In Singapore, you can get loans from many different types of financial institutions to help you solve your financial problems. These financial institutions include banks and licensed money lenders.
Licensed money lenders are credit companies that are legally allowed to lend money to Singaporeans, Permanent Residents, and foreigners working in Singapore. They are licensed and regulated by the Ministry of Law, and they have to adhere strictly to the MinLaw guidelines in their business processes.
Authorised money lenders are not loan sharks or illegal money lenders, though there are often many myths and misconceptions surrounding licensed money lenders.
Intrigued? Here are some ways you can differentiate between licensed and unlicensed money lenders. It pays to know how to check a licensed money lender’s legitimacy — you’d never want to be dealing with someone from the wrong side.
How to Check a Licensed Money Lender’s Legitimacy
1. Interest rates offered by licensed money lenders are regulated
Although licensed money lenders often charge higher interest rates compared to banks, this is because they allow individuals with bad credit scores to take a loan with them (unlike banks). This increases the risk for licensed money lenders. Many loans with licensed money lenders are also unsecured loans, so they typically do not require you to pledge collateral.
However, licensed money lenders are not legally allowed to charge interest rates that are higher than 4% per month. Their interest rates usually range between 1-4% monthly, so if any money lender quotes you a higher rate, you are likely dealing with an illegal money lender.
2. Licensed money lenders are registered with the Registry of Moneylenders’ database
Unlicensed money lenders are still on the rise despite efforts by the Singapore Police Force (SPF) to curb illegal money lenders. They can easily masquerade as authentic ones by displaying fake registration numbers which can misguide you if you’re not cautious enough.
However, it is not difficult to verify if a money lender is licensed. All licensed money lenders have to be registered with the Registry of Moneylenders under the Ministry of Law.
To confirm if the money lender you are dealing with is licensed, simply check against the registered list of licensed money lenders to verify. If the money lender is not on this list, it is likely unlicensed.
You should also call the landline displayed on the list to ensure that the money lender you are dealing with is indeed the money lender listed and not an illegal one pretending to be one.
3. Authorised money lenders have a physical office with their license certificate displayed
Before taking a loan from any money lender, you should also visit their physical premises to validate the authenticity of their registered office address.
Their license certificate should be displayed prominently in their office as well.
Ask as many questions as possible before taking a loan from the money lender, and visit their corporate website to find out more about their loans. Don’t forget to check their Google reviews as well.
Some unlicensed money lenders use fake registration numbers, office addresses, and even business names of licensed money lenders without their approval. It pays to always do your checks and verification before taking any loan.
4. Licensed money lenders adhere to data privacy laws
All licensed money lenders in Singapore are required to adhere to the Personal Data Protection Act (PDPA).
They will not retain your personal documents like your original NRIC, ATM card, SingPass user ID, and password, and will never get your signature on blank or incomplete documents. If a money lender requests for you to tell them your SingPass login details, for example, beware as they might be unlicensed.
5. Received a loan offer via SMS? They are definitely illegal
Unlicensed money lenders will use various methods to solicit new clients, such as via SMS, WhatsApp, Telegram, phone calls, or on social media platforms, which licensed money lenders are not allowed to do.
Licensed money lenders are only allowed to advertise through three channels:
- Business or consumer directories in print and online media
- Websites that belong to the money lender
- Advertisements placed within or on the exterior of the money lender’s office
6. Clear loan terms in legal loan contracts
Licensed money lenders will not have any hidden clauses in their contracts as there is transparency in their application processes. According to the Registry of Moneylenders, money lenders are required to state all terms and charges upfront.
Their loan contracts will clearly state the repayment terms and period, the interest rate, the loan quantum, the loan period, and other fees if any. Should any of this crucial information be missing, do clarify it with the loan officer and ensure that it is clearly reprinted in the loan contract before you sign.
If any loan terms are still vague or missing from the loan contract, it is best not to sign it and you can look for another licensed money lender instead.
7. Loan officers from licensed money lenders are not allowed to intimidate or harass customers
Loan executives at licensed money lenders are obliged to follow a strict code of conduct at all times, even during debt recovery. They are strongly prohibited from engaging in unprofessional, anti-social, or intimidating behaviour.
Illegal money lenders, on the other hand, are usually intimidating and may even use foul language. They also tend to display pushy behaviour aimed at pressuring you to fall into their trap.
8. Licensed money lenders have flexible repayment schedules
Most money lenders can provide you with the loan you need, but make sure you discuss the payment terms first. It would be wise to choose a licensed money lender who offers flexible repayment schedules from as little as less than a month (for a payday loan) up to 24 months.
Before signing any contract, check on the repayment terms, interest rates, and other terms to make sure they are all agreeable to you.
9. One-stop loan services provided by some authorised money lenders
You should select a licensed money lender who can provide a one-stop service for all your loan needs, for instance, renovation loans, personal loans, educational loans, business loans, and debt consolidation loans.
That way, you don’t need to apply for multiple loans with different money lenders, which can be tough to juggle.
Apply for the best personal loan with the most reliable money lender in Chinatown
Now that you’ve learned the ways on how to check a licensed money lender’s legitimacy, put your knowledge to good use whenever you find yourself in need of a loan.
Soon Seng Credit is an established licensed money lender located just 2-minute walk from Chinatown MRT station. We’re one of the top money lenders in Chinatown for good reason. We have stellar reviews on Google and we always do our best to cater to our borrowers’ needs with flexible loan terms and competitive interest rates.
Get a legal personal loan with a reliable money lender today.
