One of the most popular loan-related Google searches in Singapore is “money lender interest rates”.
And there’s no wonder why people ask about it so much. When getting a loan from a licensed money lender, the interest rate will define the amount you repay on top of the principal loan amount.
Hence, quite naturally, this is something that concerns borrowers like yourself the most. After all, no one wants to pay more than what licensed money lenders are legally allowed to charge.
So we’ll try to make money lender interest rates clear in this blog post. From maximum interest rates to fees, borrowing limits, and eligibility requirements, we’ll go over everything you need to know.
Let’s start with the cap on loan amounts.
First, you should know that licensed money lenders can’t lend you an unlimited amount of cash for unsecured loans.
The Singapore government has defined loan limits under the Moneylenders Act to ensure that Singaporeans and residents don’t end up in too much debt.
Therefore, licensed money lenders are allowed to lend the following amounts:
If you need to borrow more than the above-listed limits, you will need to apply for a secured loan, which will require you to pledge collateral.
A legal money lender in Singapore can charge the following fees:
Legal moneylenders can charge you a one-time fee, which can’t be more than 10% of the principal loan amount upon loan approval.
If your monthly repayments get delayed and exceed the due period (14 days), the money lender can charge you up to $60 for each late payment.
If the money lender has to collect your late monthly payments through a lawyer, they can charge you a legal fee of $100.
In addition, if a money lender charges you more than these limits or tries to add any miscellaneous fees, you may report them to the Registry of Moneylenders.
Now, let’s answer the burning question and find out about the money lender interest rates charged by licensed moneylenders in Singapore.
The Ministry of Law operates and closely supervises the Registry of Moneylenders to safeguard borrowers’ rights and interests.
The Ministry defined clear interest limits on loans through its Moneylenders Act passed on 1 Oct 2015. As per the last update, legal moneylenders can’t charge an interest rate of more than 4% per month.
Their money lender interest rates can go below this to attract borrowers but they can’t charge slightly above 4%. If they do, they can be penalised through the Small Claims Tribunal or Consumer Court under the Consumer Protection Act.
Similarly, the Moneylenders Act doesn’t allow licensed money lenders to charge more than a 4% interest rate on late payments. If a money lender tries to charge you an extra percentage on delayed monthly repayment, you have every right to report it to the relevant authorities.
Knowing the legal limits on money lender interest rates is good, but it’s not enough. You also need to understand how interest is calculated.
The interest rate doesn’t apply to the principal amount throughout your loan tenure.
Once you start making monthly repayments, the interest will be calculated after subtracting your monthly repayments from the principal loan amount.
For example, if you borrowed $9,000 and returned $2,000 already, the interest will be calculated on the remaining $7,000.
Remember that late interest only applies to payments that exceed the allowed 14-day period.
For example, if you defaulted on your repayment in the fourth month, the late interest applies to that repayment only. Your repayments for the upcoming months are not yet overdue, so a money lender can’t charge the late interest on those payments.
Tip: If you cannot repay your loan, don’t feel threatened by money lenders. You can contact Credit Counselling Singapore (CCS) for advice. CCS can guide you on how to settle licensed money lender debt.
Now that you know about the maximum limits, let’s see what you need to do after getting your loan approved.
After approving your application, your licensed money lender will send you a copy of your loan agreement and the account statement for your signature.
Review these documents carefully and understand your rights and duties as a borrower. If you are not sure what the terms and conditions mean, ask questions and clarify everything beforehand.
Remember, getting into a loan agreement is a legal obligation. So make sure you read and review these documents thoroughly before signing.
But which is better: getting a loan from a bank or a licensed money lender?
Borrowing from banks and licensed moneylenders can be a whole different experience.
Borrowing from banks is a little complicated compared to borrowing from money lenders.
Banks tend to have strict lending criteria and require some additional documents. For instance, they require higher annual incomes than what money lenders demand. They also place great emphasis on your credit score.
Their strict protocols make the application processing time a little longer, which might put some borrowers off.
However, banks offer lower interest rates and can lend you much more than licensed money lenders. This makes them a better choice for bigger loan amounts.
Licensed money lenders are easy to find, and their application process is relatively straightforward.
The most significant advantage of borrowing from licensed money lenders is that they don’t have strict eligibility criteria like banks. They will approve your application if you have a steady income to repay the loan.
Another advantage is that licensed moneylenders can lend you smaller amounts for shorter durations. So they are a good option if you need cash urgently to tide over some financial difficulty.
A downside of borrowing from licensed moneylenders is their high interest rates.
However, their lenient requirements, easy processes, and quick approval make up for the higher licensed money lender Singapore interest rate. This makes licensed money lenders a better option than banks.
Still, you need to consider a few things before applying for a loan.
Consider the following things before taking a loan from a money lender.
Getting into a loan agreement is a serious responsibility that can have legal consequences if you default. Therefore, evaluating your options before applying for a loan is necessary.
Ask around your network of friends and family. If you need a small amount for a short period, maybe they can offer it without any interest.
Alternatively, you can explore government financial assistance schemes. Go to their official websites and see if you are eligible for any grants.
You have to be sure you are eligible to apply for a loan. The minimum age to apply for a personal loan in Singapore is 21 years old.
Plus, you need to have proof of a steady income and valid residence or citizenship status.
As explained above, money lenders can only lend you a certain loan amount. It will either be $3,000 or six times what you earn per month.
So consider your needs first and ensure that a licensed money lender’s loan can meet them. You wouldn’t want to deal with repaying a loan that doesn’t even fulfil its purpose.
You should also ensure you are able to repay what you borrow. In other words, borrow within your limits.
Good credit history is more likely to get your loan approved. On the other hand, a poor credit score and history is likely to compromise your loan application.
Analyse your credit score beforehand by getting a copy of your credit report, and see if you need to improve your credit score or not.
Even in Singapore, loan scams and unlicensed money lending institutions are everywhere, waiting to prey on unsuspecting borrowers. This puts borrowers at risk of getting trapped in a cycle of debt.
So it’s essential that you only work with licensed and reputable money lenders. Check the Ministry of Law’s website to see a regularly updated list of all licensed money lenders in Singapore.
You can view the list and verify a money lender’s complete business name, phone number, licence number, and physical address.
Or call the Registry at 1800-2255-529 to verify if a money lender is registered or report an illegal money lender in Singapore.
So these are all the things you need to consider before taking a loan from a money lender.
Need help with securing a loan? Katong Credit is a reliable licensed money lender in Singapore. We offer some of the most affordable interest rates and no hidden fees.