People take loans for a variety of reasons, including medical and financial emergencies.
But it’s not always emergencies that call for loans. You might also want to take a loan to chart new barriers in your life – like starting a new business, renovating a new home, or taking an epic holiday and striking a dream vacation off of your bucket list!
As we explore our options, some of us might first think of getting a loan from the bank, or from licensed money lenders, depending on our needs and urgency (a quick money lender can provide faster loans).
If you are planning to take a loan from a licensed money lender, here’s your ultimate go-to guide on everything to do with legal money lenders in Singapore, from interest rates to how to tell whether you can trust a money lender!
In general, the types of loans offered by licensed money lenders span across two categories: personal loans and business loans.
A personal loan money lender in Singapore offers loans for just about any purpose.
This could include study or education loans, renovation loans, medical or surgery loans, investment loans, holiday loans, debt and credit card consolidation loans, wedding loans, property bridging loans, or even freelancer loans.
Business loans are loans typically offered to small and medium enterprises (SMEs) that need an injection of capital. Such short-term financial boosts could allow you to guide your business to achieve its potential by helping you to attain resources and scale your business accordingly.
Both loan types have different implications on you, the borrower.
Secured loans require you to peg a collateral to your loan. For instance, if you’re taking a car loan, this collateral might be your car. If you default on your loan payments, your licensed money lender can seize and sell your collateral to recuperate losses.
This is also often the case with property loans, where a property can be seized if payments are defaulted on.
Unsecured loans, on the other hand, don’t require you to peg a collateral to your loan. But that means that even the most reliable money lenders are undertaking a higher amount of risk when lending to you. Therefore, unsecured loans typically come with steeper interest rates!
In general, banks are significantly stricter with the loan application process. A legal money lender is a good option in such instances, especially if you’re looking for a short term loan.
There are numerous benefits to borrowing money from a good licensed money lender.
|Comparison point||Borrowing from a bank||Borrowing from a licensed money lender|
|Regulations||If you have a bad credit history, unstable income, or income of less than $20,000 a year, you’ll get rejected||No credit discrimination, even if you have a bad credit history|
|Maximum loan amount||Borrow up to 10 times your monthly income||Borrow up to 6 times your monthly income|
|Repayment period||Up to 5 years||Up to 12 months|
|Loan approval time||Approximately 2 weeks for approval||Instant approval, in as fast as 30 minutes. Funds disbursed by cash or bank transfer immediately after approval|
|Interest rates||Vary from 3.5% to 11% yearly||Vary from 1% to 4% monthly|
|Processing fees||6.5% to 20% of principal loan amount yearly||Up to 10% of principal loan amount.|
Ultimately, you should evaluate all of the above listed factors and decide if borrowing from the bank or a licensed money lender is a more suitable option for you.
A bank may be a preferred choice for you if you’re looking for a long term loan, and if you have a good credit history.
On the other hand, a loan from an authorised money lender in Singapore might be perfect for you if you’re looking for a loan that you can clear within 12 months.
Not to mention, licensed money lenders don’t practise credit discrimination, so you don’t have to stress over any bad credit history, butinstead focus on rebuilding it with healthy credit habits!
If you’ve decided that you’ll be borrowing from a money lender, make sure to compare money lenders to get the best rates and find the best loan terms for you.
At Cash Direct, we provide you with competitive rates and excellent loan terms.
Loan terms can make or break your decision to take a loan because they have a direct impact on your financial circumstances.
The maximum amount that you can borrow from a bank or reliable money lender varies based on your nationality and income.
If you’re looking at an unsecured loan, here are the limits you’ll encounter:
|Annual Income||Amount you can borrow from a bank||Amount you can borrow from a licensed money lender|
|I earn less than $10,000 annually||You’ll get rejected||Up to $3,000 if you’re Singaporean/PR
Up to $500 if you’re a foreigner residing in Singapore
|I earn between $10,000 and less than $20,000 annually||You’ll get rejected||Up to $3,000 whether you’re Singaporean, PR, or a foreigner residing in Singapore|
|I earn at least $20,000 annually||Up to 10 times your monthly income||Up to 6 months your monthly income whether you’re Singaporean, PR, or a foreigner residing in Singapore|
In general, the maximum amount that you can borrow from a licensed money lender for a secured loan is:
- A maximum of 55% of your Total Debt Servicing Ratio (TDSR – portion of your gross monthly income that goes toward repaying loans)
- A maximum of 30% of your Borrower’s Mortgage Servicing Ratio (MSR – portion of your gross monthly income that goes toward repaying any property loans)
- A maximum of 60-70% of a vehicle’s market value, including COE price, for car loans (Loan-to Value or LTV ratio)
However, despite the maximum loan amount a licensed money lender or bank is legally allowed to give you, it doesn’t mean that they necessarily will loan you that maximum amount, even if they are the best money lender in SG.
Licensed money lenders will also review your other financial information such as your credit history and they will vary your loan amount and interest rates based on how much they trust you to make a full repayment.
Although the above are the official loan limits, it is common that licensed money lenders offer up to 3 times your monthly income as a loan amount, with processing fees of approximately 5-10% of your loan amount.
Many monthly loan money lenders offer a repayment period of 1-6 months, while some may offer up to 12 months.
If you encounter a licensed money lender in Singapore who offers to lend you more than the legally stipulated amounts, you might have encountered an illegal money lender.
In such a situation, report the money lender to the police.
There’s a maximum interest rate that money lenders can charge you, and that’s 4% monthly or 48% per annum.
Interest rates are calculated based on your loan amount, with a reducing interest rate. That means that your monthly interest amount is calculated based on the principal amount remaining on your loan at the end of every month.
Say you were to take a $5,000 loan with a repayment period of 6 months, and a monthly reducing balance interest rate of 3%.
Here’s an example of how much you would have to pay in interest:
|Month||Outstanding loan amount payable this month||Interest amount payable this amount (3%)||Total amount payable this month||Balance amount remaining on principal loan|
With a reducing balance interest rate, you would have spent a grand total of $573.92 on interest for your $5,000 loan. If this were a flat interest rate, you would have spent a total of $900 on loan interest.
When comparing interest rates among different lenders, you may find that some offer interest-free loans. Do be careful as there is no free lunch in the world. You might end up paying high fees even with 0% interest rates.
Searching for a licensed money lender with low interest rates?
A money lender also has legal limits to processing fees.
You may also be charged processing fees when your loan is granted to you, not exceeding 10% of your principal loan amount.
If you’re late on your payments, you may be charged a late repayment fee not exceeding $60 monthly.
You will also be charged a maximum of 4% a month in late interest on the overdue loan, for each month that the loan is repaid late.
No matter what, the total of your processing fees, late interest, late repayment fees and other fees cannot legally exceed the principal amount of your loan.
Money lenders with charges that exceed the legally permitted amount may be engaging in misconduct, or be unlicensed.
In the event that you’re unable to repay your loan, a licensed money lender may take legal action against you. If their course of action is successful, you may also have to reimburse the money lenders the legal fees they have incurred.
With that said, this is unlikely to occur as long as you speak with your money lender about your financial situation and work out a new repayment plan. This, however, may incur additional fees.
If you find yourself caught in a debt cycle you can’t get out of, seek help from a social service agency in Singapore. And if your debt has amounted to at least 15,000 and you can’t repay your loan even with extensions, consider filing for bankruptcy. Your loan interest accumulation will stop, and money lenders will be unable to carry out legal proceedings against you.
However, this has severe consequences. Filing for bankruptcy might involve the seizing of your assets to repay loans. It may also leave a mark on your professional and financial future, so it should be your last resort.
Having a good credit score is the best way to get the lowest interest rates. You can achieve this by repaying your bills on a timely basis and minimising the frequency at which you take loans.
When you apply for a loan, a money lender will check your borrowing history with other money lenders with the Money Lender Credit Bureau (MLCB) which is operated by CBS.
The loan application process is a simple and seamless one.
Before you proceed, make sure to have the relevant documents ready:
If you are a Singaporean or PR, this includes:
- Identity card or passport
- If you’re employed:
- Last three months of payslips
- CPF statements
- If you’re self-employed:
- IRAS Notice of Assessment
- Proof of income (bank statements, commission statements, etc)
If you’re a foreigner, this includes:
- Employment pass
- Proof of your home address (phone bill, tenancy agreement, etc)
- Last three months of payslips
After that, you can start the loan application process with a Singapore online money lender:
- Apply for the loan on the licensed money lender’s website or walk in to apply.
- If you have applied online, wait for a loan executive to call you and schedule an appointment with you.
- Go to the money lender’s office for a short interview and document verification.
- Your loan application might be approved in less than 20 minutes
- The loan executive will go through the loan terms in the loan contract with you. Make sure you understand them before signing.
- Sign the loan contract and your funds will be disbursed to you immediately either in cash or through bank transfer.
There may be many reasons that might get you rejected by authorised money lenders in Singapore. This might include not having a Singapore home address, being bankrupt, unemployed, or even having applied for too many loans recently.
Sometimes, you may encounter illegal money lenders or loan sharks masquerading as licensed money lenders. While they may have attractive terms such as low interest rates on the surface, their loan structures are built to extort money out of you. Many victims end up struggling to cope with repaying illegal money lenders.
Be vigilant and don’t fall prey to money lender scams. If a deal is too good to be true, it probably is.
Licensed money lenders are registered loan companies that lend money legally. This means that they must be registered and listed within MinLaw’s list of licensed moneylenders in Singapore. Verify that your money lender is within this list.
You can call the office landline of the licensed money lender to ensure it is indeed them you’ve been communicating with.
Licensed money lenders are required to adhere to the guidelines specified by MinLaw, as part of the Moneylenders Act.
Guidelines on borrowing from licensed money lenders are also updated regularly.
Also, licensed money lenders cannot lend money to you without face-to-face verification. Always ensure they have a physical office by visiting the physical address. If they don’t invite you to their office, it means that they’re not abiding by a legal process.
When you visit a money lender’s office, also check a money lender’s license by taking note if they display their money lender license prominently.
Moreover, you should check money lender in Singapore reviews on Google, forums, and social media pages to learn from others’ experiences and determine if your money lender is the right fit for you. Try searching for “licensed money lender Singapore review” to get a sense of what previous borrowers have to say about various money lenders, before you commit to a loan.
Remember to keep a lookout for any review or news that reports about licensed money lender harassment. If the lender has been notorious in harassing its borrowers if borrowers are late in repayment, avoid them, as they are not supposed to do so during debt collection.
Debt collectors have to adhere to a set of debt collection guidelines and code of conduct as well.
Applying for a loan for the first time can be stressful. At Cash Direct, we prioritise your needs and ensure that you are always comfortable.
Regardless of whether you need an instant loan or simply some advice on the best options for you to consider, we will be here for you.
Get your loan approval in less than 20 minutes.