At some point in your life, you may face situations where you need urgent cash or a fast loan. During such circumstances, you may resort to taking a loan from a money lender instead of a bank due to various reasons.
The great thing about taking a private, legal loan in Singapore is that you’re protected in the eyes of the law. Legal money lenders here have specific rules to follow if they want to remain in business. The rules also help to protect borrowers against illegal money lenders in Singapore who charge exorbitant interest rates and use unnecessary violence or scare tactics when collecting debts.
It’s always a good idea for borrowers to be aware of the signs and markers of unlicensed money lenders, so steps can be taken to avoid any unintentional interaction or borrowing from the illegitimate lenders lurking out there.
Let’s understand this: How do private money lenders work?
Compared to banks, private money lenders have much less stringent requirements when it comes to loaning money. Sometimes, they also provide more flexible repayment modes or schedules.
Case in point, if you’re ever faced with the dilemma of being unable to pay a money lender by the due date, do not fret — legal lenders are usually open to renegotiating repayment terms or schedules that aim to facilitate manageable repayments on your end.
Private money lenders are especially popular when people are looking for short-term cash loans or payday loans in Singapore. But it’s also in these moments of urgency that many fall prey to unlicensed money lenders when they desperately need a personal loan.
Why do some people turn to unlicensed money lenders?
Despite the drop in the number of people turning to unlicensed money lenders, unlicensed moneylending continues to raise its ugly head, particularly in less wealthy regions of Singapore.
There are several reasons for this:
- Need for urgent cash — unlicensed money lenders have no formal vetting process and are eager to give you the money you need within minutes.
- Unemployment — Most lenders prefer to lend to employed individuals, so the unemployed who can’t get a loan elsewhere sometimes have no choice but to turn to unlicensed money lenders
- Bad credit — A poor credit history means either loan rejection or higher interest rates from traditional loan providers like banks and financial institutions
- Habit — Some people are caught in a cycle of borrowing from illegal money lenders in Singapore because they have been doing it for years
- Ignorance — Most victims of unlicensed money lenders do not have much education, may be completely unaware that legal lenders exist, or may not know how legal lenders operate
7 clear signs of unlicensed money lenders
1.Unlicensed money lenders are not registered with the Ministry of Law
A really quick and simple way to check if the money lender you are dealing with is an unlicensed money lender or a licensed one is to refer to the Registry of Moneylenders’ list of registered money lenders in Singapore.
Visit the lender’s office and ask questions. Make sure the lender’s company name, licence number, website(s) landline number and business address all tally with the information provided by the Registry of Moneylenders, before proceeding any further.
This is well worth your time and effort — you do not want to be misled by illegal money lenders in Singapore that are pretending to be legitimate lenders.
2. Unlicensed money lenders do not operate in a physical office
Most borrowers are very savvy consumers, doing their research online and perhaps trusting enough to give their particulars to a website for the money lenders to contact them.
The reality is, sneaky unlicensed money lenders can put up websites that imitate those of legal lenders. This can put you in danger of identity theft and other money lender scams because you can’t tell who is on the other end receiving such confidential information.
As it is, licensed lenders must have business addresses that are listed on the Ministry of Law’s website.
Borrowers must visit the licensed lender’s office to do face-to-face verification and a quick credit assessment to analyse their financial status and ability to repay the loan, before a loan can be extended to them. If you didn’t already know, loans cannot be disbursed online.
If the lender you’ve been engaging with is giving all sorts of excuses to keep the entire conversation and loan process online and remote, beware! These people are highly likely to be unlicensed money lenders.
3. Unlicensed money lenders will not limit your loan amount
A tell-tale sign you are dealing with an illegal money lender in Singapore is the promise of borrowing “unlimited funds” with no strings attached. However, we all know that this can’t be true if the lender is legitimate.
All licensed lenders are required to set their maximum loan amounts based on your income and existing loan obligations as per your Loan Information Report at the Moneylenders Credit Bureau.
In terms of the total loan amount that you will be eligible for when borrowing from a legal lender, there are some guidelines that licensed lenders follow. For secured loans, which are loans backed by collateral such as mortgages and car loans, you can obtain a loan of any amount.
However, applying for unsecured loans is slightly different. The maximum amount that you may borrow at any time across all registered lenders in Singapore is:
| Borrower’s Annual Salary | Singaporeans and Permanent Residents | Foreigners Residing in Singapore |
| Less than S$10,000 | S$3,000 | S$500 |
| S$10,000 – <S$20,000 | S$3,000 | S$3,000 |
| S$20,000 and above | 6X your monthly income | 6X your monthly income |
(Source: Registry of Moneylenders, Ministry of Law)
If a money lender attempts to lend you more than the legal limit, you should opt out of the contract to steer clear of even more financial woes in the future — these are unlawful, unlicensed money lenders.
4. Unlicensed money lenders will not require you to sign an official loan contract
A loan agreement is only legal and binding if there is a contract signed by both parties. The contract will clearly state the following information:
- Interest rate
- Loan tenor
- All types of fees charged
- Repayment options
Instead of a proper contract, an illegal money lender in Singapore may ask you to submit your Singpass to them (which you shouldn’t!) or take a selfie with your ID so that they can ‘verify your identity’.
Remember, your loan should only be valid with a proper, signed loan contract. When you’re borrowing money, read your contract carefully. And then read it again. Make sure that the terms of the agreement are clear and reasonable before you sign on the dotted line.
5. Unlicensed money lenders do not have standardised caps on interest rates
Currently, the maximum interest rate legal lenders can charge is 4% per month. This cap stands regardless of the borrower’s income level and applies to both secured and unsecured loans.
This means that if a lender attempts to charge you a higher interest rate because you desperately need a payday loan or an urgent loan to make ends meet, run the other way! You’re likely dealing with an unlicensed money lender.
When borrowing from a legitimate lender, note that late interest can only be charged on the amount that is due and repaid late. To illustrate, if Andy takes a loan of $10,000 and fails to pay for the first instalment of $2,000, a legal lender may charge late interest only on the $2,000, but not on the remaining $8,000 that is not yet due.
Pro tip: A maximum interest rate of 4% per month works out to a maximum interest rate of 48% per annum.
6. Unlicensed money lenders may charge all sorts of fees
Borrowing from unlicensed money lenders is never a good idea. Apart from putting you and your loved ones at risk of unlicensed money lender harassment, unlicensed money lenders are known for charging incredibly high interest rates, fees and an array of random charges they deem fit.
Illegal money lenders in Singapore are happy to charge vague interest rates or pile on additional charges that might cost you a lot of money after you’ve borrowed from them.
They can come up with many creative ways to layer on the fees borrowers are liable for (e.g. an upfront payment fee to kickstart the loan processing step, an interest fee hike later in the tenure).
In case you didn’t already know, authorised lenders can only charge these 3 types of fees:
- Late payment fee equivalent to or less than S$60 per month of late repayment
- Processing fee or administrative fee equivalent to or less than 10% of the principal loan amount, only right before loan disbursement
- Legal costs granted by the court when a lender makes a successful claim to recover a loan from the borrower
These are the permitted extra fees authorised lenders can charge on top of the regular interest charges.
Additionally, the total charges imposed by an authorised lender on any loan, including all accrued interest and late interest, loan processing fee, and all applicable late fees, cannot be more than an amount equivalent to the loan principal.
7. Unlicensed money lenders may collect upfront fees
As briefly mentioned in the above point, authorised lenders can only collect the loan processing or administration fee right before loan disbursement, after the loan is approved and granted.
At no point should an authorised lender ask for this fee to be paid in order to kickstart the loan application process.
On the contrary, if a seemingly legitimate lender demands this fee to be paid to them upfront, hold your horses and do not do it, even if this lender promises that doing so is to ‘confirm’ or ‘guarantee’ your loan — the lender is likely an unlicensed money lender!
What are the markers I’m dealing with unlicensed money lenders?
1. They’re asking for user IDs and passwords.
Don’t reveal any of your passwords or OTPs to any money lender. Don’t reveal your NRIC number either.
After they’ve verified your IC, they should also keep it. Illegal money lenders in Singapore might misuse your identity card to impersonate you while committing a crime.
2. They’re threatening you or using abusive language.
Remember that no professional business should adopt a threatening or demeaning tone. If a business has done that with you, make a police report; you’re most likely facing unlicensed money lender harassment.
3. They contacted you via WhatsApp or through SMS ads.
Take note that authorised lenders are not allowed to solicit loans via text messages, phone calls, or social media platforms. This means no authorised money lender will reach out to you advertising a loan package on their own initiative!
In case you’re curious, authorised Singapore lenders are only allowed to advertise via:
- Consumer/Business directories (online/print media)
- Online sites owned by the respective licensed lender
- Advertisements put up inside or outside (e.g. door, window, the side of the wall, shutter, and gate) of the legal lender’s office premises
4. They offer to transfer money to you remotely without ever meeting you.
Just so you know, authorised lenders are not allowed to engage in entirely remote loan processes, no matter if a customer is a new or returning one.
A face-to-face meetup is a must for both you and the legal lender — it’s your chance to verify the legitimacy of the money lender. While you’re at it, ask to see their moneylending licence and check it against the information listed within the Registry of Moneylenders’ official list of licensed lenders in Singapore.
On the flip side, illegal money lenders in Singapore are more than happy to take the entire loan process online. When borrowing from unlicensed money lenders, borrowers will never have to meet these unlicensed money lenders in person, even if they wanted to! This is understandable since unlicensed money lenders will logically prefer to stay under the radar and avoid detection or arrest.
Should you report unlicensed money lenders or unlicensed moneylending activities?
The short answer is yes, you should report unlicensed money lenders and any unlicensed moneylending activity you’re aware of. And you shouldn’t feel bad or intimidated when doing so, especially if you’re experiencing unlicensed money lender harassment.
How to report unlicensed money lenders or unlicensed moneylending activities?
There are a couple of ways you can go about this:
- Reach out to the police via ‘999’
- Call the X-Ah Long hotline via ‘1800-924-5664’
- Inform the police anonymously, if you wish, through I-Witness
- Report and block all messages that were sent to you from unknown sources soliciting loans
It is important that you stay guarded and not fall prey to unlicensed money lenders’ ill-intentioned tactics, even if you’re in urgent need of securing funds.
Why should you take a loan from a licensed private lender instead of an unlicensed money lender?
Licensed private lenders can certainly compete with unlicensed money lenders. In terms of loan terms, legality and protection against exploitation and aggression, legal lenders definitely fare better than their illegal counterparts.
Borrowing from legal lenders gives you these advantages:
- Legal option — First and foremost, it is illegal to take a loan from an unlicensed money lender. That should be all the motivation you need to visit only legal lenders in Singapore
- Legal protections — Legal lenders are prohibited from intimidating or threatening you; violence is strictly forbidden
- Limits on interest rates and fees — Legal lenders have stringent guidelines on the private money lending rates and fees they can charge, unlike unlicensed money lenders
- Lower risk — As legal lenders have to adhere to a strict code of conduct set by MinLaw, you have a lower risk of being harassed for payments or being charged exorbitant interest rates
How to find good private money lenders in Singapore?
Borrowing from unlicensed money lenders knowingly or unknowingly can have serious consequences. It is your responsibility as a borrower to ensure you are taking a loan from a legitimate lender.
Finding a trusted money lender is not always easy when you’re trying to verify their legitimacy while also seeking to understand whether they’re the right fit for you.
This is where CompareSing can help ease the process. We’re a loan comparison company that works with a sizeable number of top-rated licensed lenders in Singapore that can offer you a personal loan, including short-term cash loans, micro loans, and payday loans in Singapore.
Our loan comparison platform is free of charge, too. Intrigued? Simply submit your details, sit back and wait for several loan packages to be sent your way.
About the Author
Led by a team with invaluable expertise across Singapore’s licensed moneylending, banking, and finance industries, CompareSing provides users with a streamlined yet informative experience at every step of their loan journey.
