No doubt Singapore is an expensive city for living, it, sometimes, becomes challenging to manage all expenses without any other assistance. When these expenses are as significant as unexpected medical bills, over spend in luxury goods, wedding costs, and consolidate debts, Singaporeans often use the financial services of banks or moneylenders. It is primarily due to this reason that there is no scarcity of licensed moneylenders in Singapore. Currently, the island country has 154 licensed moneylenders can lend you fast money. If you are desperately need an extra cash for an emergency and thinking of borrowing a short term loan from a licensed moneylender in Singapore, read on. In this guide for borrowers, we focus on discussing all crucial aspects related to money borrowing in Singapore.
Before making an application for a personal loan, evaluate your financial understanding, and make an informed decision regarding the type of loan you want. Ask yourself the following questions to decide which loan type is the right choice for you.
- Are you dealing with a small emergency or a major one? In the case of minor crises that require only a small sum of money, personal loans are an ideal choice. They are suitable for paying off home renovation, credit card debts, etc. Keep in mind that, in Singapore, the loan amount you are eligible for is determined by your annual income.
- Once you have decided on the type of loan, do some research on repayment terms. These days, moneylenders offer a loan on both fixed as well as variable repayment terms. Do some research to figure out what repayment terms are suitable for you.
- Finally, apply with the Credit Bureau of Singapore (CBS) to get your credit report. CBS will charge you a nominal fee of S$6 and provide you with your credit report within a few days. Though many licensed moneylenders do not even bother to check a borrower’s credit report, especially in case of personal loans, some lenders do not sanction loans to borrowers with a bad rating. Thus, if you have a bad credit report, it’s better to clean it up a bit before making a loan application.
Since personal loans are unsecured loans, money lenders make it a point to check every borrower’s financial standing as well as financial integrity before approving a loan. Thus, there are a few important things you, as a borrower, must do to increase the chances of your loan getting approved. First of all, decide on the type of loan you want and check if you are eligible for it. Next, refer to the website of the Ministry of Law, Singapore, to check how much money are you allowed to borrow. Once you are clear on these finer details, start collecting all the documents you will need to apply for the loan successfully. These include:
- Proof of income and employment
- Current credit score and past CPF statements
- Residency proof
- Tenancy agreement, employment letter, employment pass, and bank statements (for foreigners)
Money lenders may not ask for all of these documents, but it’s best to keep everything ready. Moneylenders ask for these documents to evaluate your financial ability to pay back the loan. It is, thus, that in Singapore, loans are often approved based on an individual’s annual income and not their credit history. However, individuals with a poor credit history are often given special loan packages with special repayment terms.
In Singapore, all moneylenders are mandatory required to adhere to the rules laid down by the Ministry of Law. Thus, there is a definite limit on interest, late fees, and other costs that a lender can charge a borrower. The strict rules laid down by the Ministry of Law went into effect on 1st October 2015 and loans from licensed lenders are subject to the following:
- A licensed moneylender cannot charge interest exceeding 4% per month
- The administrative fee charged must not exceed 10% of the principal loan granted
- There is a cap of $60 per month on the late fee
- The total cost charged by the moneylender, including interest, administrative fees, late interest, and other related charges, must not exceed the principal loan amount
When you think you have made a well-informed decision about the type of loan you want, it’s time to find a moneylender you can trust. The first thing to know here is how to separate authorised moneylenders from the unauthorised ones. The easiest way to check if a moneylender is licensed or not is to refer to the list of licensed lenders in Singapore. Also, always make some time to go through the reviews about the moneylender you have chosen and check if their license is still valid.
If a money lender is trying to solicit loans through phone calls or text messages, you are probably dealing with an unlicensed lender (Ah-Long) or a lender defying the rules laid by the Ministry of Law. The rules laid down by the ministry clearly state that licensed moneylenders can only use business or consumer directories, their website, and the interior and exterior of their place of business for advertising. Anyone not abiding by these rules must not be trusted.
Similarly, an authorised licensed money lender will always return your NRIC and other personal identification documents after evaluating them and will never ask borrowers to sign any blank papers. All licensed lenders also make it a point to explain each stipulate mentioned in the Note of Contract to the borrower. The Note of Contract provided by them will also include all relevant details, including interest rate, repayment terms, repayment period, etc. Finally, before accepting a loan contract, all borrowers must check that the name, office address, telephone number and license number of their moneylender is registered with the Ministry of Law website, you can refer to this updated list of licensed moneylenders in Singapore.
Once your lender has approved your loan and has given the principal amount to you, make sure the lender has charged you the right approval fee. According to the rules laid down by the Ministry of Law, moneylenders can charge only 10% of the principal amount as the loan approval fee. Once you are sure everything is okay and you have the money with you, the onus is now on you to make sure you are paying each instalment in time. Paying debts late will lead to the accumulation of late fees, something you must try your best to avoid. Also, once your loan has been approved, make sure you have the following documents in your possession:
- A copy of the Note of Loan Contract
- Receipts for every payment you have made towards your loan
- A statement of account and the balance account
- Copies of all accounts, receipts, and any other relevant document
When borrowers default on their payment, moneylenders usually hire debt collection agencies and entrust them with the critical task of collecting debts from defaulting borrowers. However, even in the case of defaulting borrowers, lenders must stick to the code of ethics laid down by the Credit Collection Association of Singapore. The code of ethics forbids the use of violence, harassment, or intimation by debt collection agencies as a means to collect debts.
Further, since licensed moneylenders in Singapore fall under the Money Lender’s Registrar, they cannot charge a borrower any interest rate exceeding 4% month, irrespective of the type of loan, borrower’s income, and their ability to pay. Thus, even in the case of defaulting borrowers, moneylenders cannot charge them anything more than 4% as the interest rate.
Though money lending laws are stringent in Singapore and usually tilt in favour of borrowers, borrowers must do their best to stick to the loan repayment terms and conditions and make all payments in time. In case you, as a borrower, find yourself in a tricky situation and are unable to pay the loan instalment, it’s best you talk to your lender and request them for an extension on the refinancing plan. However, if your loan amounts to up to $15,000 and you think you won’t be able to pay the loan amount even if the lender agrees to negotiation on your refinancing plan, you can file for bankruptcy. In the case a borrower files for bankruptcy, a lender cannot sue the borrower. Further, the borrower’s account gets frozen, which stops the accumulation of interest on the account.
Before making an application for a loan, keep the following things in mind.
- Before applying for a loan or accepting it, always look out for other alternatives. Various government agencies release financial assistance schemes from time to time. Get in touch with these agencies and see if there is any scheme that you qualify for.
- Look around and talk to different moneylenders before accepting any offer. Thorough research will allow you to find a moneylender who is willing to work on the terms and conditions that are suitable for both parties.
- Accept a loan only if your financial situation allows you to stand by the stipulates of the contract. In case you are unable to abide by contractual terms, you will be required to pay late payment fees and added interest, both of which together can cause an extreme financial burden on you. Thus, think twice before you decide to take a loan and borrow only however much you can quickly return.
- The moneylenders are bound by the law to explain to borrowers each stipulate of the contract in a language the borrower clearly understands. Further, the moneylender is also obligated to provide the borrower with a copy of the loan contract. Before accepting the loan, make sure you fully understand the fees and interest rate charged by the moneylender and the repayment schedule.
- Always check all contracts to see if they permit the moneylender to lodge a caveat against your real estate property in case you are unable to pay the loan. If a moneylender lodges a caveat against your real estate property, you will be mandatorily required to repay the lender in full before selling the property.
- Borrowers are bound by the contract they sign and must abide by all terms stated in a loan contract agreed upon by the borrower and the moneylender.
In the case of secured loans, there is no upper limit; borrowers can borrow any amount they want. In the case of unsecured loans, Singapore citizens and permanent residents with income less than $10,000 can borrow up to $3,000, whereas foreigners living in Singapore and falling under the same income bracket can borrow only $500. Singapore citizens, permanent residents, and foreigners residing in Singapore with an annual income between $10,000 and $20,000 can borrow up to $3,000. Those with an annual income exceeding $20,000 can borrow a sum that is equivalent to or less than six times the monthly income of the applicant.
In October 2015, the Ministry of Law put a cap on the fees and expenses moneylenders can impose on borrowers. The charges and costs are as follows:
- In the case a borrower fails to repay the loan installment in time, the moneylender is allowed to impose a fee not exceeding $60 for every month of late payment.
- In the case a loan is granted, the fee charged should not be more than 10% of the principal loan amount.
- The moneylender cannot load the borrower with any legal costs ordered by the court authorizing the moneylender to recover the loan.
Yes, on October 1, 2015, the Ministry of Law passed a law that states that regardless of the type of loan being sanctioned and the borrower’s income, moneylenders cannot charge more than 4% per month as the maximum interest rate. Similarly, in case of delayed or no loan payment, moneylenders can charge a late interest that does not exceed 4% per month.
Interest charged by the moneylender must be calculated on the principal left after deducting all payments made by the borrower towards the loan. For example, if a borrower took a loan of $3,000 and has repaid $1,500, the interest charged by the moneylender will be computed on the remaining $1,500 and not $3,000.
Similarly, moneylenders can charge late interest only on the amount that has been paid late and not on the total principal amount or outstanding amount not due to be paid. To better understand this point, let us consider an example. Let’s assume a borrower took a loan of $5,000 and failed to pay the first installment of $1,000. In this case, the moneylender can only charge the late interest on the installment that the borrower was unable to pay, i.e., $1,000 in this case, and not on the remaining $4,000.
The Ministry of Law laid out a few advertising rules covering advertisements by licensed moneylenders. These rules went into effect from November 1, 2011. According to these rules, a moneylender can use only one of the following channels to advertise.
- Business or consumer directories (both print as well as online media)
- Moneylender’s website
- Advertisements placed within or on the exteriors of a money lender’s business premises
Licensed moneylenders in Singapore aren’t allowed to advertise beyond these three channels. Thus, if a money lender tries to contact you through email or SMS or tries to lure you in through flyers or any other form of advertisement, you are either dealing with an unlicensed moneylender or a licensed moneylender violating the rules laid out by the Ministry of Law. You can report such ads and the moneylender behind them to the Registry via their website or by dialing 1800-2255-529.
Once you have filed a complaint, the Registry will investigate the offending licensed moneylender. Cases involving unlicensed moneylenders are passed to the police.
It is of utmost importance that you borrow money only from a licensed moneylender. “Click here” to see the list of licensed moneylenders in Singapore.
That apart, refuse to borrow from even a licensed moneylender if they indulge in any of the following.
- Asks you to provide them with your SingPass user ID and password.
- Refuses to return your NRIC card or any other personal ID documents.
- Accepts your loan application and processes loan without first explaining to you the terms and conditions laid out in the Note of Contract.
- Fails to provide you with a copy of the Note of Contract.
- Accepts your loan application and processes your loan without doing proper due diligence.
- Decides to withhold a part of your principal loan amount for any vague reason.
- Indulges in abusive or threatening behavior.
In case you are dealing with a moneylender who is indulging in any of the above-mentioned practices, report them to the Registry of Moneylenders. Please include the business name of the moneylender, their license, contact numbers, and other vital details in your complaint.
For more information on unlicensed moneylenders, check out this link.
No, it is not a good idea to rely solely on the content of an advertisement. Before you accept a loan agreement, seek clarifications, and try to understand every single term mentioned in the contract.
If you are standing as surety for a loan, make sure that:
- You understand what you are getting into and what will be your responsibilities as a surety.
- Ask for a copy of the Note of Contract and make sure you know and agree to all the terms in the Note of Contract.
- Seek clarifications from the moneylender on each stipulate of the Note of Contract in a language that you fully understand.
- Make sure you have not given your NRIC card or any other personal ID document to the moneylender to keep.
- Do not ever divulge information regarding your user accounts and passwords to the moneylender.
Once your application has been approved, and your loan has been sanctioned, make sure:
- The moneylender has given you the right principal amount.
- Moneylenders are allowed to deduct only 10% of the principal amount as the loan approval fee. Make sure you have been charged the right loan approval fee.
- Make sure you are paying each installment in time. In any case, try your best to avoid late payment fees and late interest.
- Every time you pay an installment or make a deposit towards your loan, ask your moneylender to provide you with a receipt.
- Ask for a statement of account for your loan at least twice a year – once in January and then in July. Check everything for any fallacies.
- Prepare a docket for all loan-related documents, such as receipts of payments, statements of accounts, evidence of payments, etc. Keep this docket in a safe place.
In case you find yourself cheated by your moneylender, you can lodge a complaint against your moneylender with the Registry by dialing 1800-2255-529.
The Registry makes it a point to never disclose the details of a complainant to the moneylender without the consent of the complainant. Once you make a complaint with the Registry, you will be asked to attend an interview with a representative of the Registry. The meeting is organized to collect all useful information and documents related to the loan contract and moneylender. Once the Registry has all the required documents in its possession, it begins its investigation. The Registry has stringent policies when it comes to errant moneylenders.
If it is found that a moneylender has indeed indulged in unfair practices, you will be allowed to take your case through the Small Claims Tribunal or the Court under the Consumer Protection Act. The court has been given the power to nullify exorbitant or unfair loan transactions.
If you need guidance for financial or help in case you find yourself unable the pay the loan amount and are in trouble, here are a few organizations that might be able to help you out.
Credit Counselling Singapore(CCS)
Credit Counselling Singapore is a government organization that helps borrowers with debt management. If you want to design a debt repayment schedule that will allow you to pay back your loan comfortably, this is the organization you must get in touch with.
Registry of Moneylenders (MinLaw)
The Registry of Moneylenders is the organization responsible for registration and regulation of moneylenders in Singapore. This is the organization you must contact before signing any loan agreements. Other than verifying a moneylender, the Registry can also help you develop an understanding of the terms and conditions mentioned in the loan contract and advise you on what terms and conditions may not be a suitable choice for you.
Credit Collection Association of Singapore (CCAS)
Credit Collection Association of Singapore was registered under the Societies Act on 12 December 2013. They are the only association that officially represents all the credit agencies and associations in Singapore. The CCAS principal objectives are to enhance the organization of the credit collection business community in Singapore and to represent, promote, advance and protect, in Singapore and abroad, the major credit collection concerns (such as professional credit collection conduct, training, behaviour etc) of professional credit collection agencies carrying on commerce and industry in Singapore.
National Council on Problem Gambling (NCPG)
If half your life’s worries are due to your addiction to gambling, the National Council on Problem Gambling is the organization you must immediately get in touch with. NCPG helps gamblers and their families by offering them useful advice on the topic.
Credit Association of Singapore (Moneylender’s Association of Singapore)
Though the Credit Association of Singapore is the moneylender’s Association of Singapore, the organization works to protect the interests of both the parties involved. Thus, if you want any information on any moneylender, the CAS is the place to contact.
ComCare is an organization that works to empower low-income groups and allows them to become self-reliant. Thus, if you are in trouble and are looking for temporary financial support, you can approach ComCare.
Irrespective of however much you plan your life, sometimes it is normal to run into troubles. The best way to deal with financial difficulties is to take a short-term loan with the intent of paying back the loan amount in time. In Singapore, banks and licensed moneylenders are considered to be the most trustworthy source of personal loans. However, it is not uncommon for borrowers to run into unauthorised lenders out to scam people of their money. Thus, to safeguard themselves against unauthorised moneylenders, borrowers must arm themselves with all the information they will need at their disposal while applying for a loan. We hope this borrower’s guide will help all borrowers in this regard.