When you’re experiencing a sudden cash-flow problem or looking to invest in a major life change such as renovating a house or getting married and starting a family, many people consider a bank loan.
But it’s not always easy or convenient to take out a bank loan in Singapore. Paperwork, and waiting and acceptance periods, have to be overcome as well as adhering to strict banking laws designed to ensure Singaporeans don’t borrow too much and become subject to financial difficulties.
Growth in bank loans in Singapore has slowed significantly in the last 12 months with an increase of just 0.5% predicted as 2019 dawned.
This was due to a slower housing market, a decelerating Chinese economy and the effect of tighter banking rules.
All of this has meant a surge in demand for the services of licensed moneylenders who are governed by law but who can be far more flexible in their lending criteria than the big commercial banks.
Licensed moneylenders tend to be less restrictive on the amount you can borrow, process funds more quickly and be more flexible in repayment terms.
Rules on loans from licensed moneylenders in Singapore
In Singapore, it is illegal to borrow from unauthorised moneylenders, known locally as ah longs.
Such loan sharks can employ unscrupulous tactics to recover money from borrowers.
Rules mean that licensed moneylenders in Singapore must have a physical address and a landline telephone number for their business.
They are also subject to restrictions on how they advertise their financial products, for example by only advertising on their own property or website and not sending misleading messages such as “instant cash” or “instant approval”.
To protect borrowers, there are certain maximum amounts that Singaporeans and foreigners can lend from a licensed moneylender depending on how much they earn.
Those earning less than $10,000 per annum are permitted to borrow up to $3,000 if they are a permanent resident of Singapore, whereas foreign nationals can only lend $500.
For annual incomes between $10,000 dollars and $20,000, both Singaporeans and foreigners can borrow a maximum of $3,000. Anyone earning above $20,000 is permitted to loan six times their monthly income.
Borrowers are further protected by the fact that licensed moneylenders can only charge a fee of no more than 10% of the principal loan amount and late payment fees are capped at $60.