Should You Borrow From A Moneylender In Singapore? Is It Legal?


Not any moneylender Singapore has is legit. There are a lot of scams. We’ve all read stories about their cut pig heads, death threats, and extreme extortion.

However, those are Ah Longs, aka loan sharks.

Licensed moneylenders aren’t the same as loan sharks. They run legal businesses and follow the rules set by MinLaw to the T.

Of course, some agents have less experience than others or personalities that wouldn’t click with yours. Therefore, although you can expect legally fair treatment from these loan officers, you should always double-check various licensed moneylenders before making your choice.

Besides, you should understand how loans from licensed moneylenders in Singapore work. That’s what this article is about, so keep reading below.


Licensed Moneylenders Singapore: The Basics

Licensed moneylenders have authorisations from the Monetary Authority of Singapore, so their work is perfectly legal. By comparison, loan sharks don’t have these licenses, so they can’t legally grant loans in this country.

Here’s why that’s important:

MAS writes the laws that licensed moneylenders are supposed to obey and imposes them – meaning regular checks, following up with complaints, etc.

This process ensures that your loan will work seamlessly according to those rules. Thus:

• Your moneylender can’t change the interest rate during your loan as they see fit.

• They won’t confiscate personal documents or drill you for passwords to your accounts.

• You will pay comfortable and predictable instalments during the agreed tenure.

• If you can’t make a payment, the penalty is meagre. If you also have a good reason for missing a few instalments, a licensed moneylender is open to compromise and negotiation.

• If you default on your loan, no licensed moneylender Singapore has will write O$P$ on your door. Instead, they go through all the legal proceedings with you.


Eligibility, Approval, and Maximum Sums

In principle, everyone’s eligible for getting a personal loan in Singapore. In practice, foreigners have a more challenging time finding a suitable option compared to citizens and Permanent Residents because:

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• Some licensed moneylenders in Singapore don’t grant loans to foreign citizens.

• Some licensed moneylenders impose more paperwork for foreigners than Singapore citizens and PRs.

• The law in Singapore says that foreign citizens earning less than $10,000/ year are only eligible to borrow $300. By comparison, citizens and PRs in this income range are eligible for loans up to $3,000.


How Much Can I Borrow?

For Singaporeans and Permanent Residents (PRs), if your annual income is less than $20,000, you can borrow up to $3,000. If your annual income is $20,000 and above, you can borrow up to 6 times your monthly income.

For foreigners residing in Singapore, if your annual income is less than $10,000, you can borrow up to $500. If you earn between $10,000 and $20,000, you can borrow up to $3,000. If you make more than $20,000 annually, you can borrow up to 6 times your monthly income.

Note: These maximum sums refer to loans without collateral, aka unsecured loans.

If you opt for a secured loan such as a home loan or car loan, you can obtain more money.

So how do you get those funds?

The application is seamless for most licensed moneylenders. All you have to do is upload the needed documents on their website. If you’re a citizen/PR, you can usually sign into your SingPass from licensed moneylenders’ websites to instantly upload your financial information.

As a rule of thumb, you’ll need to provide proof of:

• Identity: ID card/passport

• Residence: utility bills in your name, official letters, etc.

• Income: pay slips, CPF account statements, NOA statements, etc.

Pro tip: Before applying for a personal loan, check different options. Most licensed moneylenders craft specific packages for different needs and backgrounds, such as foreigner loans, emergency loans, wedding loans, and so forth.


Loan Interest Rates & Fees

The law in Singapore states that licensed moneylenders can only impose the following charges:

Admin fee·        Up to 10%

·        If you’re borrowing more money, some licensed moneylenders can waiver this fee altogether

·        Licensed moneylenders don’t ask for this sum before loan approval

Interest rate·        Maximum of 4%/month

·        If your moneylender charges reducing interest, your rate remains the same at 4%, but the interest rate is calculated from the outstanding balance.

Late payment interest rate·        Maximum 4% from the instalment you’ve missed
The late payment penalty fee·        Maximum $60
Legal charges·        Only if a judge imposes them.

Let’s see an example:

You take a $10,000 loan that you agree to repay within 12 months. The monthly interest rate is 3%, and you have a 2% admin fee. As such:

• Total interest rate: $3,600

• Total amount paid: $13,800

• Monthly instalment: $1,150

How Do You Repay Personal Loans?

A licensed moneylender in Singapore will usually agree to the following methods of loan repayment:

• Bank transfer

• PayNow


Pro tip: Licensed moneylenders in Singapore don’t impose early penalty fees. That means you can close your loan faster if you repay larger instalments than the ones you initially agreed to.

Also, some agencies have deals and discounts if you stick to your reimbursement schedule. One example is refunding you a portion of the initial admin fee.

What if you can’t repay your loan?

The first thing you have to do is remain calm and make any rash decisions. Contact your loan officer as soon as you find out that you can’t repay the upcoming instalment and explain the reason (e.g., an accident, layoff, sudden emergency in the family).

Your licensed moneylender will find a compromise solution, such as allowing you to pay just the loan’s interest for a few months or freezing your payments altogether.

How can you guarantee the success of your negotiations?

• Contact the loan officer immediately after the problem arises.

• Bring proof of the situation you’re in.

• Bring proof that you’ll be able to resume the instalments as usual once that emergency passes.

• Contact a counselling agency like Credit Counselling Singapore. This NGO will help you rethink your budget and renegotiate your reimbursement schedule at no cost.

That brings us to the following topic:


Loan Protection Insurance

Let’s say that you’re the breadwinner in your family. You own a business, and it’s not going that great, so you decide to take a loan for personal expenses.

However, you get in a car accident.

This accident is severe enough to require a few weeks in the hospital. This situation puts a halt on your business. Although you have some savings, your family needs that money for food and utility bills.

What happens to your loan instalments in this case?

Some licensed moneylenders in Singapore offer loan protection insurance for these precise horror scenarios. Although these agencies may be more expensive, they guarantee to freeze your loan temporarily until you recover from an accident or permanently in the event of death.


Licensed Moneylenders vs Bank Loans

Any licensed moneylender Singapore will start with this advantage:

Taking a loan from the bank is a much slower and tedious process. Although some banks in Singapore have smoothened their application & approval processes for smaller loans, you still have more hoops to pass if you want a more considerable amount. Banks also make it hard for people with lower incomes and lower credit scores.

By comparison, licensed moneylenders:

• Show more leniency towards people with low credit ratings or volatile earnings.

• Have specific packages for different purposes.

• Have higher approval rates.

• Require fewer documents.

• Don’t have any early repayment fees, meaning you can close your loan as fast as you want to without any penalty.

• Offer faster approval responses*, usually within 10 minutes to an hour after sending your online loan request.

*Warning: Don’t confuse this fast response with the actual loan approval. Licensed moneylenders in Singapore are obligated by law to conduct personal verifications at their headquarters. If your loan agent skips due diligence, you should be wary – they can be loan sharks or law-breaking lenders.

That said, bank loans have particular advantages, especially for people with perfect credit scores and higher incomes:

• Meagre rates

• Small installments

• Longer tenures

• Specific discounts if you have a relationship with the bank

Some Tips When Borrowing From A Licensed Moneylender

As you can see, taking a loan from a licensed moneylender in Singapore is a safe and straightforward process. Most loan agents work hard to hone their skills because they want to have as many successful contracts as possible. As such, you’re guaranteed to get a personalised loan that suits your needs and your income.

Thus, even if licensed moneylenders in Singapore impose higher interest rates than banks do, you’re likely not going to feel that difference too much in terms of your monthly installments. Remember that your agent’s purpose is to get its loan back without incidents.

Do remember to make timely repayments for your loan to prevent late fees and charges!