Alwin Goh
Something sudden happens and you find yourself in urgent need of cash. You might be considering borrowing from the bank, but they might take a long time to approve your loan. So, you start looking for alternatives to get a fast loan in Singapore. When it comes to getting quick cash in Singapore, 2 options come to mind: a licensed money lender and a pawn shop.
But before you head towards either one of them, it’s crucial that you know the differences between them.
What’s A Licensed Money Lender? What’s A Pawn Shop?
Licensed Money Lender In Singapore
A licensed money lender refers to a person or group, typically institutionalised, who offers small loans to people or groups with financial needs.
Licensed money lenders in Singapore operate under the Ministry of Law (MinLaw), which restricts and regulates the amount that they can lend, the fees they can charge, and the maximum interest rate.
The list of licensed money lenders can be found on the Ministry of Law’s website. As of November 2020, there are a total of 156 licensed money lenders here in Singapore.
Another thing about licensed money lenders is that they don’t advertise via SMS and WhatsApp. In fact, they’re only allowed to advertise their loan products through the following channels:
- Their own website
- Business and consumer directories
- Within or on the exterior (the side of the wall, door, shutter, gate, and window) of the licensed money lender’s business premises
If you’ve received SMS or WhatsApp messages offering personal loans, they’re more likely to be from loan sharks.
Not sure if you’re dealing with a licensed money lender or a loan shark? Learn more about the differences between a licensed and an unlicensed money lender in Singapore here.
Pawn Shop In Singapore
On the other hand, a pawn shop in Singapore is a business or shop that offers money to individuals who bring in valuable items, in exchange for an instant cash loan. These individuals leave their valuables with the pawnbroker who operates the business.
Similar to licensed money lenders in Singapore, licensed pawn shops are regulated by the Ministry of Law, and there are 236 registered pawn shops as of November 2020. The most common ones include Maxi-Cash, Cash Mart, ValueMax, and MoneyMax.
While both licensed money lenders and pawn shops in Singapore provide fast cash loans, there are a few differences to keep in mind before you borrow from either of them.
With that, let’s explore the differences between licensed money lenders and pawn shops.
One advantage of borrowing from a licensed money lender is that you won’t risk losing something valuable.
3 Differences Between A Licensed Money Lender And A Pawn Shop In Singapore
1. Collateral
Pawn Shop
A pawn shop works on the basis of collateral. The general process of getting money from a pawn shop is simple. You approach the shop and pledge a valuable item.
In other words, you bring your item to the pawn shop and exchange it for money. It’s a form of a secured loan.
The broker will then evaluate your item and lend you a sum of money that he deems as worthy of your item. Typically, the amount is 60% to 80% of the market value of the pledge.
For example, if you pledge a watch initially priced at S$15,000, you can expect it to be priced by the broker at S$10,000, and hence you’ll receive S$10,000.
The good thing about borrowing money from a pawn shop is that as long as you have something valuable, you can get a lump sum of cash instantly. This can be useful for emergencies.
For instance, if you have a medical emergency, and your Medisave and insurance payouts aren’t enough to cover your bills, you can pledge valuable items for cash at the pawn shop.
Another instance in which a loan from a pawn shop can be a viable option is when you need cash to make urgent payments such as utility and credit card bills.
When taking a loan from a pawn shop, you’ll need to pledge something valuable, such as gold jewellery.
Before you head down to a pawn shop though, there are several things that you should keep in mind.
Firstly, you need to have an item that’s valuable enough to be pawned and pledged. This typically includes expensive jewellery, watches, and gold. You can even pawn valuables such as branded bags, electronics, and musical instruments.
Next, you must be ready to risk losing this valuable item if you’re unable to make at least one repayment in 6 months. After 6 months, if you haven’t made any partial payment, your pledge will most likely be auctioned off on the market.
So you might want to consider another option if you don’t want to risk losing your item.
Licensed Money Lender
On the other hand, when you borrow from a licensed money lender in Singapore, you have the option of applying for an unsecured loan. The good thing about it is that it’s not bonded to collateral.
This means that the licensed money lender doesn’t have the right to seize any of your assets when you fail to pay your debt.
Learn more about the differences between a secured and unsecured loan here.
However, compared to pawn shops, licensed money lenders in Singapore require you to submit more documents.
Typically, these include:
- Proof of identity: NRIC
- Proof of residence: utility bills, bank statements, and letters addressed to you
- Proof of income: Payslips, CPF contribution, and income tax statements
On top of these documents, you’ll also need to be at least 21 years old and earning an income to get a loan from a licensed money lender.
These are crucial for them to assess your loan application, and to ensure that you can repay your debt regularly.
Learn more about what you should know before borrowing from a licensed money lender here.
2. Repayments
Pawn Shop
Firstly, there’s no fixed repayment required when you’re taking a loan from a pawn shop in Singapore. You can pay as much as you want for every partial payment, but the loan tenure will be extended until you’ve made the full payment. This full payment also includes the interest charged to your loan.
For each payment made, the auctioning of your pledge will be delayed by 6 months. For instance, if you borrow S$3,000, you can choose to pay S$400 on your first month, S$600 on your second month, S$500 on your third month, and so on. While this keeps the account active, it also increases the interest to be paid.
But if you have enough money to repay this loan in full, you can do so and get your pledged item back.
Because loans from a pawn shop are collateral-based loans, you can also choose to keep the borrowed money by not paying back the loan at all. This means that you’ll be forfeiting the pawned item.
The typical interest rate charged by a licensed pawn shop in Singapore is 1% for the first month, and 1.5% in subsequent months. This is still lower than the average credit card interest rate in Singapore though, which is 25%.
Licensed Money Lender
If you were to borrow from a licensed money lender, you’ll need to pay back a fixed amount every week or month, depending on your repayment frequency.
The good thing about having a fixed repayment schedule is that it helps you to set aside a certain amount of money to pay the loan. This allows you to manage your spendings and restructure your finances better in the long term. It can be helpful if you’re having difficulties repaying your debt.
Learn more about what you can do if you find yourself struggling to pay off your debt.
At the same time, a majority of personal loans come with fixed interest rates for the whole duration of the loan tenure. While it’s usually subjected to the licensed money lender’s assessment of your creditworthiness, it cannot exceed more than 4% per month.
Likewise, if you make any late payments, you’ll be charged a maximum of 4% interest per month for the amount that’s repaid late. Let’s say you’ve taken a loan of S$10,000, and you’ve paid the S$2,000 late. In this case, the 4% late interest will only be applied to the S$2,000 amount.
If you’re getting charged more than 4% per month for interest rate and late repayment, chances are you’re dealing with a loan shark.
3. Loan Amount Limit
Licensed money lenders in Singapore provide a fixed repayment schedule.
Pawn Shop
The loan amount that you receive will depend on the value of your pledged item.
Your pledge will be evaluated by an expert valuer, who will offer you a loan that ranges from 60% to 80% market value of your pledged item. This means that the instant loan you’ll receive is lower than the actual value of the item.
Licensed Money Lender
The upper limit of your loan generally depends on your monthly income when borrowing from a licensed money lender.
This means that if you’re a Singapore Citizen or Permanent Resident with an annual income of less than S$20,000, you can borrow up to S$3,000. And if you earn at least S$20,000 annually, you can borrow up to 6 times of your monthly income.
Here’s a breakdown of the loan limits based on citizenship and income level.
| Annual income | Singapore Citizen/Permanent Resident | Foreigner living in Singapore |
| Less than S$10,000 | S$3,000 | S$500 |
| At least S$10,000 to less than S$20,000 | S$3,000 | S$3,000 |
| At least S$20,000 | 6 times of monthly income | 6 times of monthly income |
While licensed money lenders in Singapore generally focus more on your annual income when approving loans, they also look at other factors such as your creditworthiness.
One way to maintain your credit score is to avoid applying for multiple loans within a short period of time. For instance, if you’ve submitted a loan application, you should only submit a second one when the first one has been rejected.
Find out what else you can do to improve your credit score here.
Should You Borrow From A Licensed Money Lender Or A Pawn Shop In Singapore?
Essentially, both licensed money lenders and pawn shops have their advantages and disadvantages when it comes to extending a loan. It’s important for you to note both sides of the coin (pun intended) when you consider borrowing from these 2 platforms.
Here’s a table to summarise the pros and cons of borrowing from pawn shops and licensed money lenders.
| Pawnshop | Licensed money lender |
| Collateral – Need to have an item that’s valuable enough to be pawned (e.g. expensive jewellery, watches, and gold) – Risk losing this valuable item if you fail to make at least one repayment in 6 months |
No collateral – You have the option of taking an unsecured loan, which means that collateral isn’t needed, so you won’t risk losing it |
| No fixed repayment – Pay as much as you want for every partial payment – Loan tenure will be extended until you make the full payment |
Fixed repayment (as stated in your contract) – Pay a fixed amount depending on repayment schedule – Helps to manage your finances better |
| Loan amount limit depends on your pledged item – Loan amount is limited to the value of your pledge – You’ll get around 60% to 80% the market value of your pledge |
Loan amount limit depends on your income and other variable factors – Maximum loan amount is limited to annual income – Besides income level, your credit score will also be reviewed to determine the loan amount |
On one hand, it may take a longer time to get approval and your funds if you’re borrowing money from a licensed money lender in Singapore instead of a pawn shop.
The process of borrowing from a pawn shop may be faster since other than your identification documents, you won’t need to submit any more documents. You can basically go down to a pawn shop nearby with your valuables, and exchange it for cash. It’s almost instantaneous. This is useful especially when you need quick cash to tide over emergencies.
Need an instant cash loan in Singapore? Find out everything you need to know about it here.
Another benefit of taking a loan from a pawn shop is that you can get a loan even when you’re not earning any income.
On the other hand, borrowing from a pawn shop doesn’t give you the fixed repayment schedule that a licensed money lender puts in place. If you’re prone to missing your repayments, having a fixed repayment plan helps you to make your repayments regularly. You’ll also be less likely to default on your payments.
In addition, the loan you receive from a pawn shop is limited to the value of your pledge. If it doesn’t have a high value, you won’t be able to get much cash out of it. In these circumstances, borrowing from a licensed money lender in Singapore may be a more viable option.
When weighing these factors, it’s essential to go for the one that best suits your needs, whether it’s a licensed money lender or a pawn shop.
Are There Any Other Alternatives To Pawn Shops And Licensed Money Lenders?
If you prefer not to pledge a valuable item at a pawn shop or take a loan from a licensed money lender in Singapore, here are a few viable options to consider.
Borrow From Family And Friends
Consider asking your family and friends for financial assistance. One good thing about borrowing money from them is that they’re less likely to charge interest, hence reducing the cost of taking a loan.
However, do note that doing so comes with the risk of damaging your relationship with them.
Ask For Payday In Advance
Prefer not to borrow from family and friends? Consider asking your employer to find out if you can receive your salary earlier.
Doing so also helps to reduce the cost of borrowing, since you won’t need to pay interest for it.
Apply For Financial Assistance
Another alternative is to apply for financial assistance such as ComCare Interim Assistance. This is a financial assistance scheme that’s suited for urgent and immediate matters.
Here are the eligibility criteria:
- Singapore Citizen or Permanent Resident, with at least one immediate family member in the same household being a Singapore Citizen, and
- Have a household income of S$1,900 and below, or a per capita household income of S$650 and below
Looking to take a loan from a licensed money lender? Apply now with Crawfort.
