Know Your Rights– Guide to Loaning from Licensed Moneylenders in Singapore
What should you do before approaching a lender? Read The Money Lenders Act in Singapore!
Please note that you are lawfully obligated to meet any loan contracts you go into with a licensed money lender. Always bear in mind to guarantee you can meet your loan obligation (legal and financial smart).
The laws in Singapore needs all certified money lenders to discuss the terms of loans to you in a language you comprehend and are needed by law to supply you with a copy of the agreement. Do ensure you comprehend all terms of the agreement including the payment terms, rate of interest and all the suitable fees included.
It is smart to search for the very best possible deal you can if you need a loan.
How much can you obtain?
For guaranteed loans, there is no limitation to the loan you can secure. For unsecured loans, the amount you can obtain depends on your annual income:
You can obtain up to $3,000, if your yearly income is less than $20,000;
You can obtain as much as 2 months’ earnings, if your annual income is $20,000 or more but less than $30,000;
You can obtain up to 4 months’ income, if your annual earnings is $30,000 or more, however, less than $120,000; and
You can obtain up any amount if your annual income is $120,000 or more.
Rate of interest That Moneylenders can charge
For loans contracted in between 1 June 2012 and 30 September 2015, lenders are needed to divulge and calculate to you the Effective Interest Rate of the loan, prior to the loan is granted. If your annual income is less than $30,000, the interest rate which moneylenders can charge, for both protected and unsecured loans, is capped at:
13 percent Effective Interest Rate for safe loans; and
20 percent Effective Interest Rate for unsecured loans.
The Effective Interest Rate takes into account the compounding impact of the frequency of installments over a one-year period. This indicates that Effective Interest Rate much better reflects the real expense of borrowing over a 1-year duration. See https://www.mlaw.gov.sg/content/rom to discover more about how the Effective Interest Rate is calculated from 1 June 2012.
The caps above are not appropriate and the interest rate is to be concurred upon in between the moneylender and the borrower if your yearly earnings are $30,000 or more.
With result from 1 October 2015, the optimum rate of interest lenders can charge is 4% per month. This cap applies despite the customer’s earnings and whether the loan is an unsecured or secured one. If a customer fails to repay the loan on time, the optimum rate of late interest a moneylender can charge is 4% per month for each month the loan is paid back late.
The computation of interest charged on the loan must be based on the amount of primary staying after deducting from the original principal the total payments made by or on behalf of the customer which are appropriated to the principal. To illustrate, if X takes a loan of $10,000, and X has actually paid back $4,000, only the staying $6,000 can be taken into account for the calculation of interest.
The late interest can just be charged on a quantity that is repaid late. The moneylender can not charge on amounts that are impressive but not yet due to being paid back. [To show, if X takes a loan of $10,000, and fails to spend for the first installment of $2,000, the moneylender might charge the late interest on $2,000 but not on the staying $8,000 as it is not due yet.]
How do I know if a lender is accredited?
Never ever borrow from unlicensed moneylenders. Ensure and validate that a moneylender is licensed by checking this site by Ministry of Law Singapore. Secure your rights by obtaining only from licensed money lenders.
When you are securing a loan from a money lender, please do take note of the following:
You should not provide your SingPass username and password.
They ought to not use abusive language or threaten you in any manner
You must never sign a blank document or insufficient loan contract.
They have no rights to maintain your NRIC or any individual files.
You should not accept a loan without understanding the terms of the loan agreement or if you did not receive a copy of the loan agreement.
No parts of the primary loan need to be kept for any factor.
You need to decline a loan over the phone, e-mail or SMS without going through the appropriate procedures in applying for a loan a required by law.
If you experience any of the practice( s) above, please report the moneylender to the Registry of Moneylenders.
What are the costs that lenders can charge?
For loans contracted in between 1 June 2012 and 30 September 2015, moneylenders are only permitted to charge 6 types of charges:
For each occasion of late repayment of principal or interest;
For each occasion the regards to the loan agreement are varied at your request;
For each dishonored cheque provided by you;
For each not successful GIRO deduction from a checking account, as payment to the lender;
For early redemption of the loan or early termination of the agreement; and
Legal expenses sustained for the recovery of the loan.
Any other costs are not permitted and are for this reason not enforceable by the moneylender.
With effect from 1 October 2015, all lenders are just allowed to impose the following costs and charges.
a charge not exceeding $60 for each month of late repayment;
When a loan is granted; and, a fee not exceeding 10% of the principal of the loan
legal costs ordered by the court for a successful claim by the lender for the recovery of the loan.
The overall charges imposed by a moneylender on any loan, including interest, late interest, in advance administrative and late fee likewise can not exceed an amount equivalent to the principal of the loan. [To show, if X takes a loan of $10,000, then the interest, late interest, 10% administrative cost and regular monthly $60 late charges can not go beyond $10,000.]
If a customer fails to payback the loan on time, the maximum rate of late interest a moneylender can charge is 4% per month for each month the loan is paid back late.
The calculation of interest charged on the loan must be based on the quantity of primary remaining after deducting from the original principal the overall payments made by or on behalf of the debtor which are appropriated to the principal. To show, if X takes a loan of $10,000, and stops working to pay for the very first installment of $2,000, the moneylender might charge the late interest on $2,000 but not on the staying $8,000 as it is not due. The overall charges imposed by a lender on any loan, consisting of interest, late interest, upfront administrative and late cost also can not go beyond an amount equivalent to the principal of the loan. To highlight, if X takes a loan of $10,000, then the interest, late interest, 10% administrative fee and monthly $60 late fees can not surpass $10,000.