A vast majority of Singaporeans rely on alternative sources of finance for their education, leisure, health, wedding, and other expenses. However, in Singapore, taking a loan is often seen in a bad light. In fact, several myths about moneylending prevent the citizens of Singapore from approaching moneylenders, forcing them to opt for alternative routes to provide for their emergency needs. This often lands them in greater debts.
The Monetary Authority of Singapore (MAS) has left little space for unlicensed moneylenders and loan sharks. As a result, moneylending is becoming an effective tool that can support you when you are short on cash.
In this post, we aim at busting the top myths associated with moneylending, enabling you to confidently approach a moneylender for a personal or payday loan.
1. All Moneylenders Are Loan Sharks
That’s not true! In Singapore, moneylending is governed by the Moneylenders Act which effectively tackles the issues of loansharking and related harassment. The Monetary Authority of Singapore’s commitment to such illicit activities has led to a steady decline in loansharking cases since 2009. Thus, the number of loan sharks in Singapore has significantly gone down.
Secondly, you can easily tell a loan shark from a licensed moneylender. Loan sharks will contact you via any media that doesn’t involve face-to-face interactions, namely cold calling, SMS, or Whatsapp. Further, they will offer you lucrative finance options like easy access to money or easy repayment plans without enquiring about your credit-worthiness. They will ask you for your NRIC picture that holds critical information, such as your address and birth date. After you send these details, they will transfer money to your account without a contract to protect you.
Thus, it’s easy to differentiate between loan sharks and licensed moneylenders. Before borrowing cash, it is important to weigh your moneylending options and get some trustworthy online financial advice, enabling you to stay away from the ah longs and count on a licensed moneylender.
2. There’s No Way to Spot an Unlicensed Moneylender
No person is allowed to be a moneylender unless they have a license or are excluded or exempt moneylenders under the Moneylenders Act.
- Excluded Moneylenders are those who are permitted to lend money under any other written law. For instance, a pawnbroker may not be licensed under the Moneylenders Act but maybe holding a license under the Pawnbrokers Act. Such a moneylender may be considered as a licensed moneylender.
- Exempt Moneylenders are those who are specifically exempted from holding a moneylender’s license based on the discretion of the government and subject to the approval of an application for exemption, as provided under the law.
Use the aforementioned information to determine whether or not a moneylender is licensed under the law.
Further, licensed moneylenders are prohibited from soliciting loans through WhatsApp, text messages, or phone calls. They can only promote their business through:
- Business or consumer directories (print or digital)
- Their own internet websites
- Advertisements placed in and around the approved place of business.
Further, all moneylenders need to pass a test conducted by the Registry of Moneylenders to procure a valid license. As of July 2019, Singapore has 158 licensed moneylenders. Go through the list of licensed moneylenders on the Ministry of Law website and check their registration or license number.
Lastly, a licensed moneylender will never ask you to sign blank documents or incomplete contracts, rush you into signing a Note of Contract, or offer dodgy information pertaining to the loan.
3. Moneylenders Only Lend Money to Salaried People
If you are self-employed or work on a contract, you may think that moneylenders may not be interested in lending money to you. However, the fact is, licensed moneylenders are more flexible than you think. If you can provide information, such as your employment details, bank statements, and SingPass details, you qualify for a loan just like a salaried person.
4. Hidden Fees Are Misleading
You will find the fees misleading only if you fail to exercise due diligence before signing the contract.
Besides charging a maximum interest rate of 4 percent per month, licensed moneylenders can impose other fees as provided by the law. Thus, depending on the terms of the contract, they may charge late payment fees, loan approval fees, upfront administrative costs, and legal costs incurred by them to recover the loan amount. However, all these costs put together cannot exceed the principal loan amount.
Make sure all the fees are spelled out aptly in the contract. Also, if you do not understand the contract terms, it is advisable to check with the moneylender or your financial advisor.
5. Only Banks Can Provide Business Loans
Most business owners turn to banks for business loans. However, licensed moneylenders in Singapore can offer business loans with lesser paperwork compared to financial institutions. During the loan application process, a licensed lender may ask you for details, such as the type of industry, the expected business size and annual profits, and a few necessary documents.
They can also help you determine the most suitable type of loan for your business. So, if you need urgent funding for your new or established business, private licensed moneylenders can help.
6. A Person in Multiple Debts Shouldn’t Approach a Moneylender
When you are buried under huge debts, borrowing cash from a moneylender is the last thing on your mind. Further, you may be concerned that applying for additional loans can adversely affect your credit score.
However, the fact is, even if your credit is falling, moneylending can be an effective and easy option for you. Firstly, though moneylenders do a thorough background check before lending money, they do not lay too much emphasis on poor credit rating. As long as you have proof of a decent income, borrowing from a moneylender shouldn’t be a challenge. On the other hand, a bank or credit card company would require proof of income along with a minimum credit bureau score.
Secondly, taking a loan from a licensed moneylender can help you consolidate and pay off all your current debts, thereby improving your credit score and reputation with banks.
Moreover, taking a loan from a licensed moneylender is far more cost-effective than having a credit card. Think about it! Credit card companies charge interest of around 25 percent per year. So, if you have multiple credit card debts, imagine how much money you owe these firms. On the other hand, accepting funds from a moneylender to pay off these debts will free you from the overwhelming interest rates. Further, you will have the benefit of a smaller interest rate and a longer duration for paying off your loan. Doesn’t that sound like a cost-effective option?
Most Singaporeans are hesitant of approaching moneylenders for a loan as their minds are clouded with several moneylending half-truths. However, moneylending is one of the quickest, safest, and easiest ways to procure a loan as it requires less documentation and no collateral and is devoid of restrictions that exist with other types of loans.
We are sure the information shared in this post has helped you get clarity about moneylending. So, the next time you need a personal loan or desire to consolidate your debts, go to a licensed moneylender without any inhibitions. But remember to make timely payments to avoid penalties!
Questions? We have answers
It is legal to lend money in Singapore as long as you are not carrying on the business of money lending. To make money lending your business, you would require a license from the Ministry of Law.
You could also lend money as an “excluded moneylender”. The definition of an excluded moneylender can be found here: https://sso.agc.gov.sg/Act/MA2008?ProvIds=pr2-.
Yes. Foreigners can apply for a loan with any licensed moneylender in Singapore. Compare the rates offered by moneylenders and apply for a loan on the CashGuru platform:
According to the Ministry of Law, the maximum interest that a moneylender is allowed to charge is 4% per month which adds up to 48% per year. Find out more about borrowing from licensed money lenders here: https://blog.cashguru.sg/borrowing-from-licensed-moneylenders/
No. Licensed money lenders are not considered “ah longs”. An Ah Long is someone who lends money illegally.
Moneylenders are commonly stigmatised as “Ah Longs” due to their high interest rates. However, there is a difference between unlicensed moneylenders (Ah Longs) and licensed money lenders. As of 2019, the Ministry of Law in Singapore has provided money lending licenses to 157 businesses. With a license, businesses are allowed to lend money legally.
You will know if a moneylender is licensed by checking if their company is listed on the Ministry of Law’s list of valid money lenders in Singapore. You can find the list here: https://rom.mlaw.gov.sg/information-for-borrowers/list-of-licensed-moneylenders-in-singapore/