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Loans from Banks and Moneylenders: What’s the Difference?

4 min

We occasionally need quick financial help to manage unexpected expenses. In such cases, we would typically apply for a quick loan from a reputable bank or licensed moneylender.

Banks are usually the preferred option, but moneylenders, focused on short-term, private lending, also offer various types of private loans to individuals and businesses, just like banks. This makes them a great alternative choice for people that are in dire need of extra funds. This is significant especially for those looking for fast loan approvals.

There are some differences between loans from a licensed moneylender and a bank, but key similarities are:

  • both charge interest on your loan
  • both charge penalties for late payments or defaulting on the loan.

Loans from a licensed moneylender vs a bank

Understanding the differences between the two key financial organisations from which you can secure a loan is an important step in applying for one. This table covers all the main points to consider before you decide which option suits you best.

Moneylender Bank
Loan amount
  • Generally lower than a bank.
  • Can be up to 6X of income.
  • Generally higher than a licensed moneylender
  • Can be up to 10X of income.
Loan approval
  • Follows a fast approval strategy.
  • Loans such as payday loans can be provided within 30 minutes of application if all documents are in place.
Loan tenure or term
  • Short-term loans, typically up to 24 months.
  • Quick loans such as Payday loans must be repaid in one month.
Loan eligibility and creditworthiness
  • Borrower must be 18 years of age or above
  • Focuses on borrower’s debt-to-income ratio rather than credit history
  • This requires borrowers to provide proof of current income.
  • Does not require collateral.
  • Borrower must be 21 years of age or above
  • Focuses on credit history. A credit score of closer to 2000 is considered very good.
  • Poor credit history can attract higher interest rates or additional collateral.
  • Personal loans can be provided without collateral.
Annual income below $20,000
  • Singapore Citizens and PRs can borrow up to $3,000
  • Foreigners can borrow $500 for annual income below $10,000 and $3,000 for income between $9999 – $20,000
  • Not eligible for a loan
Criteria and documentation for Singaporeans and PRs
  • Annual income above $30,000
  • Proof of full-time employment
  • NRIC
  • 3-month salary slips.
  • 2 years’ income tax returns.
  • 12-month CPF contribution history.
Criteria and documentation for foreigners
  • Employment or Work pass
  • Passport
  • Proof of address like a rental agreement
  • Most recent payslips from three months
  • Minimum annual income between $39,999 – $60,000
  • Employment or Work pass
  • Passport
  • Proof of address like a rental agreement
  • Proof of income
  • In some cases, a guarantor may be required to prove your credit worthiness.
Interest rates
  • Generally 1-4% per month, not exceeding 4% per month.
  • Generally 4-10% annually.
  • The rate of interest depends on collateral, credit history, etc.

So, which is better?

After comparing loans from banks and licensed moneylenders, you may still feel stuck and not know which to choose. The answer depends on how much money you need and how urgently you need it.

Reviewing a complete list of moneylenders in Singapore and available loans from banks can also help you choose what’s best. With different attributes and limitations, banks and moneylenders have their different advantages.

Therefore, before moving ahead with either of these options, it is essential to determine your requirements.

Here’s a general guide to help make the decision easier:

Go with a bank when:

  • You need a large loan for big purchases such as a car or a house.
  • You need a longer tenure to repay since the maximum tenure banks offer is up to 5-7 years.
  • You don’t need money urgently, since banks have a slower process.

Go with a moneylender when:

  • You require a relatively small amount to fulfil an emergency.
  • You need cash fast since moneylenders can approve loan applications within an hour.
  • You have a low credit score or you’ve been rejected by banks multiple times when applying for a loan.

If you would like to learn more about loans that you can apply for and get approved quickly, contact us at Cash Direct and we will have a loan expert take you through all the available options.


The information provided on our website is for educational and informational purposes only and is not intended to be a substitute for legal or financial advice. While we try to ensure that information on this website is accurate, we do not warrant that the information will be free from error. We shall not be liable for any loss or damage that may arise from the use of this website.

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