How To Avoid Loan Scams In Singapore And How To Tell Whether A Private Money Lender Is Licensed


How To Avoid Loan Scams In Singapore And How To Tell Whether A Private Money Lender Is Licensed

March 4, 2020

Money scams have become very common in Singapore. People could easily lose thousands of dollars or all of their life savings if they are not careful. According to a report by the Straits Times, crime rate for fake loans where victims were cheated into making deposits for a “loan” registered a huge jump of 151% from 396 cases to 994 cases in 2018.

Borrowers need to be extra careful not to fall prey to loan con artists. The first step on how to avoid loan scams and how to tell whether private money lender is licensed or not is by being aware of some of the methods that con artists use. There are several signs that can give an indication that the lender is not honest. Singapore’s Ministry of Law has strict rules and regulations that has to be followed by all licensed money lenders.

What are the methods used by scammers to deceive unsuspecting borrowers?


  • High Processing fees

Fake money lenders demand large amounts of cash in “processing fees” before supposedly giving out the loan. They ask victims to transfer an amount of money first before they “process” the loan. This amount can run into thousands of dollars. To avoid being conned, the borrower should not comply with any demand to give out large amounts of cash up front. The borrower should then withdraw the request for the loan, and warn others about the scammers.

  • Wrong Advertising

Another tip on how to avoid loan scammers is to observe the method used to advertise. In Singapore, legal money lenders are only allowed to advertise through the following three channels.

1. Business or consumer directories (in print or online media)

2. Advertise on money lender’s own website

3. Advertisements placed on the exterior of the money lender’s business premises.

Loan scams usually use social media platforms or SMS to advertise their loans. These methods are not allowed. Borrowers should ignore all such advertisements on social media or on SMS, and they should also block the contacts used to send the messages. The contacts of the scammer can also be given to the authorities so that others will not be scammed.

  • Automatic Approval

Loan scammers give borrowers a “guaranteed approval” for their loan applications. This should be a red flag for any borrower because reputable lenders usually go through credit history and will usually ask several questions before approving the loan. They will also have proper and clear documentation of the loan. A typical loan shark will immediately transfer you the money without your approval, forcing you to take a loan with them at notoriously high interest rates. A borrower should totally avoid lenders who give this kind of sure guarantee without even perusing through the documents such as the income statement of the borrower.

  • Urgent response

Fake money lenders demand urgent responses from applicants. They deceive the borrowers that if they do not apply for the loan immediately, the opportunity for the loan facility will be lost completely. This is usually a ploy to get the applicant to send cash for the deposit quickly. Genuine lenders are never hasty with lending, they go through all the necessary steps before issuing the loan.

  • No physical office

Con artists or loan scammers usually have no physical address. They operate from mobile phones and clients will never find their physical location. This is to avoid the consequences being arrested. It becomes very difficult to apprehend them if there is no physical address. The borrower should request to go to the physical location of the lender for the loan, and if it does not exist it is most probably a scam. Another thing to note is that all licensed money lenders must have an office number. Mobile phone numbers are usually loan scams.

  • No loan contract

Scammers never give any loan contracts because they never want any evidence that exposes their dealings. If a borrower asks for a contract and is told there is none, he or she should withdraw from having any further involvement with the loan scammer. Legal money lenders will prepare proper contracts stating the actual loan amount, interest rates and loan terms. They will also ensure that you understand the entire contract before letting you sign it.


So, what are the loan scam cases that have happened in Singapore before? How did the scammers cheat the victims and what kind of story did they paint?

To help readers better understand the scammers’ tactics, we have summarized three stories of how Singaporeans were duped and the amount they’ve lost to the loan fraudsters. These are real examples to help customers avoid loan scams and tell whether the private money lender is licensed or not.

1. In the case of the first victim, the lenders demanded for a “payment review” process to be done before approval of the loan. The borrower then sent cash for it to be done, but the con artist then asked for more cash saying that the review needed to be re-done. Eventually, the borrower ended up sending a total of $3,100 to the scammer without receiving any loan. The lender went ahead to demand more cash and even threatened the borrower when no more money was forth coming.

2. The second victim got the advertisement for loans through an SMS. The lender claimed to be a licensed money lender and the borrower was told to pay $800 first as a deposit before the loan is processed. The lender continued to ask for more money for processing until finally they demanded that the borrower sends a cancellation fee if the loan was not to be processed. The total paid by the borrower was a total of $2,000 and the loan was never disbursed.

3. The third victim received the loan advertisement through a WhatsApp message. In this case, the lender sent $500 to the borrower’s account and demanded that it be repaid with $300 interest after 3 days. After the borrower deposited the $800 within 3 days, the lender continued to ask for more cash for processing fees and disturbance allowance until the borrower had paid over $2,000. When there was no more cash to pay, the lender then threatened to extort it from the borrower’s family members.

These were victims of loan scams in Singapore. They turned to these “lenders” seeking financial help but not only did things get better, it got worse. Be alert and aware of what loan scammers do so that you will not end up in a situation like that as well.

There are 155 licensed money lenders in Singapore, who are obligated to give borrowers fair and legitimate services. A licensed money lender is an organization that is legally authorized to lend money. They provide an alternative to banks for consumers to borrow money.


In Singapore, there are several things that private licensed money lenders are not allowed to do. Seven of these points are given below.

1. No advertising through SMS, WhatsApp, flyers, and other casual ways. It is illegal for licensed money lenders in Singapore to advertise through the avenues mentioned above. Licensed money lenders are only allowed to advertise through business directories, their own website, or an advertisement posted on the physical premises of their offices.

2. They are not allowed to operate without being registered with the Registrar of Moneylenders in Singapore. This registration ensures that the lenders adhere to all the rules and regulations laid down by the Singapore government. These rules are designed to protect borrowers from exploitation.

3. Private licensed moneylenders are not allowed to lend an amount of money that exceeds the borrower’s income. This is a legal requirement and it is designed to protect both the borrower and the lender. The debt burden should be calculated to be within what the borrower can pay. In Singapore, the TDSR (total debt servicing ratio) is 60%, whereby the maximum amount a person’s monthly income can go to loan repayment is 60%.

4. Licensed money lenders are not allowed to lend cash without a contract. A contract should include the amount borrowed, the interest rate being charged, the period of repayment and other charges such as late payment fees. This contract is legally binding for both parties, and it protects the interests of both. The contract is the legal document that can be used in court if the lender or the borrower violate the terms laid down.

5. Licensed money lenders are restricted by law on the interest rate that they are allowed to charge. This is to prevent exploitation towards the borrower. The maximum monthly interest charged is capped at 4% of the principal amount. It is illegal to charge any amount higher than this fixed rate.

6. It is illegal for licensed money lenders to charge any other fees except loan processing fees, late payment fees and legal fees. These fees are also limited. Loan processing fees is capped at 10% of the principal amount, and late payment fees cannot be more than $60 per month.

7. Licensed money lenders must have a physical location for their offices. They are not allowed to operate without an office because it will be impossible to track them down if a legal problem arises.

Licensed money lenders are an alternate safe source of funds to banks for Singaporeans, because of legal requirements mentioned above. Most private legal money lenders offer greater flexibility and are able to approve of loans quickly.


If a borrower decides to source cash from a licensed private money lender instead of a bank, what does he or she get to enjoy? 


  • Ease of application

A borrower can apply online conveniently for a loan from a licensed money lender. This saves time and money, and loan application can be done at any time whether day or night. In the case of a bank, the borrower may need a go there physically and line up to apply for the loan. This takes plenty of time, effort and the loan application can only be done when the bank is open. Most banks in Singapore usually close around 4:30pm or 6:00pm, making it difficult for working professionals to make a trip during working hours.

  • Flexibility

Licensed moneylenders are generally much more flexible in their terms and conditions of lending than banks. The borrower will be able to negotiate for friendlier terms of repayment with a licensed money lender. This will reduce cases of defaulting and the borrower will also save on interest rates.

  • Credit ratings

Banks usually take credit ratings very seriously. The applications of many borrowers end up being declined because of bad credit ratings. However, private licensed moneylenders are slightly more flexible with their terms and they actually have loan packages which are specifically designed for borrowers with bad credit ratings. This enables a wider range of borrowers to access loan facilities.

  • Amount loaned

Banks and other financial institutions generally give more conservative amounts in loans. This is because they are stricter on terms of lending and have to weigh the risks of lending the money. However, private licensed moneylenders are usually willing to lend more. This is a great benefit to borrowers.

  • Approval process

Banks and financial institutions tend to take a long time to approve loans, sometimes even up to several weeks. This can be a major disadvantage for borrowers who need funds urgently. In the case of a family financial emergency, borrowing from a bank might not be the best option. Private licensed moneylenders can approve the loan in a very short time, even within 24 hours. This is ideal for most borrowers who prefer to get their cash in good time.

  • Personal information, privacy and security

Licensed moneylenders will not keep your NRIC, driver’s license, passport or any other forms of personal identification. They should also not ask for any passwords relating to your Singpass account, internet banking or even your email account.

With rules set by MinLaw and the guides to avoid scams around, borrowers can be more aware of loan scams in Singapore. As long as borrowers are careful, private licensed money lenders can be a good source of quick and reliable source for financial help for Singaporeans.