Most Singaporeans know they should avoid dealing with loan sharks since they are opportunistic lenders that charge sky-high interest rates.
But some may inadvertently deal with a loan shark when in urgent need of money. This can be a dangerous situation.
If you fail to pay up, loan sharks may resort to threats and harassment. It becomes difficult and stressful to deal with a loan shark, especially if you have no way at all of paying the loan.
So what can you do if you find yourself in this situation?
Find out what you need to know about loan sharks in Singapore and how to run away from loan shark.
Although the Singapore government is doing its best to protect its citizens from the activities of unlicensed or rogue lenders, these organisations are still able to find ways to operate.
If you are not careful, you may fall prey to a loan shark’s cunning tactics. Here are a few ways to tell if you are dealing with a loan shark:
Loan sharks in Singapore use unconventional and unlawful methods to advertise their businesses and win customers.
In Singapore, the Ministry of Law stipulates that licensed money lenders can only advertise their services on:
Any lender that uses other means to advertise is most likely a loan shark. The most common methods loan sharks use to solicit customers include SMS, WhatsApp, and cold calls.
A typical loan shark will demand fees to process your loan application. It may claim that the processing fee facilitates the checking of your bank account and other formalities.
Worse, you may pay the processing fee and fail to receive the loan.
It is illegal to charge such fees in Singapore. The law states that a lender can only deduct admin fees up to 10% of the loan amount after the loan has been approved.
The admin fee, interest, late payment fees, and other penalties also should not exceed the principal loan amount.
No licensed money lender will extend a loan to you without first checking your ability to repay the loan. After all, licensed lenders are running a business and wouldn’t want to lose their money to loan defaulters.
While banks and licensed lenders seek to give loans to creditworthy borrowers, loan sharks will lend to any available borrower.
Unsecured loans also have a limit up to which you can borrow. The amount you can borrow depends on your annual income.
It is the complete opposite for loan sharks. They can give you a loan without proof of income. But once you default, they will charge you high interest rates.
An easy way to identify a loan shark is if they don’t provide a loan contact. Some may offer an incomplete or blank contract for you to sign.
This allows them to add anything they wish later on. If this happens to you, do not sign such a contract and walk away immediately.
When you are given a loan contract, always go through it thoroughly. Check all the details carefully, including what happens if you are unable to repay the loan.
According to the law, licensed money lenders should provide you with a copy of the contract.
They must also give you a full explanation of the loan’s terms such as interest rates, repayment schedules, and applicable fees in a language you can understand.
Loan sharks often approve loans remotely over the phone or WhatsApp without explaining the terms and conditions.
The law in Singapore states that licensed money lenders should not charge you more than 4% interest per month. The interest should apply to the amount remaining to be paid.
Also, the late interest charge is capped at 4% of the remaining amount. A late fee of $60 can also be charged for every month the payment is late.
On the other hand, loan sharks can offer a loan instantly and expect you to repay within a short period, sometimes one week.
If you don’t, the late fees may exceed the original amount borrowed. And it doesn’t stop there –the loan shark will send you threats and even call your loved ones to threaten them.
If you borrow from a licensed money lender, such harassment is prohibited by law.
Loan sharks expect you to repay the loans they offer within a short period. Once you skip a payment or fail completely to repay the loan, that’s when all hell breaks loose.
They will send text messages and call you constantly, and threaten to use violence. Sometimes, they may mention members of your family.
They may also threaten to inform your employer and colleagues about you and the defaulted loan.
These forms of persistent harassment can be stressful and annoying.
You may get entangled with a loan shark accidentally and wonder how to run away from loan shark. The first thing you must do when dealing with them is to stay calm.
Follow these steps if you encounter loan shark problems in Singapore:
Visit the Ministry of Law’s list of licensed money lenders to check if the lender is recognised legally – in fact, you should do this before working with any lender.
Some crafty lenders may use a fake website or send you false data, claiming it’s from the Ministry of Law.
Harassment can take different forms, and you may have to involve the police. If you or your loved ones receive threats from a loan shark or your property gets confiscated, contact the police. You can also call these Singapore loan shark hotlines:
Once you realise you are dealing with a loan shark, don’t make any more payments. Remember not to show the loan shark that its threats are working.
Let the authorities handle the loan sharks if you have already reported them to the relevant authorities.
To prevent continued harassment, you can change your phone number or social media accounts.
This is because loan sharks may share your personal details among themselves, so you may receive messages from other illegal lenders.
Change your contact details for your safety and peace of mind.
As per the Moneylenders Act, aiding the activities of loan sharks is punishable by law.
Suppose you help a loan shark by harassing other debtors or allow it to use your credit card or bank details for transactions. If so, you may receive the following punishments:
Corporate bodies will receive even harsher penalties.
The psychological stress of dealing with loan sharks can be overwhelming. Fortunately, you can get help from social service agencies.
Here are some helplines you can contact:
So now you know how to run away from loan shark. If you find yourself dealing with a loan shark in Singapore, don’t comply with its requests or threats.
Always borrow money from legally recognised money lenders. Check the Ministry of Law website for the list of registered money lenders in Singapore.
Banks and government-assisted programmes can also provide loans with better terms.
Other than checking the legality of the money lender, consider your ability to repay the loan. Defaulting on loans will damage your credit score and ruin your finances.
Make sure you understand the loan contract before accepting it. Make sure you compare terms from several lenders.