It is good to clear some of the misconceptions that most people have. An approved or licensed Money lender is not a loan shark. Every legal moneylender in Singapore has undergone a strict qualification process to obtain a money lender license.
A licensed money lender is a lending institution that has been authorized and licensed by the Government to lend money to the members of the public. They are guided and regulated by the Ministry of Law and have to adhere to rules and regulations as stipulated in the Moneylenders Act.
Where can I find Licensed Moneylenders?
You can access an updated list of licensed moneylenders on the Ministry of Lawβs Licensed Money Lender registry. Just to be sure that youβre dealing with a genuine lender, it is important to confirm the name of the lender from the register. If you find that the name doesnβt appear, then, beware, you could be dealing with a loan shark.
How to differentiate between a Licensed Moneylender and a loan shark
Many unlicensed moneylenders masquerade as legal moneylenders with very enticing terms. Burt, remember, when the deal is too good, think twice. Licensed moneylenders donβt dish money anyhow. There are regulations that they have to abide by.
Here are some of the ways to differentiate licensed money lender and unlicensed moneylender:
Terms and Conditions
The law requires that licensed moneylenders take you through their terms and conditions of the loan before you sign the loan contract. The contract should capture details such as repayment period, payment method, interest rates and any other details pertaining to the loan.
So, if you come across a moneylender who is not issuing a contract for signing, or one who is issuing a bank page for signing, then this should raise a red flag.
Interest Rates
Under the Ministry of Lawβs regulations interest rates offered by licensed money lenders are capped at 4% per month. So, if you come across a lender charging a rate that is above 4%, then that lender is operating illegally or is not in adherence with the set regulations.
Advertising channels
The law requires that licensed moneylender advertise their services through the following:
- Business or consumer directories
- Their own websites
- Outside their business premises
Any other form of advertisement is illegal and it may be a sign that you are dealing with unlicensed moneylenders. Loan sharks will always advertise through SMS, Facebook, Emails and other social media channels, so, beware.
Physical Location
The law requires that every licensed money lender provide a physical location where they can be traced. This is the place where you go for face-to-face verification. If you come across a briefcase lender, then this should raise more questions than answers.
Loan Collection Methods
Licensed moneylenders are prohibited from harassing and threatening clients when doing collection. If you come across a lender who is issuing threats, then know you could be dealing with a loan shark.
Final Thoughts
There are so many lending institutions in Singapore and it requires thorough scrutiny to avoid falling into the wrong hands. Be sure to keep the above tips on how to differentiate between a licensed and an unlicensed money lender and youβll thank us later.
