The Differences Between Banks and Licensed Loan Agency in Singapore

Marriage and owning a house are two of the most major milestones and costs you’ll face as an adult. The last thing you’ll want for yourself is to be in a financial bind. When this happens, most individuals consider taking out a loan to get them through the difficult period. In Singapore, you generally have two options: should I borrow from a bank or a regulated money lender?

We’ve listed some significant distinctions between receiving a loan from a bank and a licensed money lender to help you make a wiser decision.

1. Licensed Loan lenders in Singapore provide faster approvals.

Many laws apply to loans in Singapore, which may result in a higher rejection rate if you don’t match specific qualifying conditions.

Income Eligibility And Citizenship

Banks typically only lend to Singaporeans and permanent residents with yearly incomes of S$20,000 and above and foreigners with annual incomes of S$45,000 and above. Your loan will almost certainly be refused if your annual income falls below the minimum. Finding a bank willing to supply you with an unsecured loan is almost impossible if your annual salary is less than S$20,000.

Flexible Credit Score

Another reason why licensed money lenders in Singapore approve loans faster than banks is because of this feature. Based on your credit report from Credit Bureau Singapore, banks extensively verify your credit score and history (CBS). They are particularly stringent when it comes to evaluating a borrower’s credit. On the other hand, licensed money lenders are more lenient and forgiving when it comes to credit checks.

Your credit history will most likely be bad if you have a history of late or non-payments, and you will be deemed a high-risk borrower. If you have a low credit score, getting a loan from a bank is nearly difficult.

On the other hand, licensed money lenders are usually more lenient when it comes to credit history. They look at the credit record from Moneylenders Credit Bureau and are more willing to lend to persons who don’t fulfill the bank’s requirements. When evaluating whether or not to provide you with a loan, they will analyze your existing income.

Banks might take a long time to accept your loans because of all the requirements and checkpoints. If you want immediate cash, a legal money lender in Singapore may be a more practical option.

Approval Process is Faster

Whether it’s for a wedding or an unforeseen medical cost, you’ll need cash quickly. Licensed money lenders, as opposed to banks, may authorize loans more quickly, allowing them to help customers who need money right away. Because they often make smaller loans than banks, they have a simpler approval procedure.

In comparison to banks, they request less paperwork. Licensed moneylenders might approve your loan the same day or even minutes after you submit your application if you have the required paperwork.

2. Payment Terms Are Shorter For Licensed Money Lenders

Though banks often have cheaper interest rates than licensed money lenders, you must also analyze the terms of the loan. You’ll have to commit to paying your interest over a longer period of time if you choose a longer payment term.

Licensed money lenders in Singapore provide more flexible payment periods. It’s a good idea to keep in mind that the shorter your loan term, the sooner you’ll be debt-free. Nobody wants to remain in debt for the rest of their lives, so the concept of concluding your obligation early is appealing.

So, what’s the difference between a licensed loan agency and a loan shark in Singapore?

Loan sharks in Singapore are renowned for their shady practices, even if they can provide quick and easy personal loans. This is because of how shady the law has allowed them to run. It would not matter if an unlicensed person provided you with financial services as long as these were regulated correctly in Singapore or other applicable laws! 

That is why everyone should be wary if they are dealing with a licensed money lender or a loan shark. Fortunately, there are some differences between licensed lenders and loan sharks. Licensed lenders are like banks where safety measures against fraud apply. Here are some ways to distinguish a licensed money lender from a loan shark:

Loan Sharks

  • There are no loan contracts.
  • Approves your loan without going over your paperwork.
  • Before offering you a loan, they want an advance payment of “processing fees,” which is generally a considerable sum of money.
  • Everything is done over the internet. You’re unlikely to meet the lenders in person.

Licensed Money Lenders

  • They will provide you with a copy of the signed loan agreement.
  • Before authorizing the loan, the lender will review your credit history and ask various questions.
  • The processing cost is deducted from your loan, so you don’t have to pay anything.
  • A professional loan expert will properly explain the contract to you in person.

The Money Lenders Act governs licensed money lenders in Singapore.

Licensed money lenders are required to follow a set of rules and regulations in order for them not only to protect borrowers’ anonymity but also to make sure they don’t pressure or harass borrowers with payments. Licensed Lenders must be aware that these policies come from the Registry, which regulates fees as well as interest rates on loans-even giving limits on how much someone can have borrowed at one time!

The money lenders will never harass you with red paint along the hallway. They employ legal techniques of sending out notification reminders if you are late on your payment. Similar to how banks function and when borrowing from a certified lender, there’s no need for excessive stress like having spray paint tags near or around one’s home because they take care of providing loans and protecting their customer’s assets while doing so.

Singapore’s Licensed Money Lenders Follow Strict Regulations

Licensed money lenders must follow strict criteria. Licensed money lenders in Singapore are not permitted to perform the following:

  • They are not allowed to charge late fees in excess of S$60 per month.
  • They are not permitted to solicit loans from clients.
  • They are not allowed to charge more than 4% interest every month.
  • They are not authorized to charge more than 10% in administrative fees.

Licensed moneylenders are only allowed to promote their services on the exterior of their premises, such as a wall or door. They cannot use text messages and social media outlets like Facebook for advertisement purposes either- be wary if you receive one suggesting that personal loans with fast approval process exist. This is most likely due to debt collectors looking for extra income sources in order to get paid back quicker by borrowers who can’t afford it anymore.

There are many different options for borrowing money, but the best way to do it really depends on your needs. You could borrow from a bank or certified lender if you need short-term loans. However, private individuals are also always lending out who can help with longer-term financial issues like buying an engagement ring or other sudden expenses.


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