What Interest Rates Can A Money Lender Charge?

Dexter Lee October 29, 2022

What Interest Rates Can A Money Lender Charge?

People take out loans for many reasons, such as a home renovation.

While most people use credit cards as a way to get credit, they are not viable for emergencies. But getting a loan from a bank can be a time-consuming and tedious process.

The good news is that Singapore is home to over 100 legal money lenders, some of whom can provide emergency loans as quickly as 24 hours.

So borrowers who don’t meet the strict requirements set by banks can benefit from these loans.

The question now is how much interest a licensed money lender can legally charge. This article will provide clarity on money lender interest rates.

How Much Can You Borrow?

Standard personal loan terms offered by a licensed money lender in Singapore will vary from lender to lender. However, they all adhere to the same fundamental principle.

You can borrow as much money as you need with a secured loan that involves collateral.

Personal loans that don’t require collateral are unsecured loans, which come with stricter terms and conditions as there is no asset to secure the loan.

Your annual income will determine your loan eligibility, and consequently, your loan amount.

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    Singaporeans and permanent residents with annual incomes of less than $10,000 are eligible for a loan of up to $3,000. However, non-citizens with the same income level can only access a $500 loan.

    Singaporeans and permanent residents who earn more than $10,000 but less than $20,000 are eligible for a loan of up to $3,000. This applies to foreigners residing in Singapore too.

    Anyone earning more than $20,000 per year can qualify for loans up to six times their monthly salary.

    It is well-known that getting a personal loan from a legal money lender in Singapore is much simpler than going through a bank.

    However, despite the convenience of their loans, money lender interest rates are a drawback since they are high.

    What Are The Fees Money Lenders Can Charge?

    The Singapore government only permits the following fees and costs to be charged to borrowers as of 1 Oct 2015.

    • After loan approval, a fee equal to 10% of the loan’s principal may be charged as an admin fee
    • Court-ordered legal costs incurred by the lender to pursue collection of a defaulted loan
    • A late payment fee of up to $60 per month

    By law, licensed money lenders are prohibited from charging late fees, principal interest, upfront administrative, and late interest that end up being more than the principal amount.

    For example, if you borrow $1,000 and pay interest, late interest, a 10% administration fee, and $60 late fee, the total amount you repay should not exceed $1,000.

    What Are The Money Lender Interest Rates?

    Borrowing money from a licensed money lender will cost you more in interest than borrowing money from a bank.

    On 1 Oct 2015, the Singapore government set the legal cap on licensed money lender interest rates at 4% per month.

    This cap applies to secured and unsecured loans, and is independent of the borrower’s income. No matter the size of the loan, the maximum monthly late fee cannot exceed 4%.

    You can calculate the money lender interest rates on a loan by taking the remaining principal and deducting the total amount of payments you have made to date.

    For example, if you borrow $1,000 but pay back $200, only $800 of the loan amount will apply for interest.

    Don’t forget that the late interest fee only applies to late payments. When you borrow money and pay it back early, the lender cannot charge you any additional interest.

    For example, a lender can charge you late fees on the first $100 of a $1,000 loan if you don’t pay it back on time, but not on the remaining $900.

    Pros And Cons Of Banks And Licensed Money Lenders

    Licensed money lenders provide customer-friendly loan terms, including adjustable interest rates and repayment periods.

    Still, it’s helpful to know the benefits and drawbacks of each option before applying for a loan:


    1. Less Paperwork

    Licensed money lenders are more lenient than banks in terms of the documents required. Typical forms of documentation include your NRIC and recent payslips.

    2. Lenient Credit History Verification

    A poor credit score is not a dealbreaker for many legitimate lenders. Instead, they assess your ability to repay after reviewing the supporting documents you submit.

    3. Quicker Approval

    When dealing with a bank for a loan, you may have to wait a few weeks for a decision.

    In contrast, most licensed money lenders have much shorter waiting periods. Typically, the approval process for a loan takes between one and three days.

    4. Flexible Loan Terms

    Licensed money lenders are more lenient than banks with the requirements needed for approval and the timing of payments. They are likely to allow for more flexibility than banks.

    As you prepare to sign the loan agreement, they will also explain the loan’s terms and conditions to you. In fact, this is mandatory for all licensed money lenders.

    5. Borrower Information Is Kept Confidential

    Legitimate financial institutions authorised to lend money must protect the privacy of their borrowers.

    So if you cannot make your monthly payments, your money lender cannot shame you publicly because Singapore law prohibits it.


    1. Exorbitant Interest Rates

    It’s common for money lender interest rates to be higher than that of banks because of the greater risk borne by money lenders since their credit checks are less stringent.

    The high interest rate may make it challenging to repay the loan.

    2. Smaller Loan Amounts Offered

    Most money lenders will only loan a percentage of a borrower’s monthly salary because of the higher levels of risk associated with doing business with low-income earners.

    Loan amounts usually range from a few hundred to $1,500, with the upper limit based on the borrower’s income level.

    3. Shorter Repayment Schedule

    Depending on the lender’s policies and terms, the maximum time you have to repay a loan is often only 18 months.

    Paying more each month over a shorter period may strain some borrowers financially.

    What To Consider Before Taking A Loan From A Licensed Money Lender

    Make sure the lender is legitimate before you take out a loan from it. In Singapore, several red flags show a money lender is operating illegally.

    You can use the following criteria to determine if a prospective money lender in Singapore has a license from the government:

    1. Check If They Are On Singapore’s List of Licensed Money Lenders

    You must check the Ministry of Law’s website to see if the money lender has a license.

    The Ministry of Law (MinLaw) maintains an updated list of all licensed money lenders that includes their business names, license numbers and contact details. You can find this list online and download it as a PDF.

    Verify that the money lender’s name, address, license number, website URL, and phone number all match.

    2. See If Their Interest Rates Are Too High

    Keep an eye out for the money lender interest rates that are too high. Remember that the Ministry of Law has set a maximum interest rate of 4% per month.

    It’s important to remember that the late interest rates only apply to the due amount and not the entire balance.

    3. Absence Of A Money Lender’s License

    Always verify the legitimacy of a money lender by asking to see its license. Its certificate of authority (or license) should be clearly visible in its office. If the lender does not display it, it may not have a permit.

    4. Lending Money Without Verifying A Client’s Income

    If a money lender offers you a sizeable loan without verifying your regular income, tread carefully – or better yet, start running.

    Singapore law caps loan amounts that legitimate money lenders can give based on your monthly income.

    Typically, a licensed money lender can only lend borrowers up to six times of their monthly income.

    5. Asking For A Fee Before Approving Your Loan

    It is against the law for a legitimate money lender to charge you anything upfront before it even considers your loan request.

    In reality, a 10% processing fee is the maximum that a licensed money lender can charge after approving your loan.

    You should exercise caution with any money lender that demands upfront payment.

    6. Shady Terms In The Loan Contract

    If you want to avoid any unpleasant surprises down the road, read the loan agreement thoroughly and preferably more than once.

    The terms in the contract should be complete and in line with what the lender has verbally promised you, so if any terms are missing, that’s a red flag.

    Any mention of “0% money lender interest rates” or “guaranteed approval rate” should raise red flags immediately. If you see these claims anywhere, including in the contract, walk away.

    What To Do After Taking The Loan

    After you’ve received your loan principal, double-check the approval fee charged by your money lender. The maximum fee it can collect from you is 10% of the loan’s principal after loan approval.

    For future reference, keep the following documents in a safe place:

    • Proof of your loan repayment history
    • All relevant receipts, invoices, and other paperwork
    • Detailed financial report on your loan
    • A copy of the loan contract

    Be sure to make your monthly payments on time without fail. The lender can charge additional fees and interest if you are late with a loan payment.

    If you have trouble repaying the loan, contact your lender before your loan installment is due and work something out together. This is the best way to settle a licensed money lender.

    Finding A Licensed Money Lender In Singapore Is Simple

    You can feel safe borrowing from licensed money lenders because of their regulated interest rates and fees stipulated by the Moneylenders Act.

    The government has put in place stringent legal protections for borrowers like you.

    CreditMaster is a top choice among Singapore’s licensed money lenders for those who find themselves in a tight spot.

    We offer quick financial support with simple loan terms. We can tailor the loan to fit your capacity to repay with no tedious paperwork or complicated procedures.

    Contact us now or apply for a loan with us today.

    Dexter Lee

    Born with a pen in one hand and a keyboard in the other, Dexter's been crafting words into beautiful prose since he was old enough to scribble on his walls (much to his mother's chagrin). He's a self-proclaimed pun master, often leaving his coworkers in stitches with his clever wordplay. He's been known to strike up conversations with strangers and turn their stories into captivating content that keeps readers coming back for more. Despite his unconventional approach to life and work, Dexter takes his job as a content manager very seriously. He knows that every piece of content he produces has the power to make a difference in someone's life, and he's committed to using his words for good.

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