Authorised Vs Unauthorised Money Lenders: What Are the Differences?

If you’ve found yourself in need of an urgent loan in Singapore, the good news is, there are tons of reliable and simple ways to secure fast cash. All you need to do is stay calm, and make good loan decisions next!

It’s of utmost importance to remember that no matter the dire circumstance, you should never approach an unauthorised money lender. If you’re unsure whether or not you can trust a money lender, take a look at our breakdown of the vital differences between unauthorised and authorised money lenders in Singapore.

Transparent terms of the contract

It is the responsibility of any authorised money lender in Singapore to present you clear terms and conditions of the loan agreement. Not only should it be in a language which can be understood by the borrower, but it should also be phrased in terms that are clear and simple to understand.

The Ministry of Law in Singapore requires all licensed money lenders to provide all the information related to the loan contract to their customers. However, unauthorised money lenders may try to avoid providing you with these terms explicitly so that they can change them to their convenience. This means you could fall prey to exorbitant interest rates, short payment periods, or hidden fees.

Loan Amounts Determined by Income

All reliable money lenders in Singapore comply with the rules and regulations set by the Ministry of Law. And in accordance with those rules, your loan sum will be limited depending on your annual income. For annual incomes under $20,000, you may loan up to $3,000 and for annual incomes of $20,000 and above, you may loan up to 6 times your monthly income. Do note, these rates apply to local lenders only!

If a money lender offers you amounts outside of these limits, you may be dealing with an unauthorised money lender. Though you may get a larger loan amount, we do not advise taking this up offer as you could be putting yourself at serious risk.

Authorised Money Lenders Have a Contract

Like we mentioned earlier, authorised money lenders will make you sign a contract that states in clear and simple details, your loan amount and its terms and conditions. The contract will include details such as interest rates, late payment fees, repayment periods, and so on.

Someone offering you a loan without a contract is unauthorized moneylenders. They might even try to make you sign a blank agreement, don’t ever do that and stay away from this kind of moneylenders.

Interest Rates for Authorised Money Lenders

All authorised money lenders in Singapore are required to follow the guidelines set by the government on interest rates. These rates can only go up to a maximum of 4% interest rate per month.

So with that in mind, you can gauge whether or not a money lender is authorised based on the interest rate limits you receive. If your money lender proposes an interest rate that goes over the 4% limit, you should be wary.

Only Three Types of Fees can be Charged

All licensed money lenders in Singapore are only permitted to impose 3 charges on you and they are the following:

  • A fee not exceeding $60 for each month of late repayment
  • A fee not exceeding 10% of the principal of the loan when a loan is granted
  • Legal costs ordered by the court for a successful claim by the money lender for the recovery of the loan

These fees should be presented to you before signing the contract and should be clearly stated in your contract as well.

Unauthorised money lenders may trick you into some other fees, or try to impose them on you later on by avoiding giving you a clear and concise contract. So never agree to accept a loan without a clear contract, and just to be safe, refer to the Ministry of Law’s website to make sure that you’re dealing with a reliable money lender in Singapore.

Reliable Money Lender Singapore

These are just some basic ways to determine whether you’re dealing with an unauthorised or authorised money lender in Singapore. But if you have more doubts to clear or questions to answer, just leave us a comment below or contact us at our hotlines: : (+65) 62244746 (Yishun) and (+65) 62244749 (Tampines).