Q&A: Everything You Need To Know About Borrowing From Licensed Moneylenders

Every once in a while, you are bound to take out a loan. According to the latest statistics released by the Monetary Authority of Singapore, loan uptake has grown by 4.7% year-to-date. This article covers the top ten frequently asked questions by people looking to obtain a loan from licensed moneylenders.

What should I consider before taking a loan? 

Whenever you are in the market for a loan for your business or personal projects, you should keep these things in mind:

• Before you approach a moneylender, be sure to consider the alternatives, which include government financial assistance schemes. The first step is to contact the agencies to establish the nature of the various schemes
• That you are legally bound to fulfil the loan contract 
• Consider if you can abide by the contractual terms in regards to your income and other financial obligations. This way, you will be able to borrow what you need and know how to structure a payment plan. If you are unable to meet the contractual terms, the late fees and the interest payments could be a financial burden not only to yourself but to your family and dependants as well
• The moneylender ought to explain the loan terms to you in a language that you can understand as well as to provide you with a copy of the loan contract before signing it. You must read it through and understand the repayment schedule, the interest rates, and the applicable fees
• You should field offers from different moneylendersto find the most favourable terms. This will call for you to read through the terms and conditions in the loans contract before committing yourself to a single money lender 

However, the most important thing to consider is the terms that allow the lender to lodge a caveat on the sale proceeds of your property when you default on the loan. With that said, you will not be able to sell the property without paying the lender in full. If the loan repayment is taken from the proceeds of a sale of your property, it should clear the loan or a substantial chunk of the loan. 

How much can I borrow?

There are two types of loans; secured and unsecured. For starters, there is no limit for the amount of secured loan. For unsecured loans, on the other hand, the table below shows the amount you can borrow from licenced moneylenders in Singapore at any time:

Borrower’s Annual Income	Singapore Citizens & Permanent Residents	Foreigners living in Singapore
Less than SGD 10,000	SGD 3,000	SGD 500
At least $10,000 and less than $20,000	SGD 3,000	SGD 3,000
SGD 20,000 or more	6 X monthly income	6 X monthly income

What are the allowed interest rates charged by moneylenders?

As from October 1, 2015, the government put the interest cap at 4% per month. However, the cap is not dependent on the borrower’s income level or whether the loan is secured or unsecured.  

The interest cap also remains for each month that the loan goes unpaid. The computation of the interest charged on loan must be based on the principal amount remaining after the deductions from the original principal amount made by or on behalf of the borrower. 

For example, if you take out a loan of SGD 1, 000 and you repay SGD 400, only the remaining SGD 600 can be used to compute the interest. This late interest is charged on the amount paid late. The moneylender cannot charge interest on the total amount outstanding but only on what is due to be repaid. 

Suppose that you fail to pay the first instalment of SGD 200, for your SGD 1,000 loan. The moneylender should only charge interest on SGD 200 and not on the remaining SGD 800 since it is not yet due. 

What are the acceptable money lending fees?

With effect from October 1, 2015, moneylenders are only allowed to charge the following fees and expenses:

• A maximum of SGD 60 charged every month when you delay on the repayments
• A maximum of 10% of the principal after the loan is approved and granted, otherwise known as an administrative fee
• Any legal costs ordered by a court of law following a successful claim by the moneylender for loan recovery

Essentially, all the applicable fees and costs should not exceed the original principal amount. 

How do I ascertain the legality of a money lender?

One of the biggest headaches faced by borrowers in Singapore is in ascertaining whether the money lender is licenced or not. Fortunately, the Ministry of Law maintains a database of all the licenced moneylenders in Singapore. Moreover, you should be mindful of the moneylender that acts in the following ways:

• They use abusive language and threaten you 
• They ask for your SingPass user ID and/or password
• They retain your identification documents such as work permit, driver’s license, NRIC card, passport, ATM card or employment pass
• Ask that you sign a blank or incomplete Note of Contract for the loan
• Grant you the loan without issuing you with the Note of Contract if they fail to disclose the terms and conditions of the loan
• Grant you the loan without following the due process such as approving the loan via phone, emailing you before they receive your loan application form and supporting documents
• Withhold an amount of the principal amount 

These practices are not acceptable, and if you encounter them, you should report the lender to the Registry of Moneylenders. 

How can I distinguish between an advertisement from a licensed and unlicensed moneylender?

As from November 1, 2011, licenced moneylenders can only advertise through these channels:

• Consumer or business directories in print or online media
• The lender’s website
• Advertisements placed in or outside the business premises

These advertising rules will help you tell the difference between licenced and unlicensed moneylenders. This includes receiving SMSs, emails, and other forms of advertisement not outlined above. 

Can I rely on the advert content to take a loan from a moneylender?

You should seek clarification from the moneylender on the specifics of the terms and conditions and not to rely solely on the advert’s contents. Unfortunately, most Singaporeans overlook the importance of consulting the moneylender and taking loans based on what they have seen or heard from the adverts.

What should a loan guarantor/surety consider?

If you are standing as a surety for a loan, ensure that:

• You understand the responsibilities of the surety
• You receive a copy of the Note of Contract when the loan is granted to the borrower
• The moneylender has explained in detail the terms and conditions of the Note of Contract in a language that you can understand
• The moneylender does not take possession of your identification documents
• The moneylender does not get their hands on any information that contain the passwords to your user accounts

The surety can be an individual or a firm. The relationship between the borrower and the surety is solely based on trust that the borrower will repay back the loan, if not; the surety will pay it on their behalf.  

What should I do after the moneylender grants the loan?

After you get the loan, ensure that:

• The moneylender delivers the loan amount in full less the administrative cost of 10% of the loan amount
• Pay the loan amounts on or before time to avoid incurring late interest and late payment fees
• Get a receipt for every instalment paid to the moneylender
• Get a statement of account for all your loans at least once every January and July and check the correctness of the statement
• Retain all the statements of accounts and payment receipts

How do I lodge a complaint against a moneylender? 

As a borrower, you have the right to sue a moneylender against unfair practices or in the event the lender breaches the Note of Contract. Here is how to lodge a complaint against a moneylender:

• Contact the Registry of Moneylenders on the phone via 1800-2255-529 or the website
• Attend an interview with the Registry officers and provide the relevant information and supporting documents related to your loan transactions as well as the circumstances of your dealings

If the moneylender has engaged in unfair practices, you can pursue the matter through the Small Claims Tribunal. You could also sue the moneylender under the Consumer Protection (Fair Trading) Act. The court has the power to remove any loan transactions considered to be substantially unfair or exorbitant.

Conclusion

These are the rules and regulations issued by the Registry of Moneylenders on June 1, 2012, and were last updated on July 15, 2019. 

You can also use the loan calculator on our website to figure out how much you should pay in administrative fees, the monthly and total interest payable, as well as the total amount you will payback. Contact us today for professional advice when you are looking to apply for a loan in Singapore. Our support team is on hand to answer every question you might have about borrowing a loan in Singapore.