What Is The Money Lenders Act About?
Borrowing from money lenders in Singapore is a popular way to get funds quickly to finance a wedding, pay for a property downpayment, or resolve an emergency.
To protect both borrowers and money lenders, the Moneylenders Act 2008 was enacted.
This money lenders act summarises what a money lender is, as well as what is expected of legal money lenders in Singapore and borrowers alike.
It’s vital that borrowers understand the contents of this Act in order to avoid falling into the hands of illegal money lenders – or worse, permitting unacceptable behaviours from licensed money lenders.
What A Money Lender Is Permitted To Do
According to the Moneylending Act Singapore, a money lender is permitted to engage in the business of moneylending once it has been licensed by the Registry of Moneylenders.
In other words, only licensed money lenders can lend money to people.
That said, excluded money lenders (e.g. pawnbrokers) or exempt money lenders (those exempted from a moneylending license by the discretion of the government) are allowed to engage in the business of moneylending too.
A licensed money lender in Singapore can approve or deny your loan application once it has reviewed it and determined if you’re eligible.
The money lenders act also permits licensed money lenders to advertise their services in ways that are approved by the Moneylenders Act of Singapore.
Licensed money lenders can also take legal action against a borrower if he or she fails to meet the obligations to repay the loan.
Rules Regarding The Conduct Of Money Lenders
To protect borrowers, the Moneylenders Act of Singapore included some rules governing the conduct of money lenders.
Money Lenders License
Only money lenders holding a money lender license in Singapore can lend money to citizens, permanent residents or foreigners residing in the country.
To help borrowers differentiate between a licensed money lender from an unlicensed one more easily, the Ministry of Law compiled a list of licensed money lenders.
This list, which you can find online, contains a licensed money lender’s business name, physical address, phone number, license number, and website.
It is updated regularly. So if you want to borrow from a money lender, you’re advised to check if it appears on the list.
If it doesn’t, you may just be dealing with an unlicensed lender or loan shark.
Interest Rates And Fees
Licensed money lenders are also permitted to charge interest rates and other fees for the loans they provide.
As of 1 Oct 2015, the maximum interest rate money lenders can charge is 4%.
This rate is charged regardless of whether the loan is a secured or unsecured loan. Secured loans require collateral, while unsecured loans do not.
The Moneylenders Act also permits licensed money lenders to charge a fee for late repayment.
The late repayment interest rate is also capped at 4% and charged when a borrower fails to repay a debt as when it is due.
Keep in mind that the interest rate is charged on the outstanding loan principal, and not the total loan amount.
For instance, if you took a loan of $10,000, and you have repaid $5,000, the interest rate for a given month will be charged on the $5,000 left.
In addition, late repayment interest is charged on the installment for a given month that is unpaid.
So if you repay your loan in $1,000 installments, and for a given month are late in making payment, the late payment interest rate is charged on the $1,000 only for that month.
A late payment fee cannot be charged on outstanding installments that are not due yet.
Other fees can also be charged by licensed money lenders according to the Moneylenders Act. They include:
- Administrative fee: This is capped at 10% of the loan amount and is only deducted once the loan has been granted. It should not be paid upfront.
- Late payment fee: For each month of late repayment, a fee not exceeding $60 can be charged.
- Legal fees: If the money lender has to take legal action against a borrower to recover a loan, he or she can be mandated by the court to pay legal fees.
Legal money lenders in Singapore are only allowed to advertise in ways endorsed by the Moneylenders Act.
The Act provides three channels for money lenders to advertise their services. They include:
- Through online or print business or online directories
- On websites belonging to the licensed money lender
- Advertisements placed within or on the exterior of the money lender’s place of business (i.e. on walls, windows, gates).
Apart from the above, other advertising channels are not allowed.
Prohibited Practices For Money Lenders
Sometimes, even licensed money lenders may behave in a manner that is not endorsed by the money lenders act.
If a licensed money lender exhibits any of the following behaviours, it’s recommended that you desist from doing business with it immediately.
- Using abusive language or threats on you
- Withholding your personal documents such as your NRIC, driver’s license, or employment pass)
- Asking for your Singpass details
- Granting you a loan and asking you to sign the loan contract without explaining its terms
- Making you sign a blank or an incomplete loan contract
- Granting you a loan over the phone, text or email before collecting your loan application form, and other required documents such as your payslip
- Retaining a part of your loan principal (except the deduction for an administrative fee capped at 10%)
Any of these practices are not acceptable.
If you’re experiencing any of these, you can file a complaint against the money lender.
How Much Can You Get From Money Lenders?
How much you can get from licensed money lenders depends on several factors.
For secured loans, you can borrow up to any amount provided you’re eligible, and the money lender is willing to give you the loan.
But how much you can borrow for unsecured loans on the other hand is capped by the law.
For instance, citizens and permanent residents of Singapore earning less than $10,000 or less than $20,000 annually can only borrow $3,000.
Those earning at least $20,000 and above can borrow up to six times their monthly income.
The amount is a little different for foreigners residing in Singapore.
Foreigners earning less than $10,000 annually can only borrow $500. Those earning at least $10,000 but less than $20,000 can borrow up to $3,000.
Those earning $20,000 and above can borrow up to six times their monthly income.
The table below summarises how much borrowers in Singapore can get for unsecured loans.
|Borrower’s Annual Income||Singapore Citizens and Permanent Residents||Foreigners Residing in Singapore|
|Less than $10,000||$3,000||$500|
|At least $10,000 but less than $20,000||$3,000||$3,000|
|At least $20,000||Up to 6x borrower’s monthly income||Up to 6x borrower’s monthly income|
What A Money Lender Can Do If You Can’t Pay The Loan
When borrowers are protected by the Moneylenders Act, licensed money lenders are protected from losses too.
If a borrower consistently cannot pay back the loan, the money lender can take legal action against him or her.
The money lender can employ the services of a debt recovery lawyer to try to recover the loan. The borrower may also be mandated to pay legal fees by the court.
A licensed money lender cannot harass or threaten you for failing to pay back your loan.
Money lender harassment is not acceptable and is an offence.
In the case of harassment or other unacceptable behaviour from a licensed money lender, file a complaint to the Registry of Moneylenders’ website or by calling 1800-2255-529.
But if you still find yourself in a situation where you’re unable to pay back your loan, you can handle it in several ways.
Negotiate For An Extension
To avoid late payment fees and incurring more debt, reach out to the money lender and ask for an extension or a refinancing plan before your instalment is due.
This may come with additional fees, however.
Debt Repayment Scheme (DRS)
If the borrower’s debt does not exceed $150,000, the borrower can be assisted by an Official Assignee from the Ministry of Law’s Insolvency Office to come up with a reasonable repayment schedule for all outstanding debts over a fixed period.
Using the Debt Repayment Scheme stops all legal action by a money lender against a borrower.
File For Bankruptcy
If the borrower has no way of repaying a debt of at least $15,000, he or she can choose to file for bankruptcy.
Filing for bankruptcy prevents a money lender from charging interest and fees on the outstanding balance. It also stops any legal action against the borrower.
But it should be done only as a last resort.
Think Before You Borrow From A Money Lender
It’s crucial to consider a couple of factors before borrowing from a money lender so you find yourself in a position where you’re unable to repay the loan.
The first thing you want to consider is how much you really need and your ability to repay.
Only borrow what you can pay back, after considering your current income, expenses, and other debts.
You should also consider the interest rate and fees charged by the money lender.
Check out different money lenders to find the most reasonable interest rate and fees, and ensure you’re comfortable with them. This way, repayment doesn’t become an issue.
Also, consider the terms of the loan contract.
Remember money lenders are mandated by law to explain the terms of the contract to you.
Ask questions about anything you don’t understand. Find out if there are caveats in the contract such as pledging your property against the loan, and understand the implications of such caveats.
Borrowing from a money lender in Singapore can be a seamless and hassle-free process once you have a good understanding of the money lenders act.
You can avoid falling for loan scams if you know your borrower rights.
BST Credit, a licensed money lender in Singapore, has made the process of getting a loan easier.
We have streamlined our loan application process so borrowers can get the funds they need quickly.