Money Lenders Vs Banks: What’s The Difference In Loans

Money Lenders Vs Banks: What’s The Difference In Loans?

5 min

Many of us 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 private money lender in Singapore.

Banks are usually the preferred option, but licensed lenders —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 for people in dire need of extra funds. This is significant especially for those looking for fast loan approvals.

While there are some differences between loans from money lenders vs banks, their key similarities are:

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

When it comes down to it, your choice of loan provider depends on your financial circumstances and needs; and which lender will be able to best meet your requirements.

Loans from licensed money lenders vs banks

Understanding the differences between the two key loan providers 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.

Money lender Bank 
Loan amount
  • Generally lower than a bank
  • Can be up to 6X of income
  • Generally higher than a licensed lender
  • Can be up to 10X of income
Loan approval
  • Follows a fast approval strategy
  • Loans such as payday loans and instant 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 12 months, sometimes 24
  • Quick loans such as payday loans must be repaid in one month
  • Varying loan terms which can range from one to five years, with some loans available even up to seven years
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
  • Requires borrowers to provide proof of consistent income
  • Does not require collateral for personal loans and most types of loans
  • Borrower must be 21 years of age or above
  • Focuses on credit history. A credit score closer to 2000 is considered very good 
  • Poor credit history can attract higher interest rates or the need for 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 if annual income is below $10,000; and $3,000 if income is between $10,000 and $20,000
  • Not eligible for a loan
Criteria and documentation for Singaporeans and PRs
  • Identity card or passport
  • CPF statements if you are employed or IRAS Notice of Assessment if you are self-employed 
  • Most recent 3 months’ payslips or any kind of income proof
  • Annual income above $20,000
  • 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
  • Work Pass
  • Passport
  • Proof of address like a rental agreement
  • Most recent payslips from three months
  • Minimum annual income ranging $40,000 – $60,000
  • Work Pass
  • Passport
  • Proof of address like a rental agreement
  • Proof of income
  • In some cases, a guarantor may be required to prove your creditworthiness
Interest rates
  • Generally 1-4% per month, not exceeding 4% per month
  • Generally 2.6-5.5% annually
  • The rate of interest depends on collateral, credit history, etc

So, which is better when it comes to money lenders vs banks?

After looking at the above table on money lenders vs banks,, you may still feel stuck and not know which to choose.

Well, the answer depends on how much money you need, how urgently you need it, and whether or not you can qualify for loans from banks.

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

Therefore, before moving ahead with either of these options, it is essential to determine your requirements by considering the many types of personal loans available.

Here’s a general guide to help make a more informed decision:

Go with a bank if:

  • 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.
  • You have a good credit history as banks have lower interest rates.

Go with a money lender if:

  • You require a relatively small amount to fulfil an emergency.
  • You need cash fast since money lenders 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.

Both banks and money lenders have their own set of pros and cons. The best option for yourself ultimately depends on what your financial needs are, as well as your eligibility.

Consider Cash Direct if you need a loan, fast

If what you’re ultimately looking for is quick cash, speedy loan approval, and relatively less strict eligibility requirements — a money lender may be the better option.

At Cash Direct, we have a team of friendly loan officers and consultants who are more than happy to help you better understand how our loans work and guide you through the loan approval process smoothly. Also, as we’re a Jurong East money lender that’s a mere 5-minute walk from the MRT station, you’ll be pleased to know that getting to our office is a piece of cake.

Contact us today and we will have a loan expert take you through all the available options suitable for your needs. Alternatively, hit the apply now button if you already have a loan in mind!


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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