Due to the need to take loans to support the salaries that most Singaporeans earn, there has been an increase in the sources where you can go to take a loan. Among these are moneylenders. Moneylenders have always had a bad rap for being loan sharks and cheats, making people borrow from them without full disclosure of the terms and conditions of the loan, and then coming back to charge high-interest rates and even threatening the debtor. In October 2015, the Ministry of Law set down some rules and regulations that moneylenders had to follow if they wanted to remain in business.
- All moneylenders have to be licensed and registered with the Ministry before they will be considered legal and allowed to work.
- For both secured and unsecured loans, the interest rate is capped at 4%. If a loan is repaid late, an interest rate of 4% should be charged to the late payment.
- Moneylenders are required to explain the terms and conditions of the loan to the customer in a language that the customer understands, and should give the customer their own copy of the terms and conditions for personal perusal and documentation.
- No licensed moneylender will ask for your SingPass password. No moneylender is to keep your documents with them either.
- The only fee a moneylender can charge you is 10% of the principal loan amount (administrative fee).
- A moneylender shouldn’t charge you more than S$60 a month on late repayments.
- Moneylenders should issue receipts with the proper signatures/stamps anytime you make a repayment.
Despite all these regulations put in place to curb illegal money lending activity, illegal moneylenders still exist, and Singaporeans are still getting ripped off by them. One of the ways illegal moneylenders operate now is by stealing the advertisements of licensed moneylenders and then affixing their own contact details on them. You or anyone took a loan from a fake moneylender, call that number and ask for a loan. And that is how the problems begin.
How To Tell apart a Legal Moneylender From An Illegal One
An authorized moneylender will ask to see an NRIC card. They might also request for other personal identity paperwork. This will be used to help them verify your identity. Even so, they should not want to retain the documents. Some of these documents are passports, driving licenses, ATM cards, work permits, or employment passes.
When the lender needs them, they can use a copy of the ID card for their file. however, they should return to you the original after checks. A few unlicensed moneylenders will slyly ask that you provide them with the SingPass password and Username.
You are not obligated to offer such details to any lender. Even then, this request is highly unusual even as a requirement.
What Makes a Dependable Moneylender
Only seek to deal with a legal moneylender. This is because these lenders have fulfilled all requirements set by law. These regulations are aimed at protecting your interests. These moneylenders will possess all the licenses and permits that prove their compliance.
To ensure that your moneylender of choice is duly registered. Always demand that they show you their registration papers. Importantly check their license number against the one shown at the Moneylenders Registry website. Do not accept only a verbal confirmation.
How Singaporeans Get Themselves Into Sticky Financial Situations
Cases abound of Singaporeans who fall into the traps of loan sharks disguised as licensed moneylenders. For instance:
- A Singaporean, Mr Jack (not his real name), was really strapped for cash because his salary was not stable and he had a family to take care of. One day in January, he received an SMS offering him an instant cash loan without any fuss whatsoever (first red flag: no licensed moneylender will send YOU an SMS soliciting for business). He called the number but got no reply: two hours later, a Malaysian number called him, with the fluent, professional English speaker saying he was a staff of a registered moneylending institution. Jack said he needed a loan of S$2000, and the speaker asked for some documents to process the loan. Jack said he didn’t have those documents, but could he still get the loan? The speaker said yes (second red flag: you must provide documentation for them to see and verify before getting a loan), and asked for Jack’s SingPass login password (third red flag: no licensed moneylender needs your password for any reason). This password was used to find Jack’s residential address, and in a few hours, someone called him to meet on the void deck of the HDB flats where Jack lived. The visitor then called his boss, saying Jack was where he should be, and two hours later S$2000 was in his account. He didn’t have to present any documentation whatsoever. When he delayed in his repayments, things took a bad turn. He received threats on his life and that of his family, and, out of desperation, got more loans from moneylenders who had sent him SMSs (without meeting a single one of them). Jack’s debts ran up to S$12,000, and he didn’t know how he will pay all of that back.
This is just one instance; there are many of them, showing how anyone has taken loans from a fake moneylender, who isn’t actually licensed nor legal, rope themselves into financial problems with illegal moneylenders.
How A Loan Snowballs Into A Huge Debt
As in the example above, loans can metamorphose into huge debts when you keep borrowing to settle already existing debts, which all carry interest rates and a maximum time frame for repayment.
Also, when you borrow more than you earn per month/ per annum, it tends to be very difficult to repay loans with interest. Then you take another loan to settle the previous debt, and a different loan to settle that one, all with different interest rates, and that is how the debts just pile up till you don’t know what to do anymore.
What To Watch Out For In An Illegal Moneylender Pretending To Be A Legal One
- All licensed moneylenders use only three mediums to advertise their business: business or consumer directories (print or media); websites (owned by the moneylender); and ads placed in, on, or around the moneylender’s building/place of business. Any moneylender who approaches you with a flyer, or uses emails, SMSs, radio or TV ads is not a legal moneylender.
- A licensed moneylender will never send you an SMS soliciting for business.
- A legal moneylender will always ask for your documents, including your income tax assessment records. Once they have gone through them, they will be returned to you.
- A legal moneylender will always be courteous and patient, explaining every detail to you until certain that you understand. An illegal moneylender will definitely slip up on anyone of these points.
What To Do If You Really Need A Loan From Licensed Moneylender
The easiest thing to do is to check the Registry for the list of licensed moneylenders. Any moneylender not listed there is not licensed and, as such, not legal. Once you have checked the list, you can ask people around about the moneylenders you are considering: customer recommendations go a long way in helping you make the right decision.
It is easy to be duped into taken loans from fake licensed moneylenders in Singapore, and it is just as easy to avoid falling into that trap. To avoid running huge debts with high-interest rates, make sure you check the list of licensed moneylenders before approaching any moneylender for a loan.