The licensed moneylending industry in Singapore falls under the purview of the Moneylenders Act. The Act operates to protect borrowers, lenders, and moneylenders alike. When you sign a loan agreement with a licensed moneylender, you are given important legal protection against abuse by the lender.
So, before you enter into any loan agreement or finalize a company from the list of licensed money lender, you need to be better equipped to deal with any situation.
Here’s everything you need to know about before approaching a loan.
How to Find Out if a Moneylender is Licensed?
One way to know if a moneylender is licensed is to ask for official accreditation from one of these agencies:
- The Office of Financial Council
- Ministry of Law
- Monetary Authority of Singapore
- The Association of Banks in Singapore
Any unlicensed moneylender will not have such accreditation. This means you can trust that it is safe to do business with accredited ones.
This is a statute that provides clear rules for money lending to protect consumers from dishonest loan practices. In most cases, it is illegal for a moneylender to charge interest rates exceeding 4% per month from its borrowers. Failure to comply may result in prosecution by law. According to Moneylenders Act, you may need to pay another fee as well, such as a loan fee which shouldn’t go beyond 10% of the principal amount. Not to mention the repayment fee is a maximum of $60 every month.
Licensed Moneylender Policies
The government set out certain policies to regulate licensed moneylenders, including maximum interest rates and maximum loan period. These laws also govern how much a licensed money lender can lend a borrower, how long, and what interest rate. The law is clear in terms of what constitutes an allowable contract between a licensed money lender and borrower, with restrictions on penalties for late payments, prepayment fees, or cancellation fees. Below are a few rules you should read thoroughly before scouring the list of licensed money lender:
- The interest rate can’t be more than 4% every month.
- The late interest rate may not exceed 4% a month.
- Moneylenders can’t charge a monthly repayment fee of more than 60%.
- The administrative fee can’t be above 10% of the principal amount.
The Amount You Can Borrow
First, you’ll need to know how much you can borrow from a licensed moneylender. Below is a breakdown:
- Secured Loans
For such loan types, there’s no upper limit. You can borrow as much as your moneylender can provide.
- Unsecured Loans
A Singapore citizen earning $20,000 per month can borrow as much as $3,000 of his annual income combining all the moneylenders. One earning over $20,000 annually can borrow money six times of the monthly earnings.
What if You Can’t Pay the Loan?
Now, suppose you have finalized the list of licensed money lender and borrowed money from them. However, you are unable to repay the loan. What can you do in such a scenario? Most moneylenders give their customers a grace period of between 5 and 15 days after repayment is due before using them. If you can’t pay your loan on time, contact your licensed moneylender as soon as possible to ask for an extension or arrange a new repayment schedule. You can do so by visiting one of their branches or by calling them.
Complaints Against Licensed Moneylenders
If you have complaints about any moneylender in Singapore, you should start by contacting them to discuss your complaint. If they cannot resolve your complaint or if you are unhappy with their response, you can complain with the Registry of Moneylender.
The registry handles all written complaints from members of the public against licensed moneylenders. The registry will try to resolve your complaint on behalf of all parties concerned, and it may also take disciplinary action against that moneylender for any misconduct.
The Bottom Line
If you are thinking of getting a loan from a licensed moneylender, you might want to brush up on your understanding of how they work. If you aren’t aware of what is legally allowed or break their terms and conditions, things can get quite complicated for you.