Borrowing From Moneylenders: What You Need to Know

Businessman and customer shaking hands

As much as possible, nobody wants to borrow money from any lender because you’ll need to compensate them with interest. Singapore’s banks and financial institutions have continuously engaged in legal and regulated moneylending practices, allowing them to charge added fees over interest rates. However, it’s wise to borrow money if you don’t have the luxury of saving.

Whether it’s for convenience or an emergency, wisely borrowing money is an excellent decision. If you have low credit scores, you can use licensed moneylender loan services. To many Singaporeans, licensed moneylenders are worlds different than banks.

You can ensure you have the smoothest borrowing experience possible by using everything we’ve written and listed here. This post helps first-time licensed moneylender borrowers who want to know all about their services, terms and conditions, and more.

Who are Licensed Moneylenders?

The v of 2008 established moneylenders as parties that can act as the primary lender of money or the bridge and middleman between two lending institutions. If this party received a moneylending license from the Registry of Moneylenders (ROM), they have every right to provide their lending services.

Singapore’s government identifies loan sharks as unlicensed individual lenders. They can be organized institutions with multiple agents, too. If the ROM has previously banned a former licensed moneylender, they cannot engage in moneylending practices unless ROM has legitimized their practice with a license once again.

Licensed moneylenders operate under a series of authorized and restricted actions to protect their own and their borrowers’ rights. In the next section, you’ll learn more about easily identifying licensed moneylenders.

Identifying Licensed Moneylenders

The Registry of Moneylenders has a dedicated and frequently updated licensed moneylender list, allowing any borrower in Singapore to check and evaluate their prospect lender’s legitimacy.

If you have found a moneylender during your search queries, you can download the ROM’s present list and check their name and license number. Anytime you cannot find the licensed moneylender’s license number, you should avoid using their services even if they provide you an attractive offer.

All legitimate moneylenders openly display their license numbers for all prospective borrowers to view and evaluate. Be wary of licensed moneylenders refusing to display their license numbers because they’re most likely unlicensed lenders or even loan sharks.

Advertising Practices

In Singapore, it’s a routine activity to receive unsolicited text messages. While illegal, Singapore’s government has yet to come up with a permanent measure, but you can block them from sending you another message. Loan sharks and unlicensed moneylenders give their best effort in giving you the most enticing and attractive offers. However, Singaporean licensed moneylenders cannot engage in outreach advertising, such as:

  • SMS, call, and internet chat messaging
  • Email list and lead generation

Licensed moneylenders can only advertise their respective legal, physical property specifications and online business directories, and respective brand websites.

ROM Registration

The Registry is responsible for the testing, evaluation, licensing, and revocation of moneylending licenses. All prospective moneylenders must take the test, which varies in items before a moneylender can receive their lending license. Therefore, any lender with a license is under the ROM and Ministry of Law’s regulation and jurisdiction. Borrowers can trust that their activities, offers, and contracts are legitimate, and they have recourse for any possible undesirable events or misconduct.

The ROM is a sub-department of MinLaw. It answers directly to the Ministry of Law and implements any legal changes the latter might have concerning Singapore’s licensed moneylenders.

Take Note of Suspicious Moneylender Activities

The Moneylenders Act of 2008 exists to protect customers against illegal moneylending activities. Loan sharks use abusive practices to hook and trap needful borrowers. By sending unsolicited chats and SMS with attractive offers, many Singaporean and foreign borrowers mistake their service’s legitimacy and fall prey to their seemingly friendly but heavily manipulative lending practices.

However, zero recourse is the least of a borrower’s worries with a loan shark. These parties can change your loan contract’s terms and demand higher monthly payments from you. They can add higher interest rates or processing fees above your principal. Lastly, they can engage in identity theft by withholding your SingPass ID and other confidential documents.

Here is a list of commonly suspicious moneylending activities. Plus, keep in mind that even licensed moneylenders may commit this. If it should happen, you can call and report their activity to the Ministry of Law.

  • Threatening or Abusive Language
  • Asking and Retaining Your SingPass ID and Password
  • Blank Note of Contract For Loan Signing
  • Immediate Loan Grant
  • Withholding the Agreed and Finalized Principal Loan Amount

A Borrower’s Loan Application Checklist

A smooth loan application process comes from a dedicated plan and foresight. Every loan’s purpose is to provide a high cash amount in the shortest possible time. A wise borrower never applies for a loan to pay for grocery expenses and utility bills (unless they’re using a payday loan). In doing so, they avoid high interest over their loan principal and fully pay their dues where possible.

Before borrowing from any bank, financial institution, or moneylender, we highly advise borrowers to use the following list and condition themselves, review their resources, and make an informed financing decision during the right time.

Loan Contract Commitment

Upon signing their loan contract, all borrowers bind themselves to it like a seal. They pre-agree about the consequences of any future contract breaches or term violations. Loan contracts are necessary to bind both borrowers and lenders to their appointed roles and prevent neglecting their respective responsibilities to each other.

If you can’t agree to one small detail in your loan contract, the lender can revise it, or you can reject their loan application. However, don’t just agree for the sake of receiving financing, especially if the interest rate, processing fee, or other factors are too high or impossible for you and your resources to address. Many borrowers build unsustainable credentials for the sake of borrowing higher without proper financial planning.

Maximum Interest Rate

When planning your monthly budgets, keep in mind that all licensed moneylenders can only charge you a 4% interest rate for personal, payday, bridging, monthly, and foreign loans. On the other hand, licensed moneylender business loans can have a 5-15% interest rate payable with its principal within two years.

The flat interest rates are useful because licensed moneylenders charge interest per day except for business loans. Therefore, MinLaw and ROM restrict them from driving down customers into deep debt unwittingly, giving them better chances to recover, especially those with missed payments. Loan sharks have no ceiling rates, and they can radically change the interest rate and hurl additional fees without informing borrowers first.

Loan Processing, Late Payments, and Other Fees

All licensed moneylenders cannot charge more than 10% of the principal’s amount for a legal loan processing and administrative fees. Most loan sharks justify higher processing fees due to the handling of higher-amount loans. Lastly, lenders can charge a maximum of S $60 for every late payment each month. While the late penalty is a hefty sum, it’s to encourage borrowers to perform timely payments and fulfill their obligations according to their terms and conditions.

Moneylender business loans have a fee set unique to their counterparts. It charges borrowers zero processing fees and has flexible late fee options. In most cases, borrowers and lenders create a customized agreement on all penalties within their contract’s terms and conditions, which is why it takes much more time for business loans to get lender approval.

Lastly, if moneylenders file a claim against indebted borrowers and win, the former will shoulder all the legal costs the latter has incurred. The borrower will answer all other fees the lender incurs, including handling and other miscellaneous costs.

Equity and Collateral Requirements

All licensed lenders must inform you of equity or collateral requirements they need to grant their loan application approval. Borrowers with a questionable job or income stability often receive offers to lodge caveats on properties they possess. In most cases, licensed lenders accept property equity as collateral for securing a personal, bridging, monthly, or foreigner loan.

When you agree to equity and collateral attachment, you might be giving the lender partial or full property acquisition if you fail to pay for your loan. Clarify with the lender’s representative whether the collateral is enough to pay for any unpaid debt in the event of bankruptcy because they may have you address the unpaid remainder with a formulated payment plan.

Typical Licensed Moneylender Borrowing Requirements

Because all licensed moneylenders undergo regulation and consistent activity checks, you can trust them with your sensitive information. You have recourse through the Registry of Moneylenders and Ministry of Law for any document mishandling.

With licensed moneylenders, the typical eligibility for all their financial products except business loans are the following:

  • 18 years of age
  • Singaporean minimum monthly income: S $1,500
  • Foreign worker minimum monthly income: S $2,000

Business loans require all owners to be the following:

  • 18 years of age
  • Company earns S $60,000 minimum per year
  • The business is at least one year old

Personal Requirements for Borrowers and Sureties

Here is the usual information borrowers and sureties must provide licensed moneylenders.

  • Full name
  • Date of birth
  • Personal identification number
  • Nationality
  • Residential address
  • Email address (if any)
  • Contact number
  • Loan Amount

Supporting Documents Commonly Involved

To prove your eligibility and paying capability, moneylenders will ask you for the following documents. Take note that they might ask you for more documents on the spot.

  • 3 Months of Previous Payslips
  • Utility Bills
  • Other Payslips
  • Income Tax Statements

Common Foreigner Loan Requirements

Foreigners usually have to submit the following with their loan application.

  • S-Pass or Other Legal Working Passes
  • Passport
  • Tenancy Agreement Copy
  • Employer Letter of Offer
  • Offshore and Local Bank Statements

How Much Can Moneylenders Lend Me?

In this handy table, you’ll always know how much you can borrow from all licensed moneylenders in Singapore. This table is helpful when you’re planning your financing alongside your existing budget.

Loan Type Loan Amount
Personal Up to Six Times Your Salary
Foreigner Up to Six Times Your Salary
Payday Up to Your Monthly Due
Monthly Up to Six Times Your Salary
Business Up to S $200,000 maximum
Bridging Up to Six Times Your Salary

Top view of businessman signing documents

Upfront Information Licensed Moneylenders Must Provide

Information is crucial to a borrower’s successful loan payment. The Moneylenders Act of 2008 appoints all licensed moneylenders to provide all data and details regarding their financial products. Plus, their failure to do so can mean a possible suspension or ban from providing their services.

The lender must inform all borrowers verbally or in writing about the following crucial information regarding their financing:

  • Nominal Interest Rate
  • Late Interest Rate
  • Other Permitted Fee Charges
  • Installment Payment Details Where Available
  • Abusive Practices of Loan Sharks

To enforce proper business practices and help against the spread of illegal and unfair loan practices, all moneylenders must provide borrowers with a cautionary statement and elaboration about loan shark activities.

Failed Licensed Moneylender Loan Payment Process

Loan contracts protect borrowers from abusive lender actions when they fail to pay their financing. Lenders receive protection through the law because they can recover their capital from borrowers within the latter’s responsibility. In case you fail to pay your licensed moneylender, here is the entire process you’ll go through.

Refinancing Negotiation

Many licensed moneylenders are understanding, especially if they’ve previously worked successfully with the borrower. Even with new borrowers, licensed moneylenders are willing to negotiate for payment extensions or repayment plans to help you pay back your debt. However, beware that this has its respective limits and disadvantages.

Moneylender Claims

Borrowers who have not made payments to their loan for three months or more can receive a written legal warning from their licensed moneylender. In case moneylenders use their legal right to sue the borrower, they can quickly lay partial or full claim to collateral depending on the loan contract stipulations. Plus, they can present a claims court summons to the borrower.

Debt Repayment Scheme

Borrowers with total debts not exceeding S $100,000 can receive help from MinLaw through the Debt Repayment Scheme. DRS gives borrowers help from an Official Assignee MinLaw’s Insolvency Office appoints. Over a fixed period, the Official Assignee will create a suitable repayment calendar for borrowers and lenders.

Dealing With The Possibility of Licensed Moneylender Harassment

Any licensed moneylender harassing borrowers is subject to immediate suspension and an industry-wide ban on conducting moneylending activities. You can report them to ROM or MinLaw by calling 1800-2255-529. ROM has its online feedback form. They might ask you for the following information:

  • Lender name
  • License number
  • Contact Numbers

The ROM might contact you for an interview to learn more about your experience and gather more data.

Always Avoid Ah Longs By Working With The Best Licensed Moneylenders

By using this short, detailed guide, you can avoid working with loan sharks and only with legitimate and upstanding licensed moneylenders. Both are convenient services, but it’s best to have both parties’ legal rights and obligations in the clear with a proper contract and government regulation.

If you need an excellent for lender all your needs, you can always trust us at A1 Credit the best licensed moneylender by applying for a Singapore personal loan. We approve and release loans on the same day you submit all our requirements.

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