Licensed Moneylenders are a good alternative to large and structured financial institutions like banks. They offer many advantages, such as less stringent criteria, a better risk appetite and faster approvals. If you’re considering a moneylender for your personal financing needs, there are several things you should clarify before signing a loan agreement.
In Singapore, licensed moneylenders are safe to borrow from, because they are strictly regulated by the Ministry of Law. Despite that, it’s still important to ensure you have all the necessary facts to make an informed decision.
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Before we dive into some of the essential questions to ask your moneylender in Singapore, let’s look at several important things you need to know about them.
While many licensed moneylenders operate legally in Singapore, unlicensed lenders and scammers still pose a risk. Understanding how to identify a legitimate lender can help protect you from fraud.
1. Check the License
Always confirm that the moneylender is licensed by visiting the Ministry of Law’s website. If the lender is not listed, you should not proceed.
2. Look Up Reviews
Search online for customer reviews to understand the lender’s reputation. Frequent complaints or negative experiences may indicate unethical or illegal practices.
3. Spot the Red Flags
Legitimate lenders do not advertise through spammy messages or personal calls. They also do not ask for upfront payments before giving you a loan. Be wary if you are asked for personal documents too early in the process.
4. Professional Behaviour Matters
Licensed lenders must act respectfully. If a lender is rude, pushy, or threatening, they are likely operating illegally.
5. Stay Safe
Always verify, research, and trust your instincts. A few quick checks can protect you from loan scams.
Once you are certain that moneylender is trustworthy, you can begin your quest for financing. Here are some essential questions to ask them:
When communicating with a potential moneylender, this should be one of the first questions to ask. By law in Singapore, moneylenders are allowed to charge a maximum interest rate of 4% per month, calculated on the monthly outstanding balance. This roughly translates to a nominal annual rate of up to 48% per year.
However, borrowers can expect their interest rates to be lower than this, depending on their income, credit rating, perceived risks and other factors. In short, you can expect favourable interest rates if your creditworthiness is better.
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It’s also good to know how your interests will be calculated, whether at a flat or reducing balance methods as this will then influence the total interest costs you will be paying.
It is important for a borrower to understand the various fees and penalties associated with a loan. By law in Singapore, a licensed moneylender may charge an administrative fee of up to 10% of the principal loan amount, a late repayment fee of up to $60 per month, and late interest of up to 4% per month, which is calculated only on the overdue amount.
In practice, actual charges often fall below these maximum limits. Understanding these caps can help you make better comparisons between licensed moneylenders, as shopping around and comparing offers is one of the most effective ways to reduce your overall borrowing costs.
Most moneylenders will expect you to make monthly repayments, but it helps to ask nevertheless, just in case their conditions are different. Knowing the repayment cycle will help you plan your finances as well, so that you know how often and at which point in the month you’ll have to pay.
You can also ask your moneylender to explain and calculate your monthly repayments, with all the costs factored in, preferably with different tenors so you can compare. These numbers will help you determine which personal loan offer you can afford and which one meets your needs.
All licensed moneylenders in Singapore are required to report borrowers’ loan information to the Moneylenders Credit Bureau (MLCB), which is regulated by the Ministry of Law. The MLCB record helps moneylenders assess your borrowing history and repayment behaviour.
While the MLCB is separate from the banks’ Credit Bureau Singapore (CBS) system, maintaining a good repayment record with licensed moneylenders can still strengthen your reputation as a responsible borrower.
Conversely, missing payments or defaulting on loans will be reflected in your MLCB report and may reduce your chances of getting future financing from licensed moneylenders.
Always review the loan agreement carefully before committing to it. As a borrower, this step is especially important because it directly affects your personal finances. Make sure you fully understand the terms, repayment schedule, interest rates, and any fees involved, and clarify any points that are unclear.
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Only sign your loan agreement if you’re confident that you understand all aspects of the agreement before putting your name to it. Do not feel pressured to rush into signing the agreement whilst you have questions. Only sign the loan agreement once you are confident that you understand every part of it.
A licensed moneylender is required by law to provide and explain the written contract before you agree to the loan, so never feel pressured to rush into signing if you still have questions.
Licensed moneylenders, in general, are trustworthy and offer high quality services to their clients. As such, you would generally face no problems posing questions that relate to your personal loan. Finding a suitable money lender on your own may take a lot of time and resources.
If you’re struggling to find the perfect loan, Lendingpot can help. Sign up just once with your SingPass account and enjoy access to multiple moneylenders who offer customised financing that you can compare and choose from.
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