In life, we sometimes encounter sticky situations–ones that need an extra boost in the form of dollars and cents. It may be an upcoming wedding, a newborn on the way, or even healthcare emergencies that leave us blind-sided.

Some of us may turn to banks, others to family and friends for help. But not everyone is as lucky to not be turned away. That is where licensed money lenders can play a part.

Borrowing from a licensed money lender in Singapore is safe, but you need to make sure the money lender you’re getting the loan from is legal. It is a common misconception that getting a loan from a licensed money lender is akin to borrowing from a loan shark, but the truth could not be further. Loan sharks, who claim to be “licensed” money lenders are in fact not legal entities.

In this article, we’ll share what to look out for when borrowing from a licensed money lender in Singapore.

What are licensed money lenders?

Licensed money lenders in Singapore come under the regulation of the Ministry of Law. Firms that wish to provide financial loans are required to obtain a license from the ministry and have it regularly renewed to operate.

There are several rules which licensed money lenders to have to abide by, such as keeping to a stipulated ceiling on interest fees and administrative fees. These lenders are also barred from advertising their services on mainstream media, both print and online.

Above all, licensed money lenders are prohibited from using harassment tactics in any manner.

What are illegal money lenders?

Illegal money lenders, also known as loan sharks, are unlicensed lenders. They sometimes claim to be licensed money lenders but are actually not registered under the Ministry of Law to provide loan services.

These illegal lenders often resort to soliciting business through SMS or WhatsApp and coerce their victims into repaying via intimidation.

Things to do before getting a loan from a money lender in Singapore

Check the Ministry of Law’s registry. Do confirm first that the money lender is indeed licensed before approaching any of them.

Get familiar with the stipulated cap on interest rates and fees. Licensed money lenders in Singapore are allowed to charge a maximum of:

4% interest rate per month. 10% in administrative fees upon approving the loan.

On the occasion of a default, lenders can levy:

Late interest fees of up to 4% per month. Late repayment fees of up to S$60 per month. Full legal costs were ordered by the court.

The total charges imposed by a moneylender on any loan cannot exceed the loan principal. This includes interest, late interest, administrative fee, and late fee.

Ensure the money lender has a physical office. All licensed money lenders in Singapore should conduct their business only on the premises of a registered office. Take note of lenders who insist on meeting in public spaces when procuring a loan offer–these are most likely to be illegal lenders.

Pay attention to employees’ behavior. Always meet your loan officer in person, which lets you understand and see if the company you are borrowing from makes you feel safe and at ease. They should go over the entire contract with you and explain every single term clearly.

Look for someone with professional and polite conduct because chances are, having someone pay close attention to your needs will make the negotiation process much smoother. A thorough loan officer is also a telltale of a good business process, unlike illegal money lenders who are often in a rush to move the loan through.

Search online for reviews and testimonials. Positive feedback from people who’ve used the service provides valuable insight into the company’s reliability.

What would happen if I cannot repay my loan?

If you’re worried about the endless phone calls, and the physical and mental harassment that loan sharks often use, rest assured that a licensed money lender will, under no circumstances, be allowed to exert such means. In the unlikely event that it does happen, do not hesitate to call the police.

However, even though licensed money lenders in Singapore are not allowed to cause any property damage or other acts that would constitute harassment, they are permitted to mail or email you a letter of demand. They may also visit your home or office to issue the letter of demand and are permitted to take legal action against you if you do not repay your loan on time.