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.
Where Can I Find A List Of Licensed Money Lenders?
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.
What Licensed Money Lenders Can And Cannot Do
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:
- Lenders of short-term loans can provide financing for various projects, including home improvements, business expansion, and personal financial obligations.
- Their loans are structured quite differently from those offered by banks. Renovation loans from reputable Singapore money lenders, for instance, may cover the cost of new furniture and electrical appliances. This is unlike banks.
- The interest rate charged on a mortgage by a licensed money lender is often higher than the interest rate charged on a mortgage by a bank.
- Money lenders are authorised to engage with borrowers that have credit scores that are less than perfect, and most of them are willing to do so.
- In Singapore, money lenders may deduct an administration fee of 10% off the total loan amount. Upon switching mortgages, this fee may be withheld.
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:
- Business directories
- Consumer directories
- Their websites
- Their place of business (e.g. posters on their walls and windows)
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 maximum amount of interest that licensed money lenders may charge for being late cannot be more than 4% of the missed payment.
- The maximum amount of the late reimbursement fee is $60 for each month that the repayment is late.
- They are not allowed to charge any fees for receiving payments early.
- Licensed money lenders should not charge any costs associated with the pre-approval process.
- They also must provide a comprehensive loan contract that spells out every one of the terms of the deal. They are obligated to furnish you with an identical copy of the contract.
- A legal money lender in Singapore is not allowed to make any sudden modifications to the contract and its terms.
- When you borrow money from an approved lender in Singapore, it is not allowed to keep any of your personal documents such as your NRIC or passport. In addition, it shouldn’t ask for your bank or credit card credentials.
- Licensed money lenders are not allowed to resort to coercion, threats, or harassment to collect their payments.
- Your loan application cannot be accepted by a licensed lender unless there was a prior verification meeting conducted in person at the company’s office. The lender cannot disburse the funds to you by sending an SMS message or doing so in a parking lot.
- If you fail to make payments on a loan to a licensed lender, it has the right to pursue legal action against you, but it is not allowed to use any kind of physical force or make any threats toward you.
How Much Can You Borrow From A Licensed Money Lender?
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:
- $3,000 dollars for Singaporeans and permanent residents with annual earnings of less than $10,000
- $500 dollars for foreigners with yearly incomes of less than $10,000
- $3,000 dollars for Singaporeans and permanent residents with annual earnings of less than $20,000
- $3,000 for foreigners with yearly incomes of between $10,000 and $20,000
- Up to six times your monthly salary for Singaporeans, permanent residents, and foreigners who earn more than $20,000 annually
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.
What Are The Interest Rates And Fees A Licensed Money Lender Can Charge?
The following are the types of fees that licensed money lenders may charge:
- The cost of interest
- Interest rate as of the recent date
- Charges applicable for being late
- Administrative fee
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:
- If you borrow $10,000 at a rate of 4%, your first year’s interest payment will be $400. It assumes that the loan is for $10,000.
- Let’s say the amount of your installment payment each month is $500.
- You will have paid $400 toward the interest at the end of the first month and put $100 down the principal balance.
- Your interest rate for the second month will then be 4% out of the $9,900 you borrowed. That results in a debt of $396 for the loan.
Using the same calculations, the interest you pay should decrease monthly.
Late Fees For Both The Interest And The Repayment
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.
How To Tell If A Money Lender Is Licensed
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:
- Visit the Ministry of Law website.
- To see a list of licensed money lenders in Singapore, choose the “List of Licensed Money Lenders in Singapore” option under the “Info for Borrowers” tab.
- You will be directed to a new web page that provides extra information in addition to a link to a PDF.
- Simply open up the PDF to see the list.
- Verify if your money lender is on the list.
What To Do After Your Loan Is Granted
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.
Ensure You Know How To Check A Licensed Money Lender
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.