The cost of living in Singapore is high. With the housing, transportation, and health costs increasing month on month, it can be tough to live a comfortable life in this country. Add to this the cost of nice-to-haves like a luxury vacation, a swanky car, or the latest smartphones and iPads. In fact, 2017 data reveals that at least 20 percent of Singaporeans are earning less than their monthly expenditure. No wonder, most Singaporeans run short on cash and apply for personal loans.
It isn’t a bad decision to borrow money when in need. However, when you are in a crisis, the only thing on your mind is to get money, causing you to make erratic decisions that you may regret later. Several unlicensed moneylenders (UML) and loan sharks present themselves as reputable lenders who are willing to lend money without the hassle of a lengthy loan application process. In a cash-crunch situation, this may sound like the best option, causing you to sign the agreement without even realizing the aftermath.
UML and ah longs are on a constant lookout for gullible individuals who are financially broke or need cash urgently. But borrowing from them is an open invitation to bigger debts, heavy interest rates, harassment, and undue stress.
Read on to know why you should avoid dealing with such unauthorized lenders even if you are in the middle of a financial crisis.
1. Your Debt Will Never Be Repaid
UML and loan sharks charge sky-high interest rates that can compound to a large sum of money, making it next to impossible for borrowers to fully pay the debt. Most borrowers desperate for financial help often fall for the deceitful promotion tactics used by these unauthorized lenders. Since these lenders are not bound by law, they never communicate the precise interest rate and hidden costs and keep changing the terms and conditions to suit their pockets.
Unlicensed moneylenders and ah longs will never share the detailed terms and conditions in the loan agreement. They tactfully get you to sign the agreement (mostly a black document) by saying that the late fees are minimal. So, when you miss a payment they suddenly quote unreasonable penalty interest rates and surcharges that are way higher than what licensed lenders would charge.
Lastly, unauthorized lenders rarely allow you to make a full settlement of the debt as the exorbitant interest rates and penalties add to their profits. Instead, they may pressurize you to take another loan to fully pay off the previous one, thereby trapping you in larger debts, with higher interest rates.
Thus, with these hidden costs and changing conditions, the burden of your debt will grow exponentially, forcing you to give up your personal belongings and assets to pay for a debt that will never be settled.
2. They Can Harass You for Repayment
Unlike licensed moneylenders, the unauthorized ones are not bound by the Ministry of Law, Singapore. So, they often employ illegal methods, such as harassment, threats, blackmails, and public and social media shaming to recover their money. They often harass the borrower’s family, friends, and neighbors to force them to make the payments. What’s worse, they may resort to violence, vandalism, and crimes like assault and arson to get their money back.
Thus, it is best not to deal with an unauthorized lender. When you are in need of a personal loan, look for authorized moneylenders with a valid license from the Ministry of Law, Singapore.
3. You Can Lose Personal Possessions Given as Collateral
Unscrupulous moneylenders often ask for personal belongings and assets as security to ensure that you continue making the payments regularly. They illegally claim your personal identification documents, namely the passport, NRIC, work permits, driver’s license, or ATM cards that hold sensitive information.
These documents deserve to be protected at all costs to prevent cases of identity theft. If you trade these for a loan, the unlicensed lender may misuse your personal details in the future. Further, if you fail to repay the debt the lender may never return them to you.
4. It’s Illegal to Borrow from Unlicensed Moneylenders
UML operate illegally. So, they hardly care about breaking the law when using illicit means to recover debts. Moreover, in several cases, the Singapore law authorities have observed that borrowers who are unable to repay the loan to UML have offered to assist them in illegal activities. These borrowers become a runner or harass other borrowers for recovery, thereby acting on behalf of these illicit lenders. A few others have given their bank account details to assist these illicit lenders in their transactions.
Under the Moneylenders’ Act, people borrowing from UML, offering their bank account or ATM card, distributing pamphlets, acting as a lookout, being a runner, or acting as a harasser for loan sharks are presumed to be supporting the business of unlicensed moneylending. Such individuals face serious consequences, such as a massive fine, rigorous imprisonment, and even caning.
Check out this case where a borrower was acting on behalf of the UML, issuing loans to foreign workers and foreign domestic workers (FDW). The alleged person was charged for assisting in the illegal lending business and harassing other borrowers.
Thus, by borrowing from a UML you too are breaking the law. Isn’t that a strong reason not to approach them for money?
5. Better Personal Loan Alternatives Exist
Regardless of how cash crunched you are, it is wise to stay away from unlicensed lenders who can trap you in bigger debts and cause excessive stress. Instead, get in touch with a licensed moneylender who can offer you a personal loan at a reasonable interest rate.
Accredited lenders are regulated and designated by the Government of Singapore. Hence, they abide by the regulations and help individuals who have a hard time getting loans.
Also, most banks and financial institutions reject loan applications from people with a poor credit rating. Licensed lenders, on the other hand, offer a separate loan package for such individuals, enabling them to get their hands on fast cash.
Having said that, it is important to spot UML or ah longs who falsely claim of having a valid license. Here are a few warning signs that will tell you that the lender is unauthorized to lend money.
- They do not have a valid license issued by the Ministry of Law, Singapore.
- They work without a written contract. Even if they have one, the terms and conditions are vague and not legitimate.
- They often ask borrowers to sign on blank documents.
- They readily agree to lend a large loan even if you have a modest income.
- They use high-pressure tactics to get you to borrow from them.
- Their interest rates and processing fees are exorbitant.
- They are often rude and aggressive.
- They do not have a registered office or claim to have one but discourage you from visiting them.
- They get in touch with you through SMS, WhatsApp messages, or phone calls.
When you need money to provide for your essentials, the only thing that may concern you is the money in hand, not the aftermath. However, even in a crisis situation, it is important to keep a good head on your shoulders and select a licensed moneylender for a personal loan.
Borrowing money from an unlicensed moneylender or loan shark can lead to dire consequences. So, steer clear of these illegal entities who can ruin your life in more ways than one.
Questions? We have answers
A loan shark is an individual who offers loans at extremely high interest rates, has unfair repayment terms, and operates outside of the law.
When borrowers fail to repay a loan, a loan shark will use the threat of violence to scare them as well as shame them by painting the borrower’s home with paint. The sign “O$P$” which means Owe Money Pay Money and the borrower’s unit number will be painted using red paint.
Loan sharking is illegal in Singapore and the penalties for breaking this law are severe. Loan sharks can face up to 5 years of imprisonment, fined between $5,000 and $50,000, and receive between 3 and 6 strokes of canning.
It is illegal to lend money without a license, however it is not illegal to borrow money from a loan shark. If the money was lent illegally, chances are, you do not have to pay the money back. The loan shark has no legal right to collect the money and they cannot call the police as the loan is illegal.
Nevertheless, the perils of borrowing money from a loan shark far outweigh the potential benefit of receiving “free money”. Loan sharks are dangerous individuals who will use methods that consist of threats and violence to ensure that they get their loans repaid.
Therefore, for your own safety, you should never borrow money from an unlicensed money lender.
Loan sharks usually prey on lower income people who are incapable of obtaining a loan from mainstream banks and lenders. A loan shark would take advantage of the borrower’s desperate situation by offering a loan at an unreasoably high interest rate paired with unfair terms and conditions.
The high interest rate would make it almost impossible for the borrower to repay the loan and hence, would be at the mercy of the loan shark. This often leads to family members getting beaten up and threatened by the loan shark or in extreme cases, may lead to the borrower committing suicide. For those reasons, loan sharking is illegal in Singapore.
On the other hand, borrowing from a bank or a licensed moneylender is legal as these lenders are constantly being audited by the government for fair lending practices. There is even a cap on how much interest a licensed money lender can charge a borrower. Read more on borrowing from licensed money lenders here: https://blog.cashguru.sg/borrowing-from-licensed-moneylenders/
Yes. Loan Sharks still exist in Singapore. In fact, there has been a growing number of harassment cases reported to the police in 2019 as compared to 2018. Loan sharks have moved towards the digital landscape and now use technology to offer loans to unsuspecting borrowers via mobile messaging. This new way of operating allows loan sharks to target a larger number of people at one go.
If you are getting harassed by text messages sent by loan sharks, read our article on how to block text messages from loan sharks here:
You can report loan sharks anonymously by calling the hotline at 1800-X-AH-LONG which translates to 1800-9-24-5664. You can also notify the police online via I-Witness.