With the global economic crisis and rising costs of living, it’s not surprising for many families to face financial strains. In case of an emergency financial crisis, never turn to illegal money lenders for quick cash.
Unlicensed moneylenders, also known as “ah longs” or loan sharks, thrive in desperate times. These perpetrators may approach you through fishy websites, social media accounts, unsolicited emails, or Whatsapp messages. Loan sharks will even disguise themselves as a legal money lender.
But borrowing from loan sharks can put you in a very dire situation. For instance, there was an incident where loan sharks allegedly sent S$1000 worth of cash-on-delivery food orders to intentionally harass their victim. So how do you differentiate licensed money lenders from loan sharks?
Legal vs Illegal Money Lenders
Before you start applying for a loan, make sure that you are dealing with a legal money lender.
The key difference with legal vs illegal moneylender is that all licensed money lenders must be registered with the Ministry of Law. The Registry of Moneylenders oversees the registration and regulation of legal moneylenders in Singapore. You can verify by checking the complete list of licensed moneylenders on MinLaw’s website.
On top of that, you must also consider these factors to understand how licensed money lenders differ from loan sharks.
| Licensed Moneylenders | Unlicensed moneylenders | |
| Advertisement | Only advertise via three channels: directories, own websites, and within their business premises | Advertise via other channels, such as flyers, WhatsApp messages, emails, and social media |
| Transparency | Obligated to thoroughly explain the terms and conditions of the loan | Fail to explain the terms |
| Interest Rates | 1%-4% | Charge exorbitant interest rates |
| Fees and Charges | Not more than 10% administrative fee of the principal loan amount Not more than S$60 late repayment fee for each month the loan is repaid late | Will ask for a processing fee upfront before the loan is approved |
| Loan Amount | You can loan up to 6 times your monthly income if you have an annual income of at least S$20,000 | There is no limit to the loan amount and will allow you to borrow more than what’s legally allowed. |
| Loan Contract | You will be asked to sign a loan contract complete with details, including the loan terms, amount, tenure, and interest rate | Will not give you a loan contract or will have you sign a blank note |
1. Advertisement
Licensed Money Lenders
Licensed money lenders’ advertisements are permitted through three channels:
- Business or consumer directories – in print or online media
- Official websites of the licensed money lender
- Advertisements placed within or on the exterior of the legal money lender’s business premises
Unlicensed Money Lenders
Loan sharks will try to reach you in various ways, such as through flyers, Whatsapp messages, emails, or social media platforms. These channels are not permitted under the advertising rules. That said, these moneylenders are violating the law. Furthermore, no physical money lenders operating 24 hours in Singapore.
2. Transparency
Licensed Money Lenders
A legal money lender is obligated by law to explain the terms and conditions of the loan in a clear and concise manner. Plus, they must explain it in a language you understand. If there are terms or conditions you don’t understand, don’t be afraid to ask questions. Find out more on the rules and regulation of Singapore’s Moneylender Act.
Unlicensed Money Lenders
On the other hand, loan sharks will immediately provide you with a loan without explaining the terms or conditions. Be vigilant of lenders who may send you a PDF document for an ongoing loan process, supposedly from the Money Authority of Singapore (MAS). Such documents are part of a loan scam and they may send it via WhatsApp or SMS.
3. Interest Rates, Fees, and Charges
Licensed Money Lenders
The Ministry of Law regulates how much interest rates a legal money lender can charge. Interest rates are capped at 4% per month regardless of the borrower’s income or whether the loan is secured or unsecured.
Additionally, licensed money lenders can only charge the following fees:
- Not more than 10% administrative fee of the principal loan amount when the loan is granted
- Not more than S$60 late repayment fee for each month the loan is repaid late
- Late interest rate of up to 4% per month for every month the loan is repaid late
Note that the total charges, including interest, late fees, and administrative fees, must not exceed the principal loan amount.
Unlicensed Money Lenders
Conversely, illegal money lenders will charge extremely high interest rates and late interest rates – typically well above 4% per month. This makes it impossible to pay back the loan.
Additionally, loan sharks are also known to ask borrowers to pay fees even before the loan is granted. They will instruct borrowers to pay a deposit amount for the loan processing fee. And if the borrower decides to cancel the loan, they will suffer from threats and harassment.
4. Loan Amount
Licensed Money Lenders
For secured loans, you can borrow any loan amount from licensed moneylenders. For unsecured loans, you can borrow up to 6x your monthly income if your annual income is at least S$20,000.
| Borrower’s annual income | Singapore Citizens and Permanent Residents | Foreigners residing in Singapore |
| Less than $10,000 | $3,000 | $500 |
| At least $10,000and less than $20,000 | $3,000 | |
| At least $20,000 | 6 times monthly income | 6 times monthly income |
Unlicensed Money Lenders
There is no limit to how much you can borrow from loan sharks. However, it comes with several caveats, such as sky-high hidden fees and exorbitant interest rates. They will allow you to borrow more than what’s legally allowed, causing more financial strains in the future.
5. Loan Contract
Licensed Money Lenders
Legal money lenders are required by law to provide you with a loan contract. It must detail all the terms and conditions of the loan, including:
- Loan amount
- Interest rate charged
- Repayment period
- Repayment method options
Unlicensed Money Lenders
On the other hand, unlicensed money lenders will not provide you with any loan contract. Or they may ask you to sign an incomplete or blank loan note.
How Does Singapore Deal With Illegal Money Lenders?
Loan sharks are becoming more and more creative in their schemes. That’s why you must remain vigilant.
If you suspect that you are dealing with an illegal money lender, immediately contact 1800-722-6688 to get scam-related advice. Additionally, call the police at 1800-255-0000 to report any illegal activity.
(Source: Singapore Police Force)
Note that assisting a loan shark in conducting its illegal money lending business is punishable by law.
For assisting in the business of unlicensed moneylending:
- Fine between S$30,000 and S$300,000
- Imprisonment for a term of up to four years; and
- Caning of up to six strokes
For acting on behalf of an unlicensed moneylender to commit harassment:
- Imprisonment for a term of up to 5 years
- Fine between S$5,000 and S$50,000; and
- Caning of between 3 and 6 strokes
How To Deal With Loan Sharks as a Borrower
- Verify the legal money lender’s license. Check whether they are registered under the Ministry of Law’s Registry of Moneylenders.
- Report them immediately to the authorities. Contact the police or the X-Ah Long hotline at 1800-924-5664. You can also lodge a complaint with the Registry at 1800-2255-529.
- Stay calm and don’t yield to threats or harassment. Never agree to help loan sharks in their illegal money lending services. Additionally, never allow them to use your bank or ATM card.
- Seize all payments. After lodging a report to the authorities, immediately stop making further payments for your debt. Note that the transaction was done illegally. As such, loan sharks don’t have the right to receive payments.
- Seek credit counseling or assistance from financial advice experts. You can seek assistance from government agencies, such as Credit Counselling Singapore to help you have a better handle on your financial situation.
Final Word
With the current global inflation, it’s not surprising that many families are struggling financially. If you need financial assistance, you can always turn to banks or licensed money lenders. Legal money lenders are regulated by the Ministry of Law, making them a viable option if you need quick cash loans.
Key Takeaways:
- Verify the license of a money lender by checking the complete list of licensed moneylenders on MinLaw’s website.
- Loan sharks charge exorbitant interest rates while legal money lenders can only charge up to 4% interest rate per month.
- Loan sharks may approach you through fishy websites, social media accounts, unsolicited emails, or Whatsapp messages.
- Loan sharks will use threats and harassment when collecting a debt. Contact the authorities immediately and stay away from unlicensed money lenders.
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