Borrowing From Licensed Money Lenders – How Much Can I Borrow?

August 23, 2022

Are you having bills to pay right, left, and centre, which is overwhelming you?

Or do you want to take a huge step in life, such as having a wedding or renovating your home?

Such expenses cost thousands of dollars in Singapore, and if you are short on funds, a loan can be the best option.

But if you have never tried getting a loan, you might ask, “ How much can I borrow from a money lender?”

Borrowing a loan is not a walk in the park, especially with the presence of loan sharks in the finance industry.

These unlicensed lenders can make your life hell with their high interest rates and harassment tactics. This makes working with licensed money lenders a much better option.

Here is a detailed guide on borrowing from licensed money lenders (LMLs) in Singapore, how much you can borrow, the interest rates charged, and much more.

What To Consider Before Taking Up A Loan

Before approaching any money lender for a loan, it is important to sit down and consider a few things first. These include:

Source Of The Loan

In Singapore, you can access loans from different sources. You can approach a bank, licensed money lenders, or financial assistance schemes by government agencies.

These sources offer their loans with different terms and conditions, such as interest rates, payment terms, and plans.

Weigh their pros and cons to get the best loan option for your financial status.

Loan Type To Take

Another key thing to consider before approaching a money lender is the loan type you want. Do you want it for a big project or a small emergency?

Also, evaluate your financial situation to see how much the project needs and how you will repay the loan. You can consider personal loans if you have a minor emergency.

Documents Required

Licensed money lenders in Singapore will request that you provide the necessary documents before they give you credit.

They will require documents such as your NRIC, proof of income and employment, current credit score, and proof of residency. So ensure you have these documents with you and that they are accurate.

Loan Terms And Conditions

As you shop around to find a money lender to work with, take note of the loan terms and conditions.

Lenders offer different interest rates, payment plans, and payment durations. Pay attention to the ones with favourable rules because you will be legally obliged to fulfil any loan contract you enter.

Your Money Lender

Finally, consider the money lender you are working with.

Are they licensed, or are you doing business with an “Ah Long” or loan shark? You can find the list of licensed money lenders in Singapore on the website of the Ministry of Law (MinLaw).

Differences Between Licensed And Unlicensed Money Lenders

Firstly, legal money lenders in Singapore are allowed to advertise their services and products via three channels only according to advertising rules that took effect on 1 Nov 2011.

These include business or consumer directories in print or online media, websites belonging to the money lender, and adverts placed within or on the exterior of the money lender’s business premises.

On the other hand, unlicensed money lenders have no qualms about advertising through other channels such as emails, text messages, flyers, or phone calls.

Do not respond to such adverts. In fact, you can report them.

Secondly, all legal money lenders can be found on the list of licensed money lenders in Singapore. The Registry of Moneylenders updates this list monthly to provide the correct information to borrowers.

An unlicensed money lender will not be found on this list.

Third, the Registry of Moneylenders requires LMLs to follow standard interest rates and fees.

For example, the interest rate charged by a licensed money lender in Singapore should not be more than 4% per month.

Also, a late payment fee should not be more than $60, and a late interest rate not be above 4%. Therefore, anything above these interest rates and fees is a red flag.

Moneylenders Act And Rules Singapore

It is a law that protects innocent borrowers from loan sharks in Singapore.

It states that licensed money lenders should adhere to standard interest rates and fees.

Also, they should not use abusive, threatening, or insulting words, writing or behaviour. They must also avoid any acts that can pose harm to the borrower and their family.

Licensed money lenders are also expected to uphold confidentiality with the borrower’s information. They should not put up banners in your neighbourhood to shame you for not repaying your debts.

On the other hand, you also have a responsibility as a borrower. You shouldn’t do business with an illegal money lender in Singapore.

This is because any work pass holder borrowing from unlicensed money lenders will likely be barred from employment in the country.

Differences Between Borrowing From A Licensed Money Lender And Bank

Legal money lenders and banks are allowed to give out loans in Singapore. But what is the difference when borrowing from the two institutions?

A good licensed money lender in Singapore offers loans more quickly and with fewer restrictions.

You can get a loan from it within hours, if not minutes. Licensed money lenders are also more lenient when it comes to poor credit scores.

On the other hand, it takes longer to access a loan from banks due to their strict criteria. Banks must cross-check your credit ratings by asking the Moneylenders Credit Bureau for your credit report.

If you have a bad rating that is close to 1,000, you may not qualify for a loan. Banks will also look at your employment and income.

In addition, licensed money lenders grant small personal loan amounts. This is because they are small businesses and cannot risk giving lump sums to a borrower in case of default.

Usually, licensed money lenders provide loans of up to $1,500. However, you can borrow higher personal loans of $10,000 and above with banks.

According to the Moneylender Rules, a licensed money lender should not charge more than 4% monthly interest rates. Banks typically charge lower interest rates than money lenders.

Some licensed money lenders also offer shorter-term loans than banks. This is favourable for a borrower who wants to save on interest and wants the loan for a short period.

How To Tell If A Money Lender Is Licensed

Before taking out a loan in Singapore, it is essential to check if you are dealing with a licensed money lender to avoid dealing with a loan shark.

As mentioned earlier, every licensed money lender should appear on the list of the Registry of Moneylenders in Singapore.

A lender’s physical business address should also be available. This provides details of where you will have a face-to-face verification before you are given the loan.

However, be cautious if a money lender:

Asks you for your Singpass user ID or password
Uses abusive language or threatens you
Wants to retain your NRIC and other personal documents such as a work permit, employment pass, driver’s licence, or passport
Ask you to sign a blank or incomplete Note of Contract to qualify for the loan
Grants you the loan without giving you a copy of the Note of Contract for the loan and without explaining all its terms and conditions
Gives you the loan without due diligence, such as approving it via a phone call or email without meeting you in person or without asking you for the supporting documents
Want to withhold part of your principal loan amount for any reason they may give.

Such practices are not allowed in Singapore.

If you encounter a licensed money lender that has breached any of these rules, report them to the Registry of Moneylenders to be blacklisted. Provide its business name, contact number, and licence.

Can You Borrow From Multiple Money Lenders?

Yes, you can simultaneously get two or more personal loans from different money lenders in Singapore.

However, before the lenders give out the loan, they have to analyse your financial situation further to weigh your repayment ability.

Also, even if you are eligible for another loan, kindly think carefully before taking it out. Do you really need it?

According to the Monetary Authority of Singapore (MAS) cap launched on 1 Jun 2019, you should not borrow more than 12 times of your monthly income.

This includes the total amount of unsecured loans such as education, credit lines, personal loans, renovation, furnishing, and credit cards.

If you exceed this limit, you will not be allowed to take out any additional unsecured loans for three consecutive months. This is to help Singaporeans from borrowing excessively.

What Is The Maximum Loan You Can Take?

The amount of unsecured loans you can take out from any money lender is limited, depending on what you earn per year.

However, there is no cap when it comes to applying for a secured loan in Singapore.

If you are a Singapore citizen and a permanent resident earning less than $20,000 per year, you qualify for a $3,000 loan.

However, if your salary is at least $20,000 annually, you can get a loan that is six times your monthly income.

On the other hand, your case is different if you are a foreigner living in Singapore. Those earning less than $10,000 per year qualify for $500 loans.

In addition, those earning at least $10,000 and less than $20,000 per year can get a $3,000 loan, while those with at least $20,000 annual income qualify for loans six times their monthly income.

What To Do Once Your Loan Is Approved

Once you have made a deal with a money lender and gotten a loan, there are key things that you need to do. This includes:

Ensure You Receive The Correct Principal Amount

Cross-check the amount you have received from the lender to ensure it is the approved and correct amount.

They should also charge you the standard administrative fee of not more than 10% of the principal amount.

Keep The Relevant Documents

It is also essential to keep the following documents:

Receipts of every payment you have made to repay the loan – check if they are correct
A copy of the loan contract
A statement of accounts for all your loans – this is issued at least once every January and July.
Copies of all accounts, receipts, and any other relevant documents

Pay Your Loan Installments On Time

When you borrow a loan from a licensed money lender in Singapore, you have committed to how you will repay the money by signing the contract.

Therefore, ensure you stick to the agreement and pay the installments on time. Avoid late payments because they attract penalties.

What Happens If You Can’t Pay Back The Loan?

If you have financial challenges and default on your loan payments, the Registry of Moneylenders is not in a position to help negotiate with your money lender.

This is because you entered into a private contract between you and the lender.

However, you can talk to your lender and request an extension. It will allow you to organise yourself on how you will repay the debt.

As a last resort, you can also file for bankruptcy. If your loan amount exceeds $15,000 and it is challenging to pay it off even after requesting for an extension, you can take this step.

Filing for bankruptcy stops the accumulation of interest. It also prevents your money lender from taking any legal proceedings against you.

Finally, you can approach social service agencies for help.

They assist borrowers in recovering from serious debt problems by offering credit counselling, general credit management awareness, and negotiation of debt repayment with lenders. Such organisations include: