what is a loan shark

What Is a Loan Shark & How To Deal With Illegal Moneylenders

Filife Team

    Amid the global economic crisis and persistent inflation, many Singapore households have begun finding ways to save money. Unfortunately, despite such adjustments, some families – and even foreigners living in Singapore, still need to dig deep to make ends meet. But no matter how desperate you are, never borrow money from a loan shark.

    Illegal money lenders, also known as “ah longs” or loan sharks, prey on vulnerable, desperate consumers. These illegal lenders may approach you through unsolicited emails, SMS messages, phone calls, or social media accounts. They might seem friendly at first, but dealing with them is never a good idea.

    While it is not illegal to borrow from a loan shark, assisting them in their illegal lending business is punishable by law. Under the Moneylender’s Act, opening a bank account or giving loan sharks access to your ATM card and PIN is considered as assisting a loan shark.

    To avoid dealing with illegal money lenders, you need to understand how they work.

    What Is a Loan Shark and How Does a Loan Shark Work?

    Unlicensed moneylending is when an unlicensed individual or entity, also known as “Ah Long” or Loan Shark, lends money to another person or business. Loan sharks are not regulated nor registered with the Ministry of Law. Their methods to lend and collect money are dangerous and will involve harassment tactics.

    An illegal money lending team might appear friendly and helpful in the beginning. They do not require background checks or credit reports. As such, they are an attractive option for desperate borrowers with a poor crediting rating who can’t access funding from banks.

    But borrowing money from these perpetrators comes at a high price. Some of the risks associated with borrowing from a loan shark include:

    • You will pay exorbitant interest rates, making it almost impossible to pay back the loan
    • Being harassed or threatened if you fail to make repayments
    • You might be pressured into borrowing more money to repay one loan with another, causing your debt to snowball

    What Is an Example of a Loan Shark?

    An Illegal money lending unit will lend large sums of money because they want to gain high interest in a short time. That said, loans from loan sharks come at extremely high interest rates – far above any regulated rate.

    One example of a loan shark at work is an incident where a house helper borrowed S$1,000 from an illegal money lender after seeing their advertisement online. However, the helper never received the money as promised. Despite this, the loan sharks continued to hound and harass her and the family she was working for.

    There was another incident wherein a family in Yishun was allegedly sent S$800 worth of food they didn’t order and another where loan sharks sent S$1,000 worth of food deliveries to a unit at Fernvale.

    These are just a few examples of how loan sharks hound and harass borrowers. It’s best to stay away from these illegal money lenders and not work with or assist them in any way.

    How To Spot and Avoid Loan Sharks

    Borrowing money from loan sharks is very dangerous, but knowing how to spot one will help you avoid dealing with them. Here are a few warning signs to watch out for:

    • If the lender approached you via unsolicited SMS messages, emails, phone calls, or social media accounts.
    •  Fails to explain the terms and conditions of the loan
    • Will not provide a loan contract or will have you sign a blank loan note
    • Keeping your NRIC card or any other personal ID documents, such as passport or ATM card
    • Asks for your SingPass user ID and/or password
    • Grants you a loan over the phone, SMS, or email – even without receiving your loan application form
    • Withholds any part of your principal loan amount for any reason
    • Charges more than 4% interest rate per month

    Can a Loan Shark Take You to Court?

    In Singapore, it is illegal to be in the business of money lending without a license. Any money lending transaction with a loan shark is done illegally. That said, you don’t have to make repayments and they can’t take you to court to get it back.

    What Happens if You Don’t Pay Back a Loan Shark?

    If you, or someone you know, owe money from a loan shark, the first thing you need to do is report the illegal money lender. Additionally, you need to seize all payments to the loan shark.

    However, these perpetrators may threaten you or may say they’ll take you to court to get you to repay the money owed. Some of the illegal methods employed by loan sharks include:

    • Physical violence
    • Intimidation or threats
    • Vandalism
    • Stalking

    If you are worried about being threatened, immediately make a police report to seek protection and assistance. Contact 999 or dial the X-Ah Long hotline at 1800 924 5664 to report loan shark harassment in Singapore or if you suspect loan shark activity.

    Alternative of a Loan Shark

    Are There Alternatives to Borrowing From a Loan Shark?

    Find yourself in a dire financial situation? You have plenty of other options, aside from banks, to tide over tough financial situations. These alternatives are legitimate lenders who can lend money legally at low interest rates:

    1. Family and Friends

    This is the most common option when you have money worries. You can ask a friend or family member who is willing and able to lend you money. Both parties can create a repayment plan or come up with a detailed IOU to ensure that everyone is treated fairly.

    2. Government Schemes

    Another option is to seek financial assistance from the government. For instance, the COVID-19 Recovery Grant was initiated to help Singaporeans affected by COVID-19. If you need capital for your business, you can consider taking an SME Working Capital Loan.

    3. Credit Unions

    Some credit unions consider credit applications from individuals with a poor credit rating. Credit union personal loans typically have lower interest rates and fees than other types of lenders.

    4. Licensed Money Lenders

    Licensed money lenders in Singapore are regulated and registered with the Ministry of Law. These legal lenders abide by the regulations set in the Moneylenders Act and will only impose interest rates, fees, and charges set by the Act. You can find out more on the differences between Legal and Illegal Money Lender in Singapore.

    If you are a foreigner living in Singapore, you can take up a foreigner personal loan with legal lenders. Take a look at the illustration below:

    Borrower’s annual income Singapore Citizens and Permanent Residents Foreigners residing in Singapore
    Less than $10,000 $3,000 $500
    At least $10,000 and less than $20,000 $3,000 $3,000
    At least $20,000 6 times monthly income 6 times monthly income

    You can verify the license of a money lender by checking the complete list of licensed moneylenders on MinLaw’s website. If the lender is not on the list, you may be dealing with an illegal lender or loan shark.

    How To Report a Loan Shark

    If you suspect that a person or entity is involved in any loan shark activity, immediately call the Police at 999 or the X-Ah Long hotline at 1800-924-5664.

    If you receive unsolicited emails, SMS, flyers, or other forms of advertisements, you are advised never to respond to such advertisements. Instead, immediately report the advertisements to the Registry at 1800-2255-529 or via their website.

    Final Word

    Most of us have experienced being strapped for cash at some point in our lives. It is only natural to seek financial assistance to tide over tough financial situations. However, only trust credible and licensed money lending institutions.

    Key Takeaways:

    • Illegal money lenders, also known as “ah longs” or loan sharks, prey on vulnerable, desperate consumers.
    • You might encounter a loan shark online, such as through fishy websites, social media accounts, and unsolicited emails. You are advised to ignore such advertisements and report them immediately.
    • Loan sharks charge sky-high interest rates and will resort to harassment and threats when collecting borrowed money.
    • Personal loans from a licensed money lender are an excellent alternative if you need fast cash loans.

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