How to Borrow from Licensed Money Lender: Understanding Your Rights and Responsibilities

Personal Finance

How to Borrow from Licensed Money Lender: Understanding Your Rights and Responsibilities

April 28, 2024

Sometimes, we may not have enough savings to last us before our next paycheck arrives.

The good news is that you can receive a loan from a variety of sources. For example, in Singapore, you can borrow funds from a bank or a licensed money lender.

Licensed money lenders are a fantastic option for borrowers because of their competitive interest rates and speedy loan processing times.

But the main concern here is how to borrow from licensed money lender in Singapore.

What would it take for you to seal the deal successfully and safely? Let’s get into it.

Differences Between Licensed And Unlicensed Money Lenders

There comes a time in everyone’s life when financial difficulties make them wonder if legitimate money lenders can be of help.

One thing you should know, though, is that an “Ah Long” is not the same as a licensed money lender.

“Ah Longs” or loan sharks are unlicensed money lenders who prey on borrowers by using methods such as exorbitant interest rates and harassment tactics.

They may even resort to threats and vandalism if you don’t pay back the loan on time.

The Registry of Moneylenders, on the other hand, oversees licensed money lenders in Singapore.

Money lenders who have been granted a license are limited in the amounts they can lend and the interest rates they can impose.

They also have a limit on the total amount of money they can collect from borrowers as per the Moneylenders Rules.

There is also a complete directory of legal money lenders on the Ministry of Law’s website. Since Apr 2022, there have been only 154 licensed money lenders in Singapore.

Before you apply for an unsecured loan from an approved lender, you may consult with a credit counselor first.

Moneylenders Act And Rules Singapore

Did you know that borrowing money from an unlicensed money lender is illegal in Singapore?

The Moneylenders Act and Regulations in Singapore regulate licensed money lenders to ensure they don’t go beyond the interest and late fees stipulated, protecting those in debt.

Although lending money without a license is illegal, some lenders don’t mind breaking the law if it means getting their money back.

Likewise, threatening, abusive, or insulting language or conduct, as well as any other behaviour that could cause physical or emotional harm to the borrower, is illegal.

This rule was put in place as a result of the crude methods loan sharks use to intimidate borrowers into making payment for their loans.

Borrowers on work permits who use illicit money lenders will soon be denied employment in Singapore.

So don’t engage with lenders that use social media marketing or text communications – licensed money lenders don’t do that.

Legal money lenders should protect their borrowers’ privacy and adhere to other consumer protection regulations.

Therefore, you need not be concerned that a licensed money lender will hang banners around the town shaming you for not paying back your debts.

Differences Between Borrowing From A Licensed Money Lender And A Bank

Small loans are typically all that you can get from money lenders with lending licenses.

Usually, these lenders are small firms that would go bankrupt if a borrower defaulted on a loan of several million dollars.

Depending on your income, these loans can range from a few hundred dollars to $1,500. However, banks often offer the most competitive interest rates and terms for personal loans of $10,000 or more.

That said, getting money from a legitimate money lender has certain advantages.

First, the procedure is less cumbersome, and eligibility requirements, including citizenship status and annual income, are relaxed.

On the other hand, only individuals with annual incomes of $20,000 or more (or $45,000 if they are not Singapore citizens) can typically qualify for personal loans from Singapore banks.

A loan from a certified money lender can be approved and disbursed in as little as a few minutes, regardless of your credit history. That is way much faster than how long a Singapore bank would take.

Licensed money lenders’ Interest rates in Singapore for these services are often between 25% and 48% annually. This is far higher than what you’d get from a standard bank.

So don’t take out a personal loan if you want to avoid living off instant ramen during the last week of the month.

Instead, you should borrow money just for a specific purpose, and you should know precisely how you’ll be repaying it.

How To Tell If A Money Lender Is Licensed

When you are in a tricky financial situation, you may not notice the tell-tale signs of a loan shark. In that context, here is how you may check if a lender has a license and not operating illegally.

First, visit the Registry of Moneylenders’ website. Online registration is available, or call 1800-2255-529. If you want to speak with the lender, you’ll need the Registry’s contact info.

You can also find the list of legal money lenders on the Ministry of Law’s website.

There is a physical location where regulated money lenders can set up shop. You must go to the lender’s office and verify your loan application before you get the loan.

Avoid verification by text message, which is how loan fraud happens.

In addition to being unable to charge upfront fees, a licensed money lender’s interest rate should be no more than 4% monthly interest.

So before applying for a loan, you should calculate the total amount you will owe, including interest and fees.

As you may have noticed, loan sharks advertise their services via text, instant, email, or flyers.

Most legitimate loan providers don’t promote their services anywhere other than on their websites, business directories or their offices.

Therefore, read the loan advertisement carefully before applying.

Can I Borrow From Multiple Money Lenders?

Yes, you can. First, the lender will investigate your current financial situation and your potential for repaying the loan.

As per your credit score and report, you could still qualify for another loan despite having another unpaid one.

Determine whether you should increase your debt load by looking at your debt-to-income (DTI) ratio. The Moneylenders Credit Bureau will obviously take into account your multiple loans, which could affect your report.

You should consider not accepting any additional loan offers you may receive.

What Is The Maximum Loan A Person Can Take?

Singapore lenders often have a maximum loan amount ranging from $3,000 to $20,000.

However, larger lending institutions may also have more loan options if you have a good credit history and meet the requirements.

Several factors will determine how much you can borrow:

  • Your salary
  • How many current loans you have
  • If your loan has any co-signers

You should be aware that the interest you pay on a loan from a licensed money lender in Singapore could end up being higher than the principal you borrowed.

That is because Singapore money lenders want to recoup their investment capital. Thus, they must charge exorbitant interest rates when they loan sums of money.

What To Do Once The Loan Is Approved

After getting the loan and the funds transferred, double-check to ensure the money lender charged you the correct amount for the approval fee.

We’ve already established that a legitimate moneylender cannot add on costs exceeding 10% of the loan’s total value in Singapore.

The following readings and resources are crucial:

  • Consent to a Loan in Writing
  • You have documentation for every single loan payment you’ve ever made
  • An itemised accounting of your loan balances and payments due is vital
  • All records, including financial and legal documents, should be duplicated

Be sure to pay everything off on time.

Late payments will result in higher total costs, plus late fees and interest.

The maximum interest rate for being late is 4%. It may be more challenging to repay a debt if you incur more of it. Therefore, it may become an issue in the long run.

The Singapore government prohibits money lenders from charging more than the late fees, loan principal in interest, upfront administrative, and late interest combined.

What Happens If You Can’t Pay Back The Loan?

The best licensed money lenders in Singapore typically turn to debt collection agencies when borrowers fail to repay their loans.

There are no laws in Singapore regarding the collection of debts.

However, licensed money lenders and debt collectors should abide by the code of conduct established by the Credit Collection Association of Singapore.

No debt collector may use threats, physical force, or coercion to force a debtor into paying. Call the police immediately if you are ever in such a precarious circumstance.

It’s preferable to negotiate a more reasonable repayment plan with your creditors if you’re having trouble making your monthly payments.

You can get in touch with debt collectors or lenders themselves.

The lender would much rather have their money repaid soon than have you go bankrupt. Therefore, it may reduce the interest rate it charges you.

You may also declare bankruptcy. But you will risk losing assets like your car or your property. Seek credit counselling if you still can’t pay back your obligations.

Get The Right Amount You Need

With that, you have all the knowledge you need on how much you can borrow from a licensed money lender.

Make sure you consider all viable options before settling for maximum loans.

For a more rational decision when borrowing from a licensed money lender, visit Credit Thirty3.

We will treat you to the best interest rates and services in case you need quick loans. Contact us today or apply for a loan now.