What's the difference between loan sharks and licensed moneylenders?

PHOTO: The Straits Times

Licensed moneylenders in Singapore aren’t the same as loan sharks. They are regulated by the Registry of Moneylenders and aren’t allowed to do many things that loan sharks do.

Did you know moneylenders in Singapore aren’t all equal? There are stark differences between loan sharks and licensed moneylenders even though both offer loans to those seeking them.

Those blood-red O$P$ messages spray-painted onto walls? That’s the work of loan sharks and their runners, not licensed moneylenders. 

Learn how to differentiate between loan sharks and licensed moneylenders, and stay on the right side of the law even if you find yourself in need of cash urgently but aren’t sure what your options are.

Loan sharks Licensed moneylenders  
Legality Illegal Legal
Spamming of unsolicited messages Yes No
Disburse loans remotely Yes No
Interest rate per month Astronomical Capped at four per cent
Maximum loan amount Unknown but presumably any huge sum you want Six times borrower’s monthly income if they make at least $20,000 annually

Loan sharks

We have loan sharks — the ruthless, unlicensed ‘ah longs’ who operate illegally and resort to crippling harassment methods like naming and shaming debtors publicly on the internet, splashing paint on debtors’ doors, vandalising debtors’ properties, pouring industrial adhesive into debtors’ locks, posing as stay-home-notice enforcers and more. 

Here are the key things you need to know about loan sharks in Singapore: 

  • Masquerade as licensed moneylenders 
  • Send annoying unsolicited spam messages through SMS, WhatsApp, flyers, emails, and social media platforms, and make cold calls 
  • Astronomical interest rates — think: sky-high weekly interest rate of 50 per cent that translates to a daily interest rate of about 7.1per cent  
  • Ask for loan processing and/or admin fee before loan approval
  • Unlikely to have a business address
  • May approve and disburse loan without any face-to-face meeting at all 
  • May grant borrowers loan without assessing borrowers’ financial standing and income 
  • Offer no loan contract, incomplete contract or no clear explanation of loan terms 
  • Resort to all sorts of harassment methods and even violence to get debtors to pay up
  • Chase debtors, debtors’ guarantors and even neighbours

Loan sharks and their runners are certainly intimidating. However, that doesn’t mean we can’t help the police in their ongoing effort to clamp down on illegal unlicensed money-lending activities in Singapore. Unlicensed moneylending is still a rampant problem in Singapore. 

The police are appealing for everyone’s help to report all loansharking activities and suspicious individuals in our neighbourhood. The more detailed the descriptions, the better. Call the police at 999 or the X-Ah Long hotline at 1800-924-5664.

ALSO READ: 'I've never borrowed money from loan sharks': Over 20 delivery riders turn up at residents' doors in suspected harassment

Licensed moneylenders

Licensed moneylenders are registered and regulated by the Registry of Moneylenders that’s parked under the Ministry of Law. They are legal moneylenders available to borrowers. 

If you are considering getting help from either loan sharks or licensed moneylenders, it is obvious which one is the wiser choice. 

Here are the key things you need to know about licensed moneylenders in Singapore: 

  • Only allowed to advertise via their own websites, at their business premises, or in business or consumer directories — they cannot offer their services through social media platforms, text messages, WhatsApp, phone calls, etc 
  • Maximum interest rate is capped at four per cent per month 
  • Maximum amount a borrower can loan without collateral is 6X the borrower’s monthly income if he or she earns at least $20,000 annually (applicable to Singaporeans, PRs and foreigners)
  • Maximum late fee is capped at $60 for each month of late repayment
  • Maximum processing and/or admin fee is capped at 10 per cent of the loan principal at the point of granting loan — this is usually deducted from the principal loan amount disbursed to the borrower
  • Not allowed to get borrowers to make any payment to secure loan disbursement 
  • Not allowed to approve and disburse loans remotely — physical face-to-face verification of borrowers’ identity is required
  • Assessment of borrowers’ financial standing is required 
  • Go through loan terms in person after approving borrowers’ loan application 
  • Loan contract signing and loan collection must be done in person at the licensed moneylender’s registered business address 
  • Most licensed moneylenders offer flexible repayment schedules, so consider your income and financial obligations very carefully before committing to the loan contract 

As a savvy consumer, do check the list of licensed moneylenders with valid licenses in Singapore here before proceeding. Keep in mind the listings may change; any moneylender whose license has been suspended will be listed separately.  

Shop around different moneylenders to find the one with the most favourable terms that cater to your needs. Remember, borrowers are legally obliged to fulfil the loan contract they sign with a licensed moneylender. 

ALSO READ: 'We are really unlucky': Moneylender in Jurong robbed twice in 5 months

Seek legitimate help

Getting help from loan sharks is not the way to go even if you find yourself dealing with money woes. The implications for you and your family can be dire! 

While it may be difficult or even embarrassing to ask, try to get help from your loved ones and close friends first. Consider alternatives such as financial schemes offered by the various government agencies, too. 

Besides loans from licensed moneylenders, you can also consider personal loans and debt consolidation plans that banks offer if you qualify for such credit facilities. Although easier said than done, it is important to prioritise reducing your debt if you’re currently in debt! 

This article was first published in SingSaver.com.sg.