise Yourself With Moneylender Rules
When taking a loan in Singapore, you must be 100% sure you’re dealing with a licensed money lender.
If your lender is licensed to operate, you don’t have to worry about unfair treatment or hidden fees as money lenders that break the rules face serious consequences.
The same moneylender rules also ensure you won’t be charged ridiculous interest rates.
If you’re looking for a licensed money lender in Singapore that you can trust, look no further than U Credit.
We offer personal loans with affordable interest rates and a repayment structure that suits you.