Borrowing From Licensed Money Lenders – How Much Can I Borrow?

 

Do you intend to borrow money from a reliable licensed money lender in Singapore?

There are a few considerations you should have in mind before making this move.

Foremost on your mind is probably the question: How much can I borrow from a money lender?

Most people in need of cash tend to turn to bank loans as a possible solution.

However, if you need cash immediately, you may find it inconvenient to apply for a loan via a bank. That’s because of the longer and more thorough approval process.

Since licensed money lenders often provide loans more quickly than banks, they may be a viable alternative.

Yet some hesitate to approach licensed money lenders because they are concerned about whether it is safe to borrow from them.

You may be glad to know that the Ministry of Law oversees all licensed money lenders. Therefore, it is safe to borrow money from them since they have to abide by strict state regulations.

But how much can you borrow from a licensed money lender in Singapore?

What To Consider Before Taking Up A Loan 

When cash is tight, it can be tempting to turn to those closest to you for a loan. Yet, this option might not be the best one.

When considering a loan from a money lender, it’s essential to be mindful of a few crucial points:

  • Before taking out a loan, consider the interest rate carefully. You should go for one that is appropriate to your financial situation.
  • Make sure the loan’s repayment time works with your budget and way of life to avoid debt due to missed or late payments.
  • Bankruptcy or other negative records on your credit report can make it challenging to obtain a loan from a legal money lender. Money lenders may be wary of lending you money if they find negative information on you from the Moneylenders Credit Bureau.

Differences Between Licensed And Unlicensed Money Lenders

Unlicensed money lenders are infamous for their high interest rates and persistent harassment of borrowers.

Because of that, they get the names “Ah Long” or loan shark.

However, the Registry of Moneylenders in Singapore monitors licensed money lenders to ensure they operate lawfully.

Authorised money lenders are limited in their lending capacity, the amount of interest they can charge, and the total amount of interest they can collect by law.

The cap for a licensed money lender interest rate in Singapore is 4%.

So how can you verify if a lender is appropriately licensed? You can look for a list of authorised money lenders on the Ministry of Law’s website.

There are currently 154 licensed money lenders in Singapore as of Apr 2022. You can verify a money lender’s active licensing status online.

A credit counsellor is another option you can use before asking for a loan from one of the licensed lenders.

Moneylenders Act And Rules Singapore

The Moneylenders Act and Moneylenders Regulations in Singapore impose stringent requirements on registered money lenders.

Any company intending to participate in this industry must adhere to these guidelines. Otherwise, it risks being shut down or subjected to severe penalties.

The following are some of the most crucial provisions of the Singapore Moneylenders Act:

  • Licensed money lenders are required to display their certification in their place of business.
  • Loan amounts of up to $3,000 are the maximum amounts licensed lenders can provide to borrowers with annual incomes below $20,000. If your yearly income is above $20,000, you can borrow up to six times that amount.
  • Money lenders with valid licenses should provide their borrowers with a half-yearly statement of their account and a copy of the loan agreement.
  • Licensed money lenders cannot use abusive or threatening language when dealing with borrowers.
  • Licensed money lenders’ interest rates should not exceed 4%.

Differences Between Borrowing From Licensed Money Lender And A Bank

As you’ve seen, you can obtain small loans from licensed money lenders.

Typically, smaller companies would suffer catastrophic losses if a borrower defaulted. That gives them a necessary limit to what they can offer.

You can borrow anywhere from a few hundred to $1,500 with these loans. The amount you can borrow depends on your income.

Banks, on the other hand, provide borrowers with unsecured loans of at least $10,000.

Getting a loan from a certified money lender has advantages, such as a shorter application process and fewer requirements regarding citizenship or income.

For banks, personal loans are often only available to citizens and permanent residents with annual incomes above $20,000 or foreign nationals with yearly revenues above $45,000.

Licensed money lenders can approve and fund your loan in minutes without conducting a thorough credit check. The process takes a lot more time when you are taking a loan from a bank.

However, the money lender interest rates are typically higher than those charged by a bank, making them comparable to or higher than those set by credit cards.

How To Tell If A Money Lender Is Licensed 

The number of loan scams is increasing, so be careful.

If you’re curious about a lender’s licensing status, you can do so in various ways.

You might need to contact the Registry. You can do so online or call 1800-2255-529. When you contact the Registry, you’ll need the lender’s name and license number.

You can also refer to the list of licensed money lenders on the Ministry of law’s website.

There is a specific location where authorised money lenders conduct their trade.

Therefore, you should visit a lender’s office and verify your loan application in person before receiving the loan, rather than via SMS like it is with loan frauds.

Licensed money lenders cannot charge any upfront fees before the loan is disbursed and are limited to charging no more than 4% interest per month.

Therefore, before committing to a loan, calculate the total amount you will owe, including interest and fees.

On the other hand, loan sharks may promote their services via SMS, IM, email, and flyers.

Most legitimate lenders exclusively promote their lending products on their websites. So take note of how the loan is being advertised.

Can You Borrow From Multiple Money Lenders?

The simple answer is yes. You can get loans from the best licensed money lenders in Singapore depending on your income, and sometimes, your credit score.

You can have a few loans from multiple money lenders according to your financial needs.

But don’t borrow more money than you can afford to repay.

What Is The Maximum Loan You Can Take?  

If your annual income doesn’t exceed $20,000, you may have trouble securing an unsecured loan from a bank, even at the best available interest rate.

On the other hand, a licensed money lender can lend you up to $3,000.

If your annual income is more than $20,000, a licensed money lender may be willing to loan you the equivalent of two to four months’ salary.

But that is by no means a guarantee. It only boils down to the lender’s confidence in your ability to repay it.

The borrower’s income has a direct correlation to the amount borrowed. But how much money you spend is another factor that lenders consider.

They may be hesitant to lend you money if you have a lot of regular bills, such as a mortgage or car repayments.

What To Do Once Your Loan Is Approved 

The lender that you apply for a loan from will look at your application and annual income.

If your loan is approved, it should also explain the terms to you thoroughly in a language you can understand.

Keep your contract, Statement of Account, and related receipts in good order and pay on time. These may be used by the Moneylenders Credit Bureau for verification in the future if need be.

Note that the loan should not only be approved online or over the phone. Make sure you visit the licensed money lender in its physical office to finalise the deal.

What Happens If You Can’t Pay Back The Loan? 

Singapore licensed money lenders typically turn to debt collection agencies when borrowers fail to repay their loans.

Before that happens, the most straightforward action would be to negotiate for an extension with your licensed money lender.

In addition, you may want to inquire with local social service agencies for credit counselling and debt management assistance.

However, you may want to file for bankruptcy if you owe more than $15,000 and have little hope of repaying it, even after renegotiating your loan installments.

When a debtor declares bankruptcy, interest payments automatically halt. It also prevents money lenders from pursuing borrowers to court. But note that this should be your last resort.

Always Borrow Within Your Means 

Now you have an idea of how much you can borrow from a money lender in Singapore.

If you can’t repay the loan, make sure you revisit the options we’ve mentioned.

At Katong Credit, our loan advisors will guide you on the best actions when taking a loan from a licensed money lender.

Contact us now or apply for a loan with us today.

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