What Should You Know About Moneylender Rules?
December 9, 2022
With a variety of money lender rules and regulations in place, you’ll need to make sure you’re up to speed with what the law in Singapore says about the borrowing and lending of money.
Licensed money lenders are regulated by the Moneylenders Act in Singapore. The Act ensures that their interest rates, loan terms, and business practices are fair.
But it’s important to know the moneylender rules in Singapore before you sign up for a loan.
How To Know If A Money Lender Is Licensed
If you’re looking for a loan, you might be wondering how to settle on a licensed money lender. The good news is that there are several ways to check whether a money lender in Singapore is legal.
First, make sure that the money lender has a license number on its website and a license displayed in its business premises. Each licensed money lender has its own unique license number, so this is an easy way to check if it is legit.
Another way is to check the list of licensed money lenders in Singapore published regularly by the country’s Ministry of Law, which is available online.
The Ministry of Law updates this list regularly to guide borrowers.
How Much Can You Borrow?
The amount of money you can borrow from a money lender in Singapore depends on the type of loan you take, your income and expenses, and your credit rating.
When looking for secured loans, you can get any loan amount as long as you pledge a collateral of adequate value. Such loan types don’t have any limit, provided the money lender approves the loan.
In contrast, unsecured loans work differently. Borrowers are categorised into different groups.
If you are a Singaporean or permanent resident who earns less than $20,000 annually, you can only get up to $3,000 from all the money lenders combined. However, if you earn more than $20,000 annually, you can get up to six times your monthly income from all money lenders combined.
Foreigners earning less than $10,000 annually can only borrow $500. Those with yearly earnings ranging between $10,000 to $20,000 can borrow up to $3,000. Those earning more than $20,000 per annum can borrow up to six times their monthly income.
Requirements And Considerations
The moneylender rules in the Moneylenders Act in Singapore has been put in place to protect borrowers who may not be able to repay the loan.
Some of the requirements and considerations to proceed with a loan application are:
- Proof of income for at least three months before the application
- Income tax statements
- Utility bills
However, foreigners in Singapore may also apply for loans but will be required to submit additional supporting documents such as:
- Original valid employment pass
- A copy of the tenancy agreement
- Bank statements
- Appointment letter from the employer
Money Lender Interest Rates And Fees
Licensed money lender interest rates and fees are charged in accordance with the Moneylenders Act in Singapore.
So what should you know about these moneylender rules?
Here’s the breakdown.
Licensed money lenders charge a maximum interest rate of 4% per month for a loan as the nominal interest. They can also charge a late interest of up to 4% per month.
Interest charged on a loan is computed on a monthly outstanding balance of the principal remaining after deducting the payments made.
For example, if the loan amount is $30,000 and you have repaid $15,000, then the 4% interest rate will be charged on the remaining $15,000.
In contrast, late interest is computed based on the overdue amount.
If you’re paying a monthly installment of $10,000 and you’re unable to pay on time, the additional 4% late rate charge only applies to the $10,000 that is late.
Other fees imposed by the law you can incur when borrowing from a Singapore legal money lender include:
- Loan approval fees – 10% of the principal loan amount
- Late payment fees of up to $60 each month
- Legal costs incurred by the money lender for successful loan recovery
Note: The total charges imposed on a personal loan by your money lender consisting of interest, late interest, late fees, upfront administrative fees, and others, cannot exceed the principal loan amount.
For instance, when you take a loan worth $20,000, the interest, late interest, monthly late fees, and administrative fees cannot exceed $20,000.
What Should Happen Before And After Loan Approval
When you’re applying for a loan, there are a few things that you should know about the process.
Firstly, you’ll need to provide some personal information. This can include your name, address, contact details, and employment status.
You’ll also need to be able to prove your identity with documents such as your NRIC or passport. You will also need to provide information about how much you want to borrow and how long it will take you to pay it back.
Before you get your loan, you’ll need to submit some documents such as:
- A copy of your NRIC
- An employment letter that confirms your salary and employment status
- A bank statement to show that you have enough money in your account
The money lender will look at this information and decide whether it wants to give you the loan.
If the loan is approved, then both parties are legally bound by terms that have been agreed upon in writing on both sides. This means that if one party does not fulfil his or her obligations under those terms, both parties are liable under the law in Singapore.
Remember that you also have to check on the approval fee charged on the principal amount given to you. Know that by law, a legal money lender can only charge up to 10% for administrative fees out of the total principal amount.
You should also keep the following documents for future reference:
- A copy of the loan contract
- Receipts made for each payment towards the loan
- Statement of account for the loan
- Copies of all receipts, accounts, and all other relevant documents
What If You Cannot Pay The Loan?
When unable to pay a money lender in Singapore, you will accumulate installments, and incur late interest and late fees. At this point, the money lender is allowed to procure the services of debt collection agencies to collect bad debts.
Though there are no specific laws regulating debt collection, debt collectors and money lenders should abide by the code of ethics stipulated by the Credit Collection Association of Singapore.
Debt collectors should not harass, be violent or intimidate someone as a technique to collect debt. If faced with such a situation, you should report it to the police.
Here are actions to take when you can no longer pay your loan:
Request For An Extension
In the event you are unable to pay your loan, talk to the money lender and ask for an extension.
Consider seeking other financial services from social services such as debt management and credit counselling.
File For Bankruptcy
If you still can’t clear your debt even after restructuring your loan payments, consider filing for bankruptcy. This should happen when your debt amount is at least $15,000.
When you file for bankruptcy, interest accumulation is stopped. Besides, the money lender can’t carry out any legal proceedings against you. But your credit score will take a big hit, so this should be your last resort.
Moneylender Rules Protect Borrowers
There are times when you are strapped for cash and the only way out is to take a short-term loan to deal with the situation.
You can try applying with banks but money lender services in Singapore often have faster approval.
However, you may run into unlicensed money lenders and scammers who charge high interest rates. Hence, the moneylender rules serve as a guide on acceptable business practices.
So be sure to stay safe by only engaging licensed money lenders when looking for loans with quick approval.
As a reliable licensed money lenders in Singapore, Credit Thirty3 is well-known for offering some of the most affordable interest rates and no hidden fees