According to the Moneylenders Act, a moneylender is one who, whether they act as the principal lender or as an agent to a moneylending institution, carries or holds himself out as carrying the business of moneylending.
Purpose and Legislative Intent of Money Lenders Act
The Moneylenders Act is a statute enforced by the Singapore government to regulate and control the business of moneylending to protect borrowers when borrowing money for business and personal matters.
For more information on the Moneylenders Act in Singapore, see here.
How To Know if the Moneylender is Licensed?
It’s always a good idea to only work with money lenders that have a proper licence.
Characteristics of Licensed Moneylenders
- They are regulated by the Singapore government, which means all terms set forth are mandated by the law.
- They will be listed on the Singapore Ministry of Law website as a licensed money lender.
- They will detail all your loan terms to you in your contract in a manner that is understandable to you.
Since all licensed money lenders are regulated by the law, you can be sure that the loans you take out with them are fair and have been reviewed.
Know Your Legal Rights When Borrowing Money
There are 5 key things borrowers should be aware of when borrowing money in Singapore:
1. Advertising Restrictions
Licensed moneylenders can only post their services through these 3 legal channels
- Business or consumer directories (in print or online media)
- Websites belonging to the licensed money lender
- Advertisements placed within or on the exterior (the side of the wall, door, shutter, gate, and window) of the licensed money lender’s business premises
They are NOT allowed to advertise their services via:
- Text messages (SMS and WhatsApp)
- Phone calls
- And other online media like social media platforms
A licensed moneylender also cannot invite you to take a loan or grant you a loan without you first requesting for it.
2. Requirements For All Loans
Before granting a loan, moneylenders must:
- Explain the terms of your loan to you in a language you understand
- Give you a signed copy of the loan contract, which includes the terms in writing
- Give you a separate cautionary statement in writing
For any existing loan, they must:
- Issue you a receipt for every payment made towards the loan
- Provide you with a statement of accounts once every half year in July or January
3. Caps on All Loan Costs
The Ministry of Law only allows licensed money lenders to charge borrowers:
- A one-time admin fee of not more than 10% of the loan principal
- Interest rates of not more than 4% per month
- Late interest rate of not more than 4% per month
- Late fee of not more than $60 in any one month
4. Caps on Loan Amount
The Ministry of Law states that the maximum amount you can borrow from all moneylenders combined for unsecured loans is $3,000, or 6 times your monthly income. Scroll further for more details on how much borrowers can loan.
5. Debt Collection
Moneylenders can take steps to recover their debts from you. They may engage debt collectors to collect them. However, violent, threatening or harassing behaviour is deemed unlawful practice and the Singapore court will regard this as a serious offence.
Other prohibited practices for licensed moneylenders:
- Use of abusive and threatening language and acts of violence
- Requesting for your SingPass user ID and/or password
- Retaining your NRIC or other personal identification documents like passport and ATM cards
- Withholding any part of the agreed loan amount
- Granting you a loan without giving you a copy of your loan contract
- Asking you to sign on a blank or incomplete loan contract
The Correct Procedure to Obtain A Loan
Step 1: Submit a duly completed application form to the moneylender which includes the borrower’s particulars such as the:
- Full name;
- Date of birth;
- Personal identification number;
- Residential address in Singapore;
- Email address (if any);
- Contact number; and
- Amount of loan applied for.
Step 2: Prepare to submit the relevant supporting documents. These may include:
- Proof of the borrower’s total income for the preceding 3 months prior to loan application;
- Utilities bills;
- Pay slips; or
- Income tax statements
Step 3: Visit the money lender in person – this is a requirement in Singapore for all legal money lending. During this appointment, you will be signing the loan agreement and relevant paperwork that is legal and binding.
This has to be done before a loan can be granted to you.
Warning About A Moneylending Licence
Looking for their license prior to engagement is a good first step to determining if this is an approved place that is permitted to run a money lending business.
However, as some illegal moneylenders in Singapore have started obtaining duplicates and imitation certificates of licensed moneylenders, it might be difficult to distinguish the legitimacy of a moneylender from a moneylending licence alone.
If you doubt the moneylender you are approaching, you can verify by looking them up on the registry that is published by the Ministry of Law. On this website, you will be able to view the registry of moneylenders in Singapore.
How To Lodge A Complaint Against A Money Lender?
If you believe your moneylender is flouting the rules and would like to report against them, you can report them to the Registry of Moneylenders with the moneylender’s business name, license, and contact number.
You can contact the Registry of Moneylenders at 1800-2255-529 to lodge a complaint.
How much can you borrow?
Borrowing from licensed money lenders
There are several factors that determine the amount you can borrow.
- Secured vs unsecured loan
- Singaporean vs Singapore permanent resident (PR) vs foreigner
- Annual income
For secured loans, there is no cap on the loan amount. But there is a limit for an unsecured business loan or personal loan.
Do note that the loan amount a moneylender is willing to grant you is subject to their discretion after taking your documents and provisions into account.
Borrowing from unlicensed money lenders
On the contrary, because they are not regulated by the Ministry of Law and the Moneylenders Act of Singapore, there’s no limit to the sum you can borrow from unlicensed money lenders.
This means that you can borrow as much as you want, although doing so comes with several risks and caveats. This includes hidden fees and interest charged to you that’s way above 4% per month.
What Are the Interest Rates Moneylenders Can Charge?
The maximum interest rate moneylenders can charge is 4% per month for the value of the borrowed money (i.e. nominal interest) as well as for each month the loan is paid late (i.e. late interest).
Licensed moneylenders may also impose other fees as provided by law. These are:
- 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 moneylender for successful recovery of the loan
However, the total charges imposed by moneylenders on any personal loan, consisting of interest, late interest, upfront administrative and late fees also cannot exceed an amount equivalent to the principal of the loan.
For example, if you take a loan of $10,000, then the interest, late interest, administrative fee and monthly late fees cannot exceed $10,000.
What Happens After the Loan Has Been Approved?
After a loan has been approved, the moneylender has to deliver to you the correct principal amount of the loan. The moneylender is permitted to deduct upfront a loan approval fee of only up to 10% of the principal amount.
Once you accept and receive the proceeds of the loan, the obligation to repay the loan now arises, based on the terms agreed upon.
As the borrower, make sure you are also aware of the following things from the time you receive the money obtained through the loan and even during or after payment:
- Obtain a copy of the loan agreement;
- Make sure the moneylender issues a receipt every time payment is made;
- Retain, for safekeeping and documentation, all copies of statements of account/s, receipts of payment and any other related documents
What Happens If a Borrower Is Unable to Pay Back the Loan?
There are ways borrowers can handleg a situation where they cannot meet the deadline to pay back the instalment or loan amount borrowed.
One such way would be for borrowers to negotiate with their moneylenders for an extension or the possibility of refinancing. However, do take into consideration that this involves additional fees.
If a borrower is repeatedly unable to pay back the loan, moneylenders have the legal right to sue the borrower, especially in cases where the loan has been secured by an asset.
For borrowers unable to pay debts amounting to at least $15,000, they may resort to filing for bankruptcy. If total amount owed does not exceed $100,000, the Debt Repayment Scheme (DRS) is also a viable alternative to bankruptcy.
When the DRS is in place, moneylenders of unsecured loans cannot take any legal action against the borrower, unless permission by the court is given.
Without a Writ of Seizure And Sale, a licensed money lender also cannot seize any of your home. Consult a lawyer for legal advice if you are in such a situation.
What a licensed moneylender can and cannot do
The activities of a licensed moneylender in Singapore are strictly regulated under the Moneylenders Act.
At QV Credit, we want to equip you with the knowledge of existing laws to protect yourself from potential illegal or unreasonable tactics by licensed money lenders or debt collectors.
What licensed moneylenders CAN do:
- Talk to your family, relatives, or friends about the money you owed
- Negotiate repayment terms within your means
What licensed moneylenders CANNOT do:
- Harass, threaten, or intimidate
- Cause injury
- Vandalize your property
- Damage or seize control of your property
- Engage in unlawful assembly
So you can rest assured that as long as you engage only with legal moneylenders, you won’t have “O$P$” signs or pig heads anywhere.
And under any circumstances, if you feel uneasy, threatened by an illegal moneylender or notice such activities, it is advisable that you report the incident at https://www.police.gov.sg/iwitness or call the non-emergency police hotline at 1800-255-0000.
While there may be instances where borrowing from a moneylender may be the most feasible solution to anyone’s financial issues, it is advised that a potential borrower first assess their capacity to repay the loan, as well as the reputation of the potential moneylender.
If you are in debt or are tight on finances, consider approaching a social service agency. They can assist you general credit management information, credit counselling, and negotiate a repayment plan with creditors. Or if there is a need, connect you with legal professionals.
Knowing that obtaining a loan creates a legal obligation, it is especially important be cautious when making such a decision.
- Check the lender’s licence and only deal with those with their business name listed in the registry of moneylenders
- Understand your legal moneylending rights
- Be aware of the maximum loan amount you can borrow, the interest and other charges by legal lenders in Singapore
- Do not disclose any sensitive information such as SingPass, NRIC, and bank account details even when you’re not applying for a loan.
- Do not sign any agreement if it lacks important information such as late repayment charges or the type of loan extended to you.
- Do not act as a guarantor for any illegal loans or money lending business not listed in the registry of moneylenders
- Know where to lodge a complaint if you are subject to unfair moneylending practices
- Obtain financial advice and help where necessary