Is Taking a Loan From a Licensed Money Lender Safe?
While taking loans is seen as a financial safety net, there remains a strong stigma surrounding it, especially when borrowing money from licensed moneylenders. Frequently misunderstood, they are commonly confused with unlicensed loan sharks despite that not being the case. In reality, licensed moneylenders actually operate under strict regulations in order to ensure safe and transparent lending practices.
In this guide, we debunk the myths and misconceptions regarding licensed moneylenders in Singapore and explain why borrowing from them can be a safe and viable money option.
Introduction to Licensed Moneylenders in Singapore
In Singapore, there are moments when customers need quick access to liquid cash for emergencies or urgent purchases, but bank loans take too long to be processed and approved due to strict eligibility requirements and extensive paperwork. During such situations, a licensed money lender in Singapore acts as a faster alternative, providing faster cash loan options.
Nonetheless, it’s still pertinent to understand the terms, loan tenures, interest rates, lender reputation, repayment obligations, and most importantly, your financial status before committing to one.
Understanding the Role of a Licensed Moneylender
While traditional bank loans exist, licensed moneylenders in Singapore exist as an alternative financing option. Essentially, licensed moneylenders cater to individuals who:
- Unable to meet bank loan eligibility due to low credit scores, irregular income, or other reasons
- Need urgent cash but want to bypass long bank approval processes
- Require smaller, shorter term loans that banks may not offer
Quick loans can differ across various types like personal loans, business loans, or fast cash loans for emergency purposes such as medical bills.
Besides that, licensed moneylenders provide structured repayment plans under a clear, legally binding loan contract. This contract must transparently outline important components like:
- Interest rates,
- Loan tenure,
- Total repayment amount,
- Instalment amounts,
- Late payment fees, and
- Consequences of defaulting.
Additionally, licensed moneylenders are strictly regulated by the Ministry of Law to adhere to fair lending practices. These practices include guidelines like fixed interest rate caps (maximum 4% per month), loan amount limits based on annual income, and clear loan terms to avoid misleading borrowers.
Aggressive debt collection tactics like harassment, intimidation, physical harm, and property vandalism are also strictly prohibited and can lead to license revocation and/or legal actions. Instead, licensed moneylenders must follow ethical debt collection methods like sending reminder notices, charging late payment fees within legal limits, and taking legal action (if needed) through the Small Claims Tribunal or courts.
Key Factors to Consider: Is Taking a Loan From a Licensed Moneylender Safe and Reliable?
In Singapore, the Moneylenders Act regulates the activities of licensed moneylenders, ensuring the security of borrowers to prevent exploitation. The best licensed moneylenders in Singapore ideally operate within these guidelines, following strict rules on interest rates, borrowing limits, and ethical debt collection practices.
Here are some financial factors governing how licensed moneylenders operate in Singapore:
Licensing Requirements
To be legitimised, moneylenders must be registered and licensed under the Registry of Moneylenders. Failure to do so will incur heavy penalties.
Cap on Interest Rates
Licensed moneylenders cannot charge more than 4% interest per month, regardless of borrower’s income level. Any interest imposed on late payments is also capped at 4% interest per month on the overdue amount.
Limits on Borrowing/Loan Amount
For secured loans, there is no established loan cap. The borrower is free to request for any amount of loan subject to the moneylender’s approval. Conversely, unsecured loans have more restrictions according to your annual income level.
For Singaporeans and PRs:
Meanwhile, stricter criteria are imposed on foreigners:
| Annual income level | Maximum loan amount | |
|---|---|---|
| Singaporeans & PRs | Foreigners | |
| < S$10,000 | S$3,000 | S$500 |
| S$10,000 ≤ x < S$20,000 | S$3,000 | |
| ≥ S$20,000 | Up to 6x monthly income | |
Fees and Charges
The total fees charged (excluding interest) cannot exceed the borrower’s principal loan amount. These include:
For clarity, if a borrower takes up a loan of S$10,000, his/her interest, late interest, admin fee, and S$60 monthly late fee cannot exceed S$10,000.
Advertising Restrictions
Licensed moneylenders can only advertise through a few mediums: their official business premises, their registered website, and consumer directories like Yellow Pages. Advertising through unauthorised channels like social media ads, SMS, and cold calls are strictly prohibited.
Therefore, online ads by licensed money lenders are carefully monitored to maintain transparency and trust.
Want to Find Your Best Cash Match?
Confused about the different types of personal loans in Singapore? You’re not alone—we were too before diving into this guide. 😉 Whether you need fast cash or a long-term solution, we’ve broken it down so you can find the best fit for your needs!
Benefits of Borrowing From a Licensed Moneylender
Comparison: Licensed Moneylenders vs Traditional Bank Loans
| Licensed Moneylenders | Bank Loans | |
|---|---|---|
| Eligibility criteria | More lenient approval—low credit scores and irregular income Lower annual income requirement of S$10,000 (foreigners) and S$20,000 (Singaporeans/PRs) |
Stricter eligibility—needs good credit score and stable annual income between S$20,000 to S$30,000 |
| Interest rates | Higher interest rates at roughly 48% p.a., otherwise capped at 4% per month | Lower interest rates, capped between 3% to 8% p.a. |
| Loan amount limits | Lower loan amounts depending on annual income (e.g. up to 6X monthly income for those earning ≥ S$20,000) | Higher loan amounts (e.g. up to 10X monthly income for those earning > S$30,000) |
| Approval speed & processes | Less paperwork & fast approval (usually within 24 hours) | More stringent document verification (e.g. CPF contributions, payslips, etc.) and slower approval |
| Loan tenure | Shorter repayment periods (~6 to 24 months) | Longer repayment periods (~1 to 7 years) |
| Fees & charges | Higher fees (Up to 10%) | Lower fees (~1% to 3%) |
| Credit score impact | No impact unless defaulted | Can either negatively or positively affect credit score (good for future financial applications) |
| Borrower protection | Regulated under Moneylenders Act | More robust protection under MAS |
Fast Approval and Minimal Paperwork
Loan applications made to licensed moneylenders in Singapore can be approved within hours, as compared to banks with a waiting time of a few days to weeks. Fewer legal documents are also required for verification where basic income proof and ID verification will suffice.
Easier Eligibility
Applying for loans from legal money lenders present a lower barrier to entry due to more flexible eligibility requirements. Individuals with lower credit scores or irregular income (like freelancers) can apply with relative ease.
In contrast, bank loans typically demand applicants to have a good credit history, stable income, and secure employment. As a result, bank loan approvals are more challenging for those from non-traditional financial backgrounds.
Flexible Borrowing Options
Loans from licensed moneylenders are available in smaller minimum amounts, and are based on your annual income. These flexible customisations make loans more accessible to lower-income borrowers.
Cap on Interest Rates
Although loans from legal money lenders have higher interest rates per annum, at least their interest rates are capped at 4% per month. This prevents moneylenders from unfairly charging borrowers excessively, maintaining fair interest rates and loan terms. Contracts should also clearly illustrate repayment schedules.
No Impact on Credit Score
Unless you default on the loan, obtaining a loan from a licensed moneylender in Singapore will not adversely affect your credit score.
Best Licensed MoneyLenders in Singapore 2025
- Interest Rate
- From 14% p.a.
- Total Amount Payable
- S$11,400
- Processing Fee
- S$0
- Per Month
- S$950
- Interest Rate
- From 21.6% p.a.
- Total Amount Payable
- S$12,160
- Processing Fee
- S$800
- Per Month
- S$1,013
Moneylenders vs Banks: Which Loan Wins? 🤔
While licensed moneylenders offer quick cash, it may still be worth your two cents (pun intended) to consider your traditional bank loan options while you're at it.
Check out other best personal loans in Singapore with low interest rates and fast approval times in Singapore!
How to Identify a Legal Moneylender in Singapore?
Although “licensed money lenders in Singapore” and “legal money lenders” are popular search terms, not all the results crawled can be trusted. Critical discernment must still be exercised in order to properly identify a legal moneylender and stay vigilant against scams and frauds.
Arguably, the easiest way to verify the authenticity of a moneylender is through this list of licensed moneylenders. Notwithstanding that, other suspicious behaviours to look out for include:
- Use of abusive language or threatening behaviour towards borrowers
- Asking for your SingPass user ID and/or password
- Retaining your NRIC card or other personal ID documents (e.g. driver’s license, passport, work permit, employment pass, or ATM card)
- Request your signature on a blank or incomplete Note of Contract for the loan
- Granting a loan without issuing you a copy of the Note of Contract and/or without explaining the terms and conditions clearly
- Not granting a loan in person (e.g. over the phone, SMS or email)
- Withholding any part of your principal amount for any reason
Should you encounter any of these unlawful behaviours, you can file a report to the Registry of Moneylenders and provide their business name, licence, and contact numbers.Unlicensed moneylenders found practising will also be penalised for their violations.
- Unlicensed moneylending: Up to S$300,000 fine, 4 years in jail, and 6 strokes of the cane
- Harassment or illegal collection: Up to S$50,000 fine, 5 years in jail, and 12 strokes of the cane
Frequently Asked Questions About Legal Money Lenders in Singapore
Can a licensed moneylender harass you?
- Licensed moneylenders are not permitted to solicit for loans via text messages, phone calls, or social media platforms. They must meet the borrower in person at an approved place of business to verify his/her identity before granting any loan.
How can I tell whether an advertisement is from a licensed moneylender or an unlicensed moneylender?
- Licensed moneylenders are prohibited from advertising their services through unauthorised channels like social media ads, SMS, and cold calls. They can only do so through their official business premises, website, or consumer directories.
Can I trust an advertisement’s content to take up a loan from a moneylender?
- No, any paid advertisement from a moneylender is considered illegal.
How to check a moneylender’s license?
- The main way to verify a legal moneylender’s license is to refer to the List of Licensed Money Lenders in Singapore PDF on the Ministry of Law’s website.
All registered licensed moneylenders can be found on that list. Can licensed moneylenders do debt consolidation plans?
- Licensed moneylenders do not offer debt consolidation plans, but they may offer debt consolidation loans. Regardless, if you’re seeking a debt consolidation plan, taking up a loan would be counterintuitive and not advisable.
Instead, we encourage you to explore our available debt consolidation plans here on MoneySmart to manage any outstanding debts.
Related Links
10 Things To Consider When Getting A Personal Loan
What are Licensed Moneylenders in Singapore?
Personal Loans For Unemployed in Singapore
