When choosing a personal loan in Singapore, one of the most important considerations is how much the loan interest is. After all, the interest is what determines how much your loan costs, and loans with high interest are more difficult to pay off.
However, the interest on the loan isn’t the only thing you should pay attention to. You also need to note the admin fees, late charges, and any other fees that you may be subject to.
To help you make an informed choice, this article will explain the rules regarding moneylender loan interest and fees in Singapore.
Moneylender loan interest, fees, and charges allowed by law
Licensed moneylenders in Singapore are bound by law to follow the rules and regulations set down by the Registry of Moneylenders Singapore.
To prevent borrowers from falling into a debt trap when taking loans, strict limits have been put in place surrounding how much a moneylender is allowed to charge in terms of interest and fees.
The following table spells out these items and their mandated limits. Moneylenders are not allowed to add any other fees or charges, nor are they allowed to exceed these caps.
| Admin fee | Up to 10% of loan principal |
| Loan interest | Up to 4% per month on outstanding loan principal |
| Late payment charge | S$60 each month payment is late |
| Late interest | Up to 4% of the amount due for the month |
| Maximum payable in interest, fees, and charges in total | 100% of the loan principal |
| Legal costs for successful recovery of loan | As ordered by the court |
Admin fee
Upon approval of your loan, you will be charged a one-time admin fee. The maximum admin fee moneylenders are allowed to charge is 10% of the loan amount.
Also, note that the admin fee will be deducted from your loan before it is disbursed to you, meaning that you will receive a smaller amount than applied for.
So, if you apply for a S$3,000 loan with a 10% admin fee, you will only receive S$2,700 in hand (S$3,000 – 10%).
Loan interest
Loan interest is charged by the moneylender for providing the loan. It is calculated as a percentage of the amount you borrow.
Under the law, the maximum interest a moneylender may charge is 4% per month. However, the loan interest is only allowed to be charged on the portion of the loan that has not yet been repaid.
In other words, moneylender loans are calculated using the “reducing balance” method, akin to how a home mortgage is structured.
This means that while the amount payable each month is fixed, the portion that goes towards the interest on the loan becomes smaller with each passing month.
Here is an example of repaying a $1000 loan over 6 months at a 4% interest rate per month:
| # | Payment | Interest | Principal | Balance |
| 1 | 168.62 | 3.33 | 165.29 | 834.71 |
| 2 | 168.62 | 2.78 | 165.84 | 668.88 |
| 3 | 168.62 | 2.23 | 166.39 | 502.49 |
| 4 | 168.62 | 1.67 | 166.95 | 335.54 |
| 5 | 168.62 | 1.12 | 167.5 | 168.04 |
| 6 | 168.6 | 0.56 | 168.04 | 0 |
Late payment charge
What if you fail to make any repayments? Well, you will incur a late payment charge, which will be added to what you owe.
The late payment charge on a moneylender loan is fixed at S$60 and may only be charged once for each month of late repayment.
Late interest
In addition to the late payment charge, you will also be subject to late interest.
Licenced moneylenders are allowed to charge up to 4% per month for each month of late payment. This interest is only allowed to be charged on the late amount, and not the remaining loan amount.
To illustrate using our example above, suppose you missed this month’s loan instalment of S$200. The maximum amount of late interest you will incur is 4% x S$200 = S$80.
This will also be added to what you owe.
Maximum payable in loan interest, fees, and charges
Between the loan interest, admin fee, late charge, and late interest, your debt can quickly balloon out of control. This is why it’s a good thing that the authorities have imposed one final guardrail.
The maximum amount payable across interest, fees, and charges cannot exceed 100% of the principal loan amount in total. This means that if you borrow S$5,000 from a moneylender, and fails to repay your debt, the maximum amount the moneylender can claim from you cannot exceed S$10,000.
While this rule limits your financial liability, it nevertheless means that your debt can still double in size.
Legal costs
Should your moneylender initiate court proceedings against you to recover your debt, know that you will be held liable to pay their legal costs should the claim succeed.
The legal costs you have to pay will be determined by the court.
Only work with moneylenders that respect your rights
Under official moneylender guidelines, the onus is on moneylenders to explain clearly the loan interest, fees, charges, and other important terms to borrowers. Moneylenders must ensure that borrowers fully understand the loan they are signing up for.
Reliable moneylenders respect your rights as a borrower, including the right not to be unfairly charged or overcharged, so it is well worth your time to seek them out.
Synergy Credit makes sure that every loan application is clearly explained in easy-to-understand terms. We are more than happy to clarify anything you may be unsure of, and we advise you on the best loan package for your circumstances. Speak with our friendly personal loan team today.
