Demystifying common myths about Singapore personal loan rates and moneylenders

It is not surprising to find many people taking a sceptical view on a Singapore personal loan or a payday loan from moneylenders.  With fake rumours circling around moneylenders and myths about Singapore personal loan rates skyrocketing overnight, these are enough reasons to stay away from such lenders.

The truth is, many of these claims are false and unsupported by facts.  Personal loans from licensed moneylenders in Singapore are highly regulated.  If you can keep an open mind about these credit facilities, you could get genuine support that not only helps you through difficult times but also get you the cheapest personal loan in Singapore.

In this article, we will clarify some misconceptions about licensed moneylenders and their interest rates, so that you can make informed decisions when doing financial planning.

Myth 1: Moneylenders Charge Exorbitant Interest Rates

This is one of the biggest misunderstandings that many people still believe today.  However, quick research will reveal that Singapore personal loan rates from licensed moneylenders are regulated by the Registry of Moneylenders, a regulatory arm of the Ministry of Law (MLaw).

According to regulations, licensed moneylenders can only charge an interest rate of up to 4% per month.  The Registry even went as far as to spell out how interest and fees must be tabulated to ensure borrowers are protected.  So, if a lender attempts to offer you a Singapore personal loan at more than 4% interest, don’t get scammed, this is bound to be an illegal loan shark.

Myth 2: Always Choose the Cheapest Personal Loan in Singapore with the Lowest Interest Rate

People always think that ‘cheap is good’ but they forget that ‘good is not always cheap’.  Borrowers tend to go for the cheapest and lowest interest rate when applying for a Singapore personal loan, however, this can be a grave mistake.

Don’t get trapped in this mentality because banks and lenders often offer low Singapore personal loan rates but impose multiple fees that end up costing more.  To get around this, make sure to examine the terms and conditions such as late repayment fees, early redemption penalty or any administrative fees that borrowers easily overlook.  When in doubt, always refer to The Registry of Moneylenders because there are guidelines on standard charges and fees that can be imposed on borrowers.

Myth 3: You Need a Fixed Salary To Get a Loan

While most banks in Singapore require borrowers to have an annual income of at least S$30,000 to apply for a personal loan, this doesn’t apply to licensed moneylenders.  Typically, locally approved moneylenders make personal loans accessible even for those earning less than S$30,000 per annum.  For example, at Soon Seng Credit, the licensed moneylender will gladly extend a Singapore personal loan as long as you are between 21 to 65 years old and earning at least S$20,000 per year,

However, take note that the Registry of Moneylenders does impose a maximum amount that you can borrow.  This largely depends on both your annual income and your ability to repay your loan.

Borrower’s Annual Income Singapore Citizens and Permanent Residents Foreigners
Less than S$10,000 S$3,000 S$500
S$10,000 to S$20,000 S$3,000 S$3,000
S$20,000 and above 6 times of monthly income 6 times of monthly income

(Source: Registry of Moneylenders, Ministry of Law)

Myth 4: Moneylenders Are Dishonest

Licensed moneylenders often get a bad rep because they are mistaken for loan sharks or ‘ah longs’ who harass borrowers and their families.  However, what many fail to see is moneylenders in Singapore are governed by the MLaw and operate under strict regulations stipulated by local authorities.  Even the lenders’ debt recovery practices are spelt out by MLaw in a handbook to prevent unlawful tactics.

While it is true that moneylenders can hire the help of debt collection officers to follow-up with borrowers, they too are subject to the industry’s Code of Ethics set by the Credit Collection Association of Singapore (CCAS).   The CCAS was tasked to improve the integrity and tactics of debtor collectors, and at the same time promote best practices to abolish the bad and outdated reputation of the operators.

Myth 5: Singapore Personal Loans From Moneylenders Will Affect Your Credit Score

According to the Credit Bureau of Singapore, six key factors affect a person’s credit score but taking a personal loan is not one of them.  However, how you manage your loan will have a significant impact on your credit score.

Here are some pointers to take note of if you don’t want your credit score to be affected negatively when taking up a personal loan:

  • Avoid owing large credit amounts and/ or having multiple accounts for credit
  • Avoid overextending your finances with multiple new credit facilities within a short period
  • Avoid late repayment on your loan/s
  • Avoid making multiple enquiries for new loan applications because the Credit Bureau will interpret them as excess credit exposures that put you at financial risk.
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