Personal Finance

How To Settle Debt With A Licensed Money Lender And Where To Get Help When Required

August 23, 2022

Are you struggling to repay your debts? You’re not alone.

Thousands of Singaporeans are in the same situation. 

But there is light at the end of the tunnel. The strategies you’ll learn from this guide will help you get back on your feet and start afresh.

Follow these tips to know how to settle debt with a licensed money lender and get started on your journey to financial freedom today.

What Are Licensed Money Lenders? 

Licensed money lenders are government-regulated financial institutions. Using their moneylending license, they offer loans to individuals and businesses, typically at higher interest rates than banks.

That high interest is one reason legal money lenders are often perceived as a last-resort option.

That shouldn’t necessarily be the case.

Licensed money lenders are a good alternative if you need fast, flexible loans with less bureaucracy than what banks put you through. 

And you’re perfectly safe when taking a loan from them. Here’s why:

  • Licensed money lenders must follow specific regulations to protect borrowers, such as capping interest rates and fees. 
  • Licensed money lenders must also be registered with the government and undergo regular audits. 
  • The best money lenders are members of the Credit Association Singapore (formerly known as the Moneylenders Association of Singapore). That means they have to follow strict ethical guidelines.

What Types Of Loans Can You Borrow From A Licensed Money Lender?

A licensed money lender can offer different types of loans, including but not limited to:

  • Personal loans: Up to six times your monthly salary; flexible repayment tenures up to 36 months (with GS Credit)
  • Business loans: The sum and tenure are established on a case-by-case basis
  • Foreigner loan: Depending on your monthly income, the foreigner loan varies between $300 and six times your monthly earnings.
  • Debt consolidation plan: Through a debt consolidation plan, the money lender combines your pre-existing debts into a single one with a better interest rate and longer tenure.
  • Wedding loan: Covering all your wedding-related needs, a wedding loan allows you to borrow up to six times your monthly income.
  • Home renovation loan: Unlike banks, licensed money lenders are more flexible with their renovation loans. For example, GS Credit allows you to purchase furniture and electrical appliances with your renovation loan, whereas banks do not.

As you can see, licensed money lenders offer a wide range of personalised financial assistance plans. But are there any drawbacks? 

Pros And Cons Of Borrowing From A Licensed Money Lender

A money lender loan has some advantages compared to a bank loan. 

  • Money lenders have laxer regulations, meaning they offer more flexibility regarding loan terms and conditions. 

For example, many banks don’t lend money to Singapore citizens and permanent residents who earn less than $20,000 per year or foreigners earning less than $45,000 per year. They also frequently establish 65 years old as the maximum age cap.

  • Money lenders are more willing to work with you even if you don’t have perfect credit. Besides, legal money lenders in Singapore obtain your credit report from the Moneylenders Credit Bureau, which only includes previous loans. 

In comparison, banks rely on your credit score, which also includes unpaid bills or outstanding credit card bills.

  • Money lenders provide loans more quickly and with less hassle. For example, with GS Credit, you can send an application in minutes with Singpass and receive an answer within an hour. In comparison, a bank loan takes three to five business days to be processed.

However, licensed money lenders have their drawbacks too:

  • Higher interest rates up to 4% per month. The main advantage of banks is that they can offer lower interest rates than money lenders, usually 3.5% to 11% per annum.
  • Lower lending limits. Money lenders in Singapore cannot legally offer you a personal loan over six times your monthly income. 

However, banks can lend people up to 10 times their monthly earnings. Besides, the maximum amount of loans a person can take in Singapore is 12 times their monthly income. 

  • Lower tenures. Money lenders typically offer shorter repayment periods than banks. A shorter term translates into larger installments if you borrow a more considerable sum. Therefore, your budget may be quite strained for a while.

How Are You Protected By Law When Borrowing From A Licensed Money Lender?

When you borrow from a licensed money lender, you are protected by the law in several ways. 

First of all, the lender must follow specific guidelines set by the government to keep its moneylending license: 

  • Capping interest rates and fees. 
    • The maximum interest rate that a money lender can ask for is 4%. The interest quantum is calculated from the outstanding balance. 
    • Legal money lenders can also impose a maximum of 4% late interest rate calculated from the missed installment and a maximum of $60 late payment fee. 
    • The maximum 10% admin fee is the last charge a money lender can legally impose.
  • Being clear and transparent about loan terms. These terms should be clearly stated in the contract, and you should be able to ask any questions you need.
  • Not using unfair or deceptive practices. For example, a legal money lender in Singapore isn’t allowed to ask for a pre-approval loan fee. They’re also not allowed to calculate the late interest rate from the principal loan amount; that rate is only based on the missed installment(s).

In addition, licensed money lenders are regulated by the Ministry of Law, so they can be held accountable if they violate the law. 

If you have a problem with a licensed money lender, you can file a complaint with the Registry of Moneylenders at 1800-2255-529 or on this website.

If the court finds your money lender guilty, the punishment includes:

  • Fine up to $20,000
  • Jail for up to six months

Here’s how to avoid that hassle and the dangers of working with a licensed money lender using unfair practices:

Do your research. 

Compare different agencies and read customer reviews carefully to ensure they’re not using unprepared (or troublesome) loan officers.

What If You Are Unable To Pay Back The Loan?

If you’re unable to pay a money lender in Singapore, you have four options: 

  1. Try a money lender debt repayment plan to extend the loan period or restructure the installments. 
  2. Approach a debt management agency or licensed insolvency practitioner for help. 
  3. File for bankruptcy. However, this should only be done as a last resort since it will harm your credit rating.
  4. Apply for the Debt Repayment Scheme (DRS).

We’ll discuss these options in the section below. 

What Happens If You Default On The Loan?

Defaulting on a loan from a licensed money lender can have serious consequences. Not only will you be liable for the full amount of the loan, plus interest and fees, but you may also be subject to legal action.

In addition, your credit score will take a hit, making it difficult to obtain future loans. 

Remember: If you’re struggling to repay your loan, it’s essential to contact your lender as soon as possible to try and work out a repayment plan. 

Taking action early can help avoid some of the more severe consequences of defaulting on a loan.

How Credit Counselling Singapore Can Help

Credit Counselling Singapore (CCS) is a non-governmental organisation that helps people settle their loans. 

Whether your debt stems from unpaid bank loans, licensed money lenders, or credit cards, CCS can help.

Here’s how:

  • First, you have to participate in a mandatory talk on debt management.
  • Next, apply for a free counselling appointment. An expert agent will guide you through all your options, starting from your current situation.
  • Start implementing the solution you’re eligible for. For example, the agent can help you negotiate a new repayment scheme with your money lender or help you with a debt consolidation plan.

That brings us to the next point. 

Other Ways To Get Help 

Here are other tips on how to settle licensed money lender:

Reach Out To Your Friends And Family

Borrowing money from friends and family can be a delicate situation: 

  • On the one hand, only people you care about are most willing to help you when you’re in a tough spot.
  • On the other hand, you risk damaging your relationships if you cannot repay the debt. In addition, you may feel as if you owe them a favour, which can be uncomfortable. 

However, if you’re in a position where you need the money and you’re confident you can repay it, borrowing from friends and family can be a great option. 

Just be sure to communicate clearly about the loan terms and ensure everyone is on the same page.

Debt Consolidation Plan

A debt consolidation plan entails taking a new loan to repay your existing debts. 

This strategy can be a good option if you struggle to make multiple monthly payments. It can also help reduce the interest you’re paying on your debt, saving you money in the long run.

However, it’s essential to ensure you’re not taking out a new loan with unfavourable terms. Otherwise, you could end up in an even worse financial situation.

Here’s an example of a debt consolidation plan.

Let’s say you have three debts:

  • Debt A: $5,000 at 2%/month interest
  • Debt B: $3,000 at 3%/month interest
  • Debt C: $2,000 at 4%/month interest

Your total monthly payments would be $500. If you consolidated your debts into a new loan with a 3%/month interest rate, your monthly installments would drop to $200. 

This drop can save you money each month and allow you to fit this installment into your monthly budget.

That’s how you can get out of debt faster.

Debt Repayment Scheme (DRS)

DRS is a government debt consolidation scheme that you can consider if you don’t qualify for another debt consolidation plan. 

The main advantage is being able to amass all your outstanding debt into one with a more convenient installment and (if you meet specific requirements) a 0% interest rate.


  • Your total loan amount must be below $150,000 to qualify.
  • The maximum tenure for DRS is five years.
  • You can’t access any other loans while part of the DRS.


Filing for bankruptcy is often seen as a last resort for those struggling to repay their debts. 

While it can provide some much-needed relief, it’s essential to understand that bankruptcy is not a magic solution. 

Here are the advantages:

  • You get a fresh start. If you’re buried under a mountain of debt, filing for bankruptcy can help you get out from under the weight of that debt and start over. 
  • Filing for bankruptcy can stop creditors from harassing you and potentially garnishing your wages.

Here are some disadvantages:

  • Bankruptcy will not erase all your debts. In most cases, you will still be responsible for repaying certain obligations, such as student loans or child support payments. 
  • Bankruptcy will stay on your credit report for five years after discharging your obligations, making it challenging to obtain new lines of credit in the future. 
  • Filing for bankruptcy can be expensive, and you may have to pay specific fees to complete the process.


There are several different ways to repay your debts, and the best option for you will depend on your situation and needs. 

If you’re struggling to make multiple monthly payments, consolidating your debts into a new loan can help reduce your interest payments and save you money in the long run. 

However, it’s essential to make sure that you understand the terms of your new loan before consolidating, as you could end up in an even worse financial situation if you’re not careful.

GS Credit is here to help. 

If you apply for a debt consolidation loan now, you can get an answer within the hour.

Get your quote here.

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