Everything you need
to know about taking
a loan from licensed moneylenders in
Singapore

Hijanah
28th April 2023
14 min

Everything you need to know about taking a
loan from licensed moneylenders in Singapore

Hijanah
28th April 2023
14 min

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 a bank a licensed money lender, 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.

Types of loans that you can take from a Singapore money lender

In general, the types of loans offered by licensed money lenders span 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.

Secured loan vs unsecured loan: What are the differences?

Both loan types have different implications for you, the borrower.

Secured loans require you to peg 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 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!

But, why take a loan from a money lender in Singapore instead of a bank?

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.

What are the differences between taking a loan from a bank and a licensed money lender?

Comparison point	Borrowing from a bank	Borrowing from a licensed money lender
Internal policy	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 12 times your monthly income	Borrow up to six times your monthly income
Repayment period	Up to five years	Up to 24 months, though 12 months is more typical
Loan approval time	Approximately two 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 the principal loan amount yearly	Up to 10% of the 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 have a good credit history.

On the other hand, a loan from an authorised money lender in Singapore might be perfect 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, but instead 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 you need to know before borrowing from private money lenders

Loan terms can make or break your decision to take a loan because they have a direct impact on your financial circumstances.

How much money can I borrow from a licensed money lender?

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	The amount you can borrow from a bank	The 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 at least $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 12 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.

Licensed money lenders will 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 is the official loan limit, it is common that licensed money lenders offer up to 3 times your monthly income as a loan amount, with processing fees of approximately 8-10% 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. A small number of lenders would extend the term up to 24 months.

If you encounter a money lender in Singapore who offers to lend you more than the commonly stipulated amounts, you might have encountered an illegal money lender.

In such a situation, report the money lender to the police.

How much must I pay in interest?

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 using 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 the principal loan
#1 (July)	$772.99	$150	922.99	$4,227.01
#2 (August)	$796.18	$126.81	922.99	$3,430.83
#3 (September)	$820.07	$102.92	922.99	$2,610.77
#4 (October)	$844.67	$78.32	922.99	$1,766.10
#5 (November)	$870.01	$52.98	922.99	$896.09
#6 (December)	$896.09	$26.88	922.97	$0.00

With a reducing balance interest rate, you would have spent a total of $537.91 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?

What other fees might I be charged by private money lenders?

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.

What if I’m unable to pay my money lender in Singapore?

If 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 for 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.

Maintain a good credit score to get low interest rates with the best money lender in Singapore

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.

Here’s how to get your credit report from Credit Bureau Singapore (CBS).

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 also operated by CBS.

How to apply for a loan with an instant money lender

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:

Work pass
Passport
Proof of your home address (phone bill, tenancy agreement, etc)
Last three months of bank statements that show salary credited

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 30 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.

What to do if I get rejected by licensed money lenders in Singapore?

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.

If you encounter this and are desperately in need of financial assistance, consider government financial assistance schemes like ComCare and SupportGoWhere.

How to make sure I’m not dealing with an illegal money lender in Singapore?

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.

How to tell if a money lender is legit?

Tips for safely borrowing money from licensed money lenders in Singapore

Check the money lenders’ license to ensure they are legal

Licensed money lenders are registered loan companies that lend money legally in Singapore. It’s important to verify that your money lender is on the list of licensed money lenders maintained by the Ministry of Law.

You can do this by visiting their website or by calling the office landline of the money lender to ensure that you have been communicating with the right party. When you visit a money lender’s office, also check if they prominently display their money lender license.

Understand the guidelines for borrowing

Licensed money lenders are required to adhere to the guidelines specified by MinLaw, as part of the Moneylenders Act. These guidelines are designed to protect borrowers from unfair lending practices. Make sure you understand the guidelines on borrowing from licensed money lenders, which are updated regularly.

Ensure face-to-face verification and a physical office

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.

Read reviews and news on licensed money lenders in Singapore

It’s important to check the reviews of licensed money lenders before borrowing money. You can find 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.

Watch out for licensed money lender harassment and unlawful debt collection practices

It’s essential to keep a lookout for any reviews or news that report on illegal debt collection tactics done by licensed money lenders. If the lender has been notorious for harassing its borrowers when 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 a code of conduct as well.

Cash Direct is a well-loved licensed money lender in Jurong East with more than 2,000 5-star Google reviews.

Find the best licensed money lender that understands your needs

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.

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 30 minutes.

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