Do you need to borrow money, but are concerned that a money lender would take advantage of you? You are not alone.
If you need cash quickly but want to be sure your lender is legitimate, read this blog post.
It is crucial to know how to check a licensed money lender so you can protect yourself against scams and monetary instability.
The first thing to do is to make sure that a lender has a valid license.
If so, you’ll have a better idea of whether you can trust its services. Having this knowledge will provide you the peace of mind you need when it comes to taking out a loan.
First, search online for a list of licensed money lenders in Singapore.
This directory, which the Registry of Moneylenders compiled under the Ministry of Law (MinLaw), contains the names, contact information and license numbers of all licensed money lenders operating within the jurisdiction of Singapore.
Remember that you shouldn’t put any stock in a lending institution that attempts to explain why it isn’t on that listing. There’s a good chance that it’s a loan shark, or unlicensed lender.
A loan shark can claim that a bug in the system prevented its company from being included in the official directory of regulated money lenders.
These “Ah Longs”, that operate as loan sharks, may even use a fake license in the hope that you won’t dig further into its legitimacy.
Simply put, they have more than a collection of tricks to deceive unsuspecting borrowers in need of cash.
If you want to be doubly sure that your cash lender is legitimate, you may check with the Registry of Moneylenders.
Call the Registry at 1800-2255-529 to enquire about a lender.
Licensed money lenders are financial institutions that provide loans to individuals and businesses.
They are subject to the laws and regulations of the Registry of Moneylenders. As such, they must adhere to certain regulations such as:
But in order to lend money legally in Singapore, licensed money lenders are subject to certain restrictions.
For instance, licensed money lenders are restricted in their ability to advertise. They are also prohibited from sending unsolicited emails to get you to use their lending services.
Their advertisements are only limited to the following platforms:
The rate of interest that money lenders may charge cannot exceed 4% per month. This must be computed based on the total amount you owe.
The answer to this question depends on the type of loan you get.
A secured mortgage, for instance, does not have a maximum loan amount limit. If you are willing to use your home that is worth $2,000,000 as collateral for a mortgage loan, a licensed money lender can legally provide you with the whole amount you need for the loan.
Nevertheless, MinLaw has set some restrictions for unsecured private loans, including the following:
In addition, the maximum amount for an unsecured loan that individuals can request from a licensed money lender is $250,000.
The Total Debt Service Ratio (TDSR) is another factor that might impact the maximum amount of money you are permitted to borrow from a legitimate money lender.
This ratio indicates the proportion of your monthly income that goes toward paying back the debts you accrued.
At the moment, the TDSR limit is 55%.
Let’s say that your monthly earnings are $10,000 and that you’re currently setting aside $4,500 for various other financial obligations.
In this scenario, the maximum amount you could borrow from an authorised money lender Singapore is $1,000. It is the highest amount that you could borrow.
The calculations are as follows:
$10,000 x 55% = $5,500. Because you have already committed $4,500 to pay off other debts, the maximum amount you can borrow is $5,500 – $4,500 = $1,000.
The following are the types of fees that licensed money lenders may charge:
Let’s discuss them further.
The maximum amount licensed cash lenders may charge monthly interest fees is 4%.
The outstanding balance determines how much interest you are set every month.
Here’s how it should go down:
Using the same calculations, the interest you pay should decrease monthly.
As mentioned, money lenders may charge a late fee of up to 4% per month for the missed payment on top of the interest rate they were already charging.
They could impose a maximum late refund fee of $60.
Consider the following example.
Let’s imagine you’re paying a mortgage for $10,000 with a monthly payment of $500 and an interest rate of 4% per month on the outstanding balance.
If you are 60 days late in making your repayments, the licensed cash lender has the right to charge you a late fee of up to 4% a month on the missing payment.
4% of $500 is $20. Hence, you must pay $40 more to cover the late interest for two months.
The money lender also has the right to levy a maximum late reimbursement fee of $60 on you. It indicates that, in total, you will be required to pay an extra $100.
The last fee that your money lender is legally allowed to charge you is an administration fee of 10%.
Given the example of a mortgage for $10,000, the administrative fee is $1,000. Therefore, the money lender is within its rights to only give you $9,000.
The Ministry of Law’s website is the best place to check for a money lender’s license number and verify its legitimacy.
Here’s how you can do so:
A helpful hint is that MinLaw provides a directory of businesses that have been excluded from becoming lenders.
These companies have been specifically exempted from the requirements of holding a moneylending license by the relevant authorities.
If you cannot find the lender’s registration number, it is quite probable that they are operating illegally, and you should avoid doing business with them.
Caution: Even if such a suspicious lender provides you with the company’s registration number, you should continue with the verification process. There are a lot of illegal lenders that rely on you not following up.
Call the police if an unlicensed lender threatens or harasses you.
That said, licensed money lenders may also break the rules. Report the lender to the Registry of Moneylenders if so.
If you need money urgently, licensed money lender CreditMaster can help you.
Apply for a loan now in just five minutes or contact us for more information. We will be more than happy to hear from you.