Life is quite unpredictable. You are living comfortably, earning and providing for yourself or your family, and the next day — you find yourself in a need of money. Emergencies do not send an alert before their arrival, and you may not always have enough savings.
One of the best solutions is borrowing a loan, which a majority of us do at some point in our lives. Most people turn towards a bank but get stuck in the red tape, the never-ending paperwork, and long waiting cycles.
It is where private money lenders come into the picture as a solid alternative to banks. They provide a faster and more seamless process for obtaining a loan.
Unfortunately, many people, in a hurry, desperation, or stress, do not research enough and end up borrowing money from an unlicensed moneylender, also known as loan sharks or ah longs. It pushes them further into the swamp instead of solving their financial problems.
Who are unlicensed money lenders; how do I recognize them; in this blog, we answer your questions about unlicensed money lending in Singapore.
Licensed and Unlicensed Money Lending Singapore
First of all, what are licensed and unlicensed money lending in Singapore? You need to understand each of them to differentiate between them.
Licensed moneylenders are money-lending companies or service providers that offer a variety of short-term loans with different repayment options. Unlike banks, they do not deposit customer money and lend money to customers from their resources. They are less stringent in reviewing borrowers’ credit reports and approving loans faster than banks. Most importantly, they are legal lenders and are registered under the Ministry of Law Singapore.
Unlicensed moneylenders are illegal loan providers and practice unlicensed money lending in Singapore. They offer loans to people, but they have no authorization under the law to lend money. They are famously known as loan sharks, primarily because they offer quick loans at extremely high-interest rates and have strict terms of debt collection.
They usually target low-income families or people who are in difficult financial times. Even if someone borrows a small sum of money, it can turn into an extraordinarily huge amount within months. There is no legal documentation and no clarity on repayment. If borrowers fail to pay off the debt and interest within their time frames, they use illegal methods like threats, intimidation, and/or violence for themselves and their families. They may even force borrowers to commit crimes, putting themselves and their families dangerously at risk.
How to Recognize an Unlicensed Money Lender?
Here are a few factors that will help you differentiate between a licensed money lender and an unlicensed money lender in Singapore –
1. No Legal Documents
Licensed money lenders are required to provide you with a loan contract, along with the legal documents. They have clear terms and conditions, which include the repayment period, payment method options, the interest rate charged to your loan, and any other details that may affect your loan in the long term.
An unlicensed moneylender does not provide you with a loan contract or defined terms or conditions. Even if they do, they may send you PDF documents via SMS or WhatsApp. Note that it’s a part of their scam.
2. Loan Limit
There is no loan limit on secured loans. However, unsecured loans in Singapore, such as personal loans, have a loan limit depending on your annual income. Licensed money lenders have to abide by those limits.
Unlicensed money lenders do not provide you with any limits on how much you can borrow. You can borrow as much as you want.
3. Loan Fees
When you borrow money, you also have to pay for certain charges and expenses.
With effect from October 2015, licensed money lenders in Singapore can only charge the following fees:
- A fee not exceeding S$60 for each month of late repayment
- A fee not exceeding 10% of the principal of the loan when a loan is granted
- Legal costs ordered by the court for a successful claim by the licensed money lender for the recovery of the loan
Every licensed money lender in Singapore has to abide by these rules. Also, they do not ask for any payment before your loan is processed.
On the other hand, unlicensed money lending in Singapore has no rules. They ask for the deposit amount and GST for the loan processing fee even before they provide the loan.
4. Excessive Interest Rates
The Ministry of Law allows licensed moneylenders to only charge up to 4% per month for their loans. Also, the interest rate is based on the assessment of the customer’s creditworthiness.
Contrary to that, unlicensed money lenders charge ridiculously high-interest rates and late interest rates. In most cases, it is well above 4% per month. Also, they can anytime ask you to pay for other implicit costs, such as processing fees and other miscellaneous payments.
5. Advertisement Methods
Licensed money lenders in Singapore are only permitted to advertise through 3 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
If you are receiving loan advertisements through other channels, such as flyers, text messages, emails, and/or any other media forms, be aware. They have either licensed moneylenders who have violated the law or unlicensed money lenders.
Singapore is a global financial hub. However, the country still has a prevalent presence of loan sharks. If you or your loved one is a victim of loanshark harassment, do not be scared.
First of all, you are under no legal obligation to repay the debt. Unlicensed money lending in Singapore is illegal, and hence, lenders who are not registered under the Ministry of Law have no legal right to recover the debt. Contact the authorities immediately and stay away from the unlicensed lenders.
If you are in dire need of money, approach a licensed moneylender in Singapore. There are several reputed and trusted money lenders who will lend you money even if you have a bad credit report. They can lend you a loan quickly and without any danger with the right documentation.
Avis Credit (SG) Pte Ltd in Singapore is a licensed and reliable source to get money. You can get personal or business loans at flexible repayment timelines. Reach out to them and apply for your loan today!