Key Takeaways
- A licensed money lender will assess your eligibility, including your income, financial capacity and MLCB loan information, before granting a loan.
- Borrowing limits depend on factors such as your annual income and residency status.
- Licensed money lenders can charge up to 4% interest per month, with regulated limits on late interest and fees.
- Compare the loan tenure and monthly instalments to ensure the repayment schedule fits your budget.
- Check the lender’s terms carefully and understand the total cost of borrowing before signing a loan agreement.
Sometimes, it does not matter how financially sound you are. You could still be faced with a need for urgent cash to cover unexpected expenses.
In such unpredictable situations, taking a personal loan from a licensed money lender in an expensive city like Singapore can be an ideal choice.
However, you might be confused about the process of getting one. Where do I begin? Is there a licensed money lender near me I can approach? How do I know about the best rates in the market?
These are some of the questions you may have before applying for a personal loan from a licensed money lender. But before we understand any of that, let’s first figure out what a personal loan is.
What is a personal loan?
A personal loan is an unsecured loan that allows a borrower to obtain funds without pledging collateral such as jewellery or a house.
Types of loans to consider from a licensed money lender
Before borrowing from a licensed money lender, it helps to first understand the types of personal loans you can get for your unique financial need.
Payday loans
A payday loan is generally intended for borrowers who need a relatively small amount of cash to manage an immediate financial shortfall. The repayment schedule is typically shorter than that of a conventional personal loan.
Medical loans
A medical loan may help borrowers manage medical-related expenses when their available savings are insufficient. Depending on the lender, the loan may be used for costs associated with treatment, procedures or other healthcare expenses.
Wedding loans
A wedding loan is a type of personal loan that can help cover wedding-related expenses, such as venue costs, photography or other arrangements.
Debt consolidation loans
A debt consolidation loan combines eligible debts into a single repayment arrangement, which can make payments easier to manage. However, borrowers should check which debts qualify and compare the new repayment terms before proceeding.
Eligibility for a personal loan from a licensed money lender
You also have to know whether you are eligible for a loan or not. Here are the criteria:
- To qualify for a personal loan from a licensed money lender in Singapore, most lenders require borrowers to be 18–21 years of age.
- The borrower must be employed (full-time, part-time, freelance, or self-employed) or have some other income source.
How does a personal loan from a licensed money lender work?
When applying for a loan from a licensed money lender, you will need to go through an assessment before the loan can be granted. This includes a credit check through the Moneylenders Credit Bureau (MLCB), which contains information on borrowers’ loans and repayment records with licensed money lenders. Licensed money lenders have been required to obtain borrowers’ MLCB loan information reports before granting loans since 1 March 2016.
Personal loans from licensed money lenders generally follow fixed repayment schedules and reducing-balance calculations. The following is an illustrative example of how a S$10,000 loan with a 12-month repayment period and 2% monthly reducing interest could be repaid:
| Loan amount | S$10,000 |
| Loan term | 1 year |
| Reducing interest rate | 2% per month |
| Monthly repayment | S$945.60 |
| # | Payment | Interest | Principal | Balance |
| 1 | 945.6 | 200 | 745.6 | 9,254.40 |
| 2 | 945.6 | 185.09 | 760.51 | 8,493.89 |
| 3 | 945.6 | 169.88 | 775.72 | 7,718.17 |
| 4 | 945.6 | 154.36 | 791.24 | 6,926.93 |
| 5 | 945.6 | 138.54 | 807.06 | 6,119.87 |
| 6 | 945.6 | 122.4 | 823.2 | 5,296.67 |
| 7 | 945.6 | 105.93 | 839.67 | 4,457.00 |
| 8 | 945.6 | 89.14 | 856.46 | 3,600.54 |
| 9 | 945.6 | 72.01 | 873.59 | 2,726.95 |
| 10 | 945.6 | 54.54 | 891.06 | 1,835.89 |
| 11 | 945.6 | 36.72 | 908.88 | 927.01 |
| 12 | 945.6 | 18.54 | 927.01 | 0.00 |
5 other factors to consider while applying for a personal loan in Singapore
#1 Monthly income
The amount you can borrow from a licensed money lender depends partly on your monthly income, so it is advisable to keep this in mind.
Here’s how your earnings determine the total amount of unsecured loans you can get from licensed money lenders in Singapore:
| Annual income | How much can I borrow from a licensed money lender? |
| Less than S$10,000 | Up to S$3,000 if you’re Singaporean/PR; up to S$500 if you’re a foreigner residing in Singapore |
| S$10,000 to below S$20,000 | Up to S$3,000 whether you’re Singaporean, PR, or a foreigner residing in Singapore |
| At least S$20,000 | Up to 6 times your monthly income whether you’re Singaporean, PR, or a foreigner residing in Singapore |
#2 Interest rates & fees
A licensed money lender can charge up to 4% interest per month. In the event of late payment, a late interest of 4% can be charged for every month that the repayment has been delayed. Also, the late interest can be calculated only on the principal amount that is remaining to be paid.
The following fees will also be applicable to your loan from a money lender:
- a fee of up to S$60 for each month of late repayment;
- an upfront administrative or loan approval fee of up to 10% of the principal; and
- legal costs ordered by the court for a successful claim to recover the loan.
Additionally, the total charges imposed on a loan—including interest, late interest, the upfront administrative fee and late fees—cannot exceed the original principal amount.
#3 Repayment flexibility
If your financial circumstances change, such as losing your job or experiencing an unexpected expense, you may find it harder to maintain your original repayment schedule.
Fortunately, it is often possible to discuss your situation with your licensed money lender and ask whether the repayment arrangement can be restructured. Any new loan amount or revised arrangement remains subject to applicable borrowing limits and the lender’s assessment.
#4 Is there discrimination against bad credit score?
While banks are often stricter when it comes to assessing your credit score, licensed money lenders are more concerned about your ability to repay the loan and may therefore approve your application even if you have bad credit, as long as you can show a regular source of income.
However, that’s not to say that licensed money lenders skip due diligence checks altogether. A legitimate lender must obtain your MLCB loan information report and consider your financial capacity before granting a loan.
#5 Tenure
A licensed money lender personal loan generally has a tenure of up to 12 months (some lenders may approve longer tenures of up to 24 months, on a case-by-case basis).
The shorter tenure may mean higher monthly instalments. Hence, always make it a point to check the repayment period before taking a loan from a money lender and make sure the instalments fit your budget comfortably.
Conclusion
Thinking of getting a personal loan from a licensed money lender? It is always best to speak with loan experts about your options before applying for a loan. Understanding how you are placed as a borrower is important before you consider applying for a loan. If you do wish to get a personal loan, do consider Cash Direct for our quick, efficient, and helpful service.
