Things to Note Before Taking Up Any Loan

  • Before approaching a moneylender, consider other alternatives, such as the various financial assistance schemes offered by various Government agencies. You may contact the agencies to find out more about their schemes.
  • You are legally obliged to fulfil any loan contract you enter into with a licensed moneylender.
  • Consider whether you are able to abide by the contractual terms, bearing in mind your income and financial obligations. Borrow only what you need and are able to repay. Be mindful that if you are unable to meet the contractual terms, the late payment fees and interest payment will be a financial strain not just on yourself but also on your family.
  • The law requires moneylenders to explain the terms of a loan to you in a language you understand and to provide you with a copy of the loan contract. Make sure you fully understand the terms of the contract, in particular, the repayment schedule, the interest rate charged and the fees applicable.
  • You should shop around different moneylenders for the most favourable terms. You should not rush into and commit yourself to a loan until you are satisfied with the terms and conditions.

Information extracted from www.minlaw.gov.sg

With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% per month. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one. If a borrower fails to repay the loan on time, the maximum rate of late interest a moneylender can charge is4% per month for each month the loan is repaid late.

The computation of interest charged on the loan must be based on the amount of principal remaining after deducting from the original principal the total payments made by or on behalf of the borrower which are appropriated to principal. [To illustrate, if X takes a loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken into account for the computation of interest.]

The late interest can only be charged on an amount that is repaid late. The moneylender cannot charge on amounts that are outstanding but not yet due to be repaid. [To illustrate, if X takes a loan of $10,000, and fails to pay for the first instalment of $2,000, the moneylender may charge the late interest on $2,000 but not on the remaining $8,000 as it is not due yet.]

Information extracted from www.minlaw.gov.sg

With effect from 1 October 2015, the maximum interest rate money lenders can charge is 4% per month. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one. If a borrower fails to repay the loan on time, the maximum rate of late interest a moneylender can charge is4% per month for each month the loan is repaid late.

The computation of interest charged on the loan must be based on the amount of principal remaining after deducting from the original principal the total payments made by or on behalf of the borrower which are appropriated to principal. [To illustrate, if X takes a loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken into account for the computation of interest.]

The late interest can only be charged on an amount that is repaid late. The moneylender cannot charge on amounts that are outstanding but not yet due to be repaid. [To illustrate, if X takes a loan of $10,000, and fails to pay for the first instalment of $2,000, the money lender may charge the late interest on $2,000 but not on the remaining $8,000 as it is not due yet.] (Information extracted from www.minlaw.gov.sg)

Do not borrow from unlicensed moneylenders. Verify that a moneylender is licensed by checking the list of licensed moneylenders. You are encouraged to visit www.minlaw.gov,sg for an updated list of licensed moneylenders in Singapore.

Notwithstanding that the moneylenders are licensed, be mindful if they:

  • Use abusive language, or behave in a threatening manner towards you.
  • Ask for your SingPass user ID and/or password.
  • Retain your NRIC card or any other personal ID documents (e.g. driver’s licence, passport,work permit, employment pass or ATM card).
  • Ask you to sign on a blank or incomplete Note of Contract for the loan.
  • Grant you a loan without giving you a copy of the Note of contract for the loan and/or without properly explaining to you all the terms and conditions.
  • Grant you a loan without exercising due diligence (e.g. approving a loan over the phone, SMS or email before even receiving your loan application form and supporting documents, such as the income tax assessment and payslips).
  • Withhold any part of your principal loan amount for any reason.

Such practices are not acceptable. If you encounter them, you should report the moneylender to the Registry of Moneylenders, with information such as the moneylender’s business name, licence and contact numbers. Please see Question 10 for more details.

To find out more about unlicensed moneylenders, you may click on this link: http://www.spf.gov.sg/ahlong/

Information extracted from www.minlaw.gov.sg

  • Make sure the moneylender delivers to you the correct principal amount of the loan. The moneylender is only permitted an upfront deduction of a loan approval fee of up to 10% of the principal amount.
  • Pay the loan instalments on time to avoid incurring late payment fees and late interest.
  • Make sure the moneylender issues to you a dated and signed receipt every time you repay your loan or pay any fees in cash, and check it for correctness (e.g. name, amount, date).
  • Make sure you receive a statement of account for all your loan(s) at least once every 6 months, and check it for correctness (e.g. name, amount, date); and
  • You should retain all statement of accounts and receipts of payments, as documentation and evidence of payments.

Information extracted from www.minlaw.gov.sg

Banks provide a broader spectrum of products, some of which fall outside the category of financial loans – they are also regulated by the Monetary Authority of Singapore. The cost of loans which involve interest, processing fees, late interest, and penalties are typically lower compared to money lenders. They also issue a higher loan quantum which is repayable over a longer tenure.

To that end, banks are stricter on quality criteria due to policy, and processing time usually takes a minimum of one week and upwards – from date of application to loan disbursement. Licensed money lenders provide a similar service in loans, and are regulated by the Registry of Moneylenders under the Ministry of Law. The cost of loans are naturally higher, however, approval may be made – and funds disbursed within the same day.

Over the years, the money lending industry has been under close scrutiny – which gave rise to strict regulations and protection of consumer rights under the Moneylenders’ Act. Loans by money lenders are therefore more suitable for individuals that require emergency funds at a shorter tenure.