While Singapore is generally law-abiding, illegal moneylending unfortunately still persists. Unlicensed moneylenders – also known as loan sharks – are notorious for imposing unreasonably high interest rates that make clearing your debt extremely difficult, if not impossible, trapping you in a never-ending cycle of debt. And should you become unable to pay, they will carry out harassment and intimidation tactics against you and your family.
Hence, before taking a loan, it is important to know how to differentiate between a licensed moneylender and a loan shark. Here are 6 signs to watch out for.
6 Key Differences Between Licensed Moneylenders and Loan Sharks
1. Loan amount
How much you can legally borrow from a licensed moneylender depends on your income level. There are also different loan limits depending on your citizenship. See the following table.
| Annual income | Maximum moneylender loan |
| Less than S$10,000 | Singaporean and PR: Up to S$3,000
Foreigner: Up to S$500 |
| S$10,000 or more but less than S$20,000 | All borrowers: Up to S$3,000 |
| More than S$20,000 | All borrowers: Up to 6 times monthly income |
As all moneylenders are required to abide by these loan limits, this is one of the key differences that help you spot a loan shark.
Anyone that promises to lend you a loan that exceeds these limits is doing so unlawfully. Hence, you should be wary of taking up such offers, as you are very likely dealing with an unlicensed moneylender.
2. Interest rates and fees
Here’s another set of numbers to familiarise yourself with to better steer clear of illegal moneylenders.
The Ministry of Law has clearly defined limits regarding how much licensed moneylenders can charge for their services. This includes loan interest rates, admin fees, and other charges. The stipulated limits are:
- Loan interest rate: up to 4% per month
- Admin or processing fee: up to 10% of loan principal
- Late payment fee: up to S$60 per month
- Late interest: up to 4% per month of the late amount
- Total interest and fees: up to 100% of loan principal
- Legal costs for a successful claim of recovery of the loan: as ordered by the court
Illegal moneylenders are likely to ignore these limits and offer you loan packages with interest and fees that are higher than legally allowed.
Hence, if you come across loans with interest rates that exceed 4% per month, or admin fees that are more than 10% of the loan amount, this is another key sign you may be dealing with a loan shark.
Additionally, loan sharks may attempt to hide their high interest rates by offering unconventional terms (such as paying X amount every Y days) or by including extra charges or hidden fees. If you are unable to clearly understand your loan interest rate, you should not proceed.
3. Loan contract and documentation
Licensed moneylenders are required to provide you with proper documentation as an official record of your loan.
One crucial document is the loan contract, which spells out the terms of your loan package – especially important details like the loan amount, loan tenure, interest rate, and fees and charges.
The licensed moneylender should go through and explain the loan contract with you in person, and clarify any questions you may have. Both parties should also sign off on it before the loan is disbursed.
If you do not receive a proper loan contract, or the document is vague and missing important terms, be wary that the other party may be a loan shark.
4. Official registration and place of business
All moneylenders in Singapore are required to register with the Ministry of Law before they can legally carry out moneylending activities.
The Ministry’s Registry of Moneylenders oversees and maintains a list of all licensed moneylenders in Singapore, which acts as a valuable resource for borrowers to help avoid falling prey to loan sharks.
You should check the official list of moneylenders to see if your lender’s company name appears on it – if not, that is a clear warning sign the moneylender is operating illegally as a loan shark.
Another check you can do is to see if there is a registered office address, which is a standard requirement for any business in Singapore. Loan sharks or unregistered moneylenders are unlikely to have a registered business address.
5. Advertisement channels
The channel through which a moneylender advertises itself to you can also help you determine whether you’re dealing with a licensed moneylender or a loan shark.
Under the law, licensed moneylenders are only allowed to advertise through these three ways:
- Their website
- Consumer directories, print, or online
- Advertisements placed within or on the exteriors of their business premises
This rule makes it easy to filter out loan offers from shady moneylenders. If you receive loan ads from social media, messaging apps, SMSes, phone calls, or flyers – or anything outside of the three permitted channels – they are likely to be coming from a loan shark and are best ignored.
6. Level of professionalism
Last but not least, the level of professionalism you receive can also clue you in on the legality of your moneylender.
Besides strict rules and regulations, licensed moneylenders are also held to high levels of professionalism when dealing with customers. All moneylenders are expected to follow the guidelines laid down in an official service handbook and must uphold high service standards at all times.
And it’s not just for show either. Failure to maintain high professionalismcan cause the moneylender to be suspended or blacklisted – especially if there has been a severe lapse in service.
Hence, this is another key differentiator between a licensed moneylender and one operating illegally. You should be encountering professionalism and good service standards at all times.
But, if you are instead getting the opposite – such as rude service, having your calls or questions ignored, abusive language, or even threatening behaviour – you could very well be dealing with an illegal moneylender or loan shark.
Don’t waste your time with unprofessional moneylenders or worse – risk getting into trouble with loan sharks. Synergy Credit is a leading licensed moneylender in Singapore that offers quick personal loans at competitive interest rates. Contact our friendly team to discuss your loan needs today!
