Many people who take a loan from licensed moneylenders have a very vague idea about the money lending industry. In this post, we will explain the requirements and rules for obtaining a money lending license in Singapore and how you can check if your lender is licensed.
The first thing to note is that every legal money lender has to be registered and licensed by the Ministry of Law. The first step to getting a license is to sign up for the Moneylender’s Test, which costs $130. Applicants also have to satisfy certain basic criteria, including educational qualifications. Here’s a step-by-step guide for the entire process..
[Note: The issuing of new money lending licenses has been suspended by the Ministry of Law as of December 2021.]
The best way to confirm if a money lender is licensed is to check the name of the business, its contact details and the listed address against the official list of licensed money lenders maintained by the Ministry of Law.
However, it is risky to go by just the business name alone. Illegal lenders who do not have a money lending license in Singapore sometimes impersonate accredited lenders by using a name from the official register. You can only be sure that you are dealing with the right business by calling their office number or visiting their office(s).
Another good indicator of whether a money lender is legitimate is to observe how they advertise to you. Singapore law restricts money lenders to only advertising on their own websites, placing advertisements on their office premises and in business or consumer directories. You can find more details here (under point 6).
If you receive phone calls, WhatsApp messages, SMS messages or emails from someone claiming to be a licensed money lender, be very careful. It is unfortunate that some licensed moneylenders may also use these illegal tactics. If they do, you can report this to the Ministry of Law.
The third sign of a licensed money lender is the loan contract itself. Licensed lenders have to follow the rules set down in the Moneylenders Act for every contract. They must include specific information such as the loan principal, interest rates, loan term (period) as well as other relevant terms, including penalties and charges.
Aside from the licensing requirements, Singapore law sets limits on the fees and penalties a lender can charge, as well as general guidelines on their conduct.
Here are 5 of the most important rules and regulations:
1. Interest rate cap – Licensed lenders may only charge a maximum of 4% interest per month on the remaining amount owed (NOT the original principal amount). This is for both secured and unsecured loans.
2. Late interest cap – Lenders may only charge a maximum of 4% interest per month on the amount that is late (NOT on the principal amount or remaining balance).
3. Caps on other fees:
a. Loan processing fee – This is capped at a maximum of 10% of the loan principal
b. Late fees – Lenders may charge a maximum of $60 as late payment fees for each month of late repayment
c. Legal fees – Any legal fees granted by a court for successful claims on defaulted loans
4. Harassment – There are strict limits on the methods that a lender can employ to recoup their loan and they are not allowed to harass borrowers. These are explained in greater detail below.
5. Adherence to the Moneylenders Act – Money lenders who are granted a money lending license in Singapore have to abide by the rules in the Moneylenders Act 2008 and Moneylenders Rules 2009.
Unlicensed money lenders, also known as ‘loan sharks’ or ‘Ah Long’, may seem like a convenient option but they are dangerous, unpredictable and very expensive despite their ‘assurances’. Here are 5 of the main differences:
1. Cost regulation – Licensed money lenders are bound by the Moneylenders Act in terms of the fees and interests they charge. Loan sharks can charge whatever they like and can change the terms as they please.
2. Debt collection – Licensed money lenders are restricted in their methods in pursuing outstanding debts so as to minimise harassment to the borrower even when a payment is overdue. Loan sharks often resort to harassment, intimidation, vandalism and even violence.
3. Loan approval – Licensed money lenders are allowed to give provisional loan approval before a face to face meeting but can only finalise it in person. This protects the borrower from identity fraud and the money lender from financial fraud. Loan sharks don’t care about the risk to you – so if any money lender does not want to meet you face to face, be wary that they may be illegal.
4. Loan contract – Before your loan funds are disbursed to you, you will need to sign a loan contract with licensed money lenders that includes all the relevant information, such as the loan principal, applicable interest rates and repayment period. Loan sharks usually do not have a contract that details all these, so that they may change the terms of the contract easily later on.
5. Office hours – Most licensed money lenders operate roughly within normal business hours, with some closing shop slightly later. Be wary of a money lender that claims to provide 24 hours services. (This does not include online application services with licensed money lenders as the websites are online all day.)
In the unfortunate event that a borrower is unable to repay a loan, licensed money lenders will attempt these 3 courses of action:
1. Send a Letter of Demand (LOD) by post to the debtor’s home or office address.
2. Visit the debtor’s home or office themselves or delegate the task to a debt collection agency.
3. Take the debtor to court. If the debtor loses the case, they may have to pay the money lender’s legal costs, too.
The code of conduct and good practices set by MinLaw states that money lenders cannot harass their debtors even if payments are overdue. Harassment includes bullying, using threatening words and actions as well as all acts of violence. This prohibition also covers the behaviour of any external debt collection agency hired by the money lender.
Anyone who is a victim of money lenders’ harassment may:
- Report it to the police
- Lodge an official complaint with the Credit Association of Singapore
- Lodge an official complaint with MinLaw’s Registry of Money Lenders
- Consult with social service agencies on the best course of action (Point #11 here).
The total amount you can borrow from a licensed money lender depends on your residency status in Singapore as well as your annual income:
|Annual income||Singapore Citizens and PRs||Foreigners living in Singapore|
|Less than $10,000||$3,000||$500|
|$10,000 – $20,000||$3,000|
|Over $20,000||6 times monthly income||6 times monthly income|
If you are ready to apply for a loan, remember to check out this step-by-step guide.
But regardless of how large or small an amount you need to borrow, always ensure that you are dealing with a licensed money lender.
If you are ready to apply for a loan, Synergy Credit is a money lender with a valid money lending license in Singapore. We offer fast approval, transparent processing and excellent customer service every day.
Get the money you need legally and safely with us. Apply for a loan here.