What Should You Know About Moneylender Rules?
In times of financial need, licensed money lenders are a useful option as they allow you to borrow cash quickly.
Nevertheless, despite the benefits of licensed money lenders, there is always the possibility of falling prey to unlawful tactics, or worse, loan sharks.
As an unlicensed lender, a loan shark does not follow any moneylender rules and so is likely to make your life a misery.
The Moneylenders Act defines a money lender as a person or company that engages in or represents himself as engaging in a moneylending business.
The government of Singapore has long acknowledged the need to safeguard the interests of both borrowers and money lenders, hence the need for the Moneylenders Act.
Therefore, no one is permitted to function as a money lender in Singapore unless he or she is licensed, or excluded from or exempt from the Moneylenders Act.
So before you get a loan, you must be as prepared as possible. Read on to learn about Singapore’s moneylender rules.
How To Know If A Money Lender Is Licensed
There is no doubt that the moneylending industry has expanded over time. But in Singapore, there are currently hundreds of legal and illegal money lenders.
Therefore, you must exercise extreme prudence when deciding which lender to trust.
The easiest way to ensure you only choose a licensed lender is to refer to the list of licensed money lenders in Singapore that is available online.
This is the quickest way to confirm if a lender is licensed or not. Every month, the Registry of Moneylenders updates this list of licensed money lenders. Using the list, you can avoid choosing lenders on the blacklist when obtaining a personal loan in Singapore.
You should also study the moneylender rules, and licensed money lender evaluations in Singapore, and verify that a lender’s license is still current.
Licensed money lenders are barred from soliciting loans via text messages, WhatsApp, phone calls or social media, so if you are approached in this method to get a loan, the money lender is likely unlicensed.
How Much Can You Borrow?
Several criteria determine how much you can borrow from a money lender. Any loan amount is available for secured loans. As long as money lenders give the necessary loan, there is no maximum loan amount.
A secured loan requires the pledging of collateral in the form of an asset. In the event that the borrower cannot repay the debt, the lender can confiscate this asset.
For borrowers of unsecured loans, there are loan caps for Singaporeans, permanent residents, and foreigners.
For the maximum amount you can borrow from Singapore money lenders for unsecured loans, refer to the table below.
|Annual Income Of The Borrower||Singaporeans And Permanent Residents||Foreigners Residing In Singapore|
|Less than $10,000||Maximum of $3,000||Maximum of $500|
|Between $10,000 to less than $20,000||Maximum of $3,000||Maximum of $3,000|
|$20,000 and above||Up to 6x the monthly income||Up to 6x the monthly income|
Money Lender Interest Rates and Fees
According to the Moneylenders Act, the highest monthly interest rate that money lenders can charge is 4%.
This limit applies to all borrowers, regardless of their income or whether the loan is secured or unsecured. The law became effective on 1 Oct 2015.
If a borrower fails to repay the loan on time, a money lender can charge a maximum of 4% monthly for each month the loan is paid back late.
The loan’s interest is to be calculated based on the monthly principal balance remaining after payments have been deducted.
For instance, if you borrowed $10,000 and repaid $5,000, the 4% interest rate will be applied to the remaining $5,000.
Licensed money lenders can charge additional fees as permitted by law. These include:
- Loan approval fees: Up to 10% of the loan principal
- Late payment fees (whether for repayment of the principal or interest): Up to $60 per month
- Legal costs incurred by the money lender: These can be charged for the successful recovery of the loan
However, the total fees assessed by a money lender on any personal loan, including interest, late interest, upfront administrative fees, and late fees, cannot exceed the loan’s principal.
Requirements And Considerations
There are numerous considerations to weigh when obtaining a loan.
Before visiting a money lender, explore other options such as the different government-sponsored financial help programmes.
In addition, examine if you can adhere to the contractual requirements in light of your income and other financial responsibilities. Borrow only what you require and can afford to pay back.
The law compels money lenders to explain loan terms in a language you can comprehend and provide you with a copy of the loan agreement. Ensure that you grasp the conditions of the contract, including the repayment plan, interest rate, and any related costs.
In addition, as a borrower in Singapore, you must meet specific standards before obtaining a loan from a licensed money lender.
A correctly filled application form with the following borrower information must be presented to the money lender:
- Official name
- Date of birth
- NRIC number
- Residential address
- Email address (if any)
- Contact number
- Loan amount applied for
If the loan is secured by a surety or guarantor, the details of the surety must also be given. To proceed with the loan application, the licensed money lender must receive supporting documentation such as:
- Documentation showing the borrower’s total income for the three months preceding loan application
- Utility bills
- Income tax statements
Foreigners residing in Singapore are required to present the following documents:
- Valid employment pass
- Copy of their rental contract
- Appointment letters from the borrower’s employer
- Bank statements
What Happens After The Loan Approval?
Verify that your money lender has charged you the correct amount for the approval fee after it has authorised your loan and provided you with the loan principal.
Administrative costs for money lenders in Singapore are capped at 10% of the loan principal.
The duty to repay the loan under the agreed-upon terms commences as soon as you get the loan proceeds. As the borrower, you should:
- Get a copy of the loan contract
- Keep loan payment receipts for each installment you’ve made
- Have a financial statement for all your loans.
- Keep copies of every account, receipt, and other pertinent documents
What If You Cannot Pay The Loan?
There are solutions if you cannot repay a loan promptly. When borrowers default on their payments and cannot pay licensed money lenders in Singapore, they typically use debt collection companies to recover the debts.
While there are no regulations governing debt collection in Singapore, licensed money lenders and debt collectors are encouraged to adhere to the Credit Collection Association of Singapore’s code of ethics.
The easiest method to handle the matter is to negotiate an extension with your licensed lender. Consider reaching out to social services for credit counselling and debt management assistance.
However, if your debt exceeds $15,000 and you are unable to repay it even after restructuring your loan installments, you may want to consider declaring bankruptcy. This should, however, be done as a last resort.
When a borrower declares bankruptcy, the accrual of interest ceases. In addition, it prohibits money lenders from pursuing legal action against the borrower.
Now that you know the moneylender rules, you know how and when to seek help. Always work with a reputable licensed money lender like Horison Credit.