What are licensed moneylenders and what to look out for when borrowing from them?

Licensed moneylenders are commonly seen as they sprout all over the country, come knocking on your neighbour’s doors, and are seen all over heartland neighbourhoods.

In this article, we consulted Credit Bureau Singapore on the different types of moneylenders, how you can differentiate licensed vs unlicensed, and how borrowing from licensed moneylenders will affect you.

We do not encourage taking excessive loans. However, if you do need to borrow money from moneylenders, do it properly and safely with our guide.

What are licensed moneylenders?

Under the Ministry of Law, there is actually a Registry of Moneylenders that oversees the registration and regulation of moneylenders in Singapore.

The purpose of this very special registry is to cultivate a safe and professional moneylending industry.

The Moneylenders Act defines a licensed moneylender as a person, whether as principal or as agent, who is authorised to carry on the business of moneylending in Singapore by a license. It is any person, other than exempted moneylenders, who lends a sum of money in consideration of a larger sum being repaid is presumed.

Where to find licensed moneylenders?

Don’t reply to those loan SMS, or free money scam Telegram messages. Instead, check out this list of moneylenders licensed under Ministry of Law here.

There are currently 153 licensed moneylenders in Singapore, such as:

• Accredit Pte. Limited
• Credit King Pte. Ltd.
• Ez Loan Pte. Ltd.
• Fast Money Pte. Ltd.
• Golden Credit (S) Pte. Ltd.
• Happy Cash Pte. Ltd.
• I-Credit Pte. Ltd.
• JD Credit Pte. Ltd.
• Karthik Money Lending Pte. Ltd.
• Lending Bee Pte. Ltd.
• Max Credit Pte. Ltd.
• Orange Credit Pte. Ltd.
• Prosper Credit Pte. Ltd.
• Quick Credit Pte. Ltd.
• and more…

You’re better off with one of these licensed moneylenders than an unlicensed… type of fish.

How to borrow money from licensed moneylenders?

Now that you know how to verify which moneylender is licensed, check out their website for their interest rates and terms.

Licensed moneylenders are allowed to advertise their products on their own websites.

However, licensed moneylenders are not allowed to advertise through SMS or social media. If they are on social media, stay away – they’re either unlicensed or flouting the rules.

Finally, make sure that the moneylenders are arranging a face-to-face appointment at their office address registered here. Online loans are not allowed. Most likely, the licensed moneylender will ask you to go to Credit Bureau Singapore and pay for a credit score report as well.

Difference between licensed vs unlicensed moneylenders

According to the Moneylenders Credit Bureau, here are the 4 key differences between licensed vs unlicensed moneylenders you should look out for:

1. Licensed moneylenders can only advertise through business or consumer directories (in print or online media), websites belonging to the moneylender and advertisements placed within or on the exterior of the moneylender’s business premises.
2. Advertising channels such as text messages, phone calls, social media platforms, flyers, emails or other forms of advertisements would be from either licensed moneylenders operating in violation of the rules, or unlicensed moneylenders*.
3. Licensed moneylenders are also required to meet the borrower in person at the approved place of business to conduct physical face-to-face verification of his identity before granting any loan.
4. A loan transaction performed fully online, and at venues other than the approved places of business, is disallowed.

But since there are banks around, why would anyone borrow from licensed moneylenders? 

Reasons why Singaporeans borrow from licensed moneylenders

Banks and their personal loans may have been your first choice. However, some of us may have maxed out our unsecured borrowing limit with the banks.

On top of that, licensed moneylenders provide different types of loans compared to the banks. They also have different repayment schemes and interest plans.

 

For example, a Payday Loan pictured above on Cash Mart's website is usually paid off the following month without interest charged. However, an administrative charge of 10per cent of the principal loan amount applies.

Other licensed moneylenders, such as 118 Credit, has a wider range of loan products available as well, such as "Fast Urgent Cash". Which brings us to the next point. 

The decision to borrow from a bank or licensed moneylender could also be dependent on different factors such as:

• urgency of the funds (banks typically require a few working days, plus they don't operate on weekends)
• repayment tenure
• loan amount
• interest rates

As the retail banks and licensed moneylenders have different risk appetites, they operate on different lending guidelines. For example, their risk assessment on salary, loan tenures and repayment history may be more relaxed with licensed moneylenders.

In exchange for shorter processing time and more relaxed borrowing criteria, expect a higher interest rate or administrative fee when borrowing from a licensed moneylender.

Assess your repayment ability and keep monthly repayment within a comfortable range so as to avoid a poor repayment record in your credit report and/or loan information report!

7 things to know before borrowing from licensed moneylenders

Should you decide to borrow from licensed moneylenders, this is what you need to know:

1. Ensure that the moneylender delivers to you the correct principal amount of the loan. The upfront deduction of the loan approval fee is capped at 10 per cent of the principal amount.
2. Pay the loan instalments on time to avoid incurring late payment fees and extra late interest charges.
3. The moneylender has to issue you a receipt every time you make any repayment towards your loan. Check it for correctness (e.g. name, amount, date).
4. Check that you receive a statement of account for all your loan(s) at least once every January and July, and check it for correctness (e.g. name, amount, date); and
5. Retain all statement of accounts and receipts of payments, as documentation and evidence of payments.
6. All moneylenders are permitted to impose a fee not exceeding $60 for each month of late repayment.
7. All moneylenders are permitted to impose legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan.

All your borrowing records with licensed moneylenders will then be consolidated by the Moneylenders Credit Bureau. If you've lost track of the moneylenders you've been to, or need to review your repayment history with licensed moneylenders, you can get a copy of your loan information report at $0.50 at www.mlcb.com.sg.

If you come across any unlicensed moneylending activities, report them to the Police hotline at 1800-255-0000 or submit the information online at www.police.gov.sg/iwitness. Members of the public may also call the National Crime Prevention Council's X-Ah Long hotline at 1800-924-5664.

ALSO READ: Bank loans vs licensed moneylender: Which is better?

This article was first published in MoneySmart.