(Frequently Asked Questions)
CRAWFORT - SINGAPORE
FAQs on Borrowing From Licensed Moneylenders in Singapore
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.