When it comes to personal loans, licensed money lenders are alternatives to financial institutions like banks. They have less paperwork and faster loan approvals.
As a borrower, you may feel apprehensive about working with a licensed money lender. But the Ministry of Law has put in place rules that govern all licensed money lenders in Singapore to protect borrowers.
If you are in the process of looking for funds, here are some of the vital things you need to know about moneylender rules.
The best way to check if a money lender is licensed is to check the list of licensed money lenders in Singapore.
The Registry of Moneylenders, which is under the purview of the Ministry of Law, updates the list monthly. This helps borrowers to avoid loan sharks while applying for personal loans.
You can easily spot unlicensed money lenders. It’s a red flag if the lender:
Note that licensed money lenders cannot solicit people to take loans via SMS, phone calls, or emails. A legal money lender can only advertise its business on the following:
If you encounter an unlicensed money lender, you should report it to the Registry of Moneylenders or call the police hotline at 1800-255-0000.
There is no limit on secured loans, which are less risky to licensed money lenders, as they can recover the borrower’s property in case of default.
For unsecured loans, there is no collateral. Thus, the law has set a maximum amount that borrowers can apply for. This applies to all licensed money lenders in Singapore:
According to Singapore’s Moneylenders Act, the maximum licensed money lender interest rate should not exceed 4% per month. The rate applies to both secured and unsecured loans.
This interest is to be computed on your outstanding monthly balance.
If you default, a late interest of 4% per month will be computed based on what is overdue. It’s against the rules to charge such interest on any outstanding amount not yet due to be repaid.
In addition, a licensed money lender can impose fees as follows:
Note that all the above costs imposed by a licensed money lender, including monthly interest, administrative fees, late fees and interest, cannot exceed the amount equivalent to the principal amount.
Before applying for a loan, be sure to understand its requirements. Your money lender in Singapore will ask you to provide the following:
In addition, licensed money lenders consider your income level and other financial obligations. It would be best if you only borrow what you can repay to avoid late payments and defaulting.
All licensed money lenders have to abide by the Moneylenders Act in Singapore.
Knowing what to do before and after a loan is granted helps you to know what to expect in the loan process.
Before you sign any document, you should consider a few things:
With this, you will better understand how to settle with a licensed money lender.
Once your loan has been granted, you should make sure that:
If a money lender is unwilling to act according to the law and starts to harass you, you can lodge a complaint to the Registry of Moneylenders. The court will do the necessary to determine if a loan transaction is unreasonable and considerably unfair.
The Registry of Moneylenders is not able to assist borrowers who are unable to meet their financial obligations.
If you are unable to pay your money lender in Singapore, try these options:
In such a situation, a Singapore legal money lender has no right to take legal redress – not unless it has been authorised by the court.
Taking a personal loan in Singapore without adequate information on licensed money lenders is extremely dangerous. The more you know about moneylender rules, the less likely you are to fall prey to loan sharks and unlicensed lenders.
You can also safeguard yourself by checking the name of the money lender you want to contact from the Registry’s list, including all its contact information.
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