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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:
& Permanent Residents
|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|
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.
An Admin fee is charged by moneylenders as soon as the loan is approved. This fee is usually deducted from the principle amount you are borrowing.
A licensed lender cannot charge you a total admin fee of more than 10 percent of the principal amount.
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.
Money lenders use various sources of information such as your Moneylenders Credit Bureau (MLCB) Credit Report to determine your loan history and if you have made payments in a timely manner in the past. If you have had a history of late payments or defaults, moneylenders would usually increase the interest rate. However, if you have never missed a payment, they are likely to charge you lower interest rates.
Moneylenders may decide on an interest rate that is up to their discretion. The Ministry of Law has set out strict regulations as to how much moneylenders can charge. To know more, read our article on (Everything you should know about borrowing from a Moneylender)