Feeling unsure about the interest rates money lenders can charge you? This is a valid concern since a lot of people find themselves in a situation where they need to take out a loan. Thankfully, Singaporeans are so lucky because the government set up very clear regulations which govern how much interest licensed money lenders can charge.

Knowing and understanding what is the interest rate for moneylenders will surely protect yourself from unscrupulous ah longs who might try to take advantage of your urgent need for money.

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What is the Interest Rate for Moneylenders?

In the Lion City, licensed money lenders are regulated by the Ministry of Law. These businesses must follow strict rules about interest rates. According to the Moneylenders Act, the highest interest rate a licensed money lender can charge is 4% per month regardless of how much the borrower is earning or whether or not the loan is secured or unsecured.

This limit was put into effect on 1 October 2015 to protect borrowers from excessively high interest rates that could make way for even more financial stress.

That said, it’s worth noting that the 4% per month limit only applies to the interest rate. It is not the same as the Effective Interest Rate (EIR) which includes the fees and charges that go with the loan.

However, do not worry because licensed money lenders are required by the government to disclose the EIR to borrowers and give them a better picture of the loan’s total cost. Remember that some loans may have lower advertised interest rates but they might come with shorter loan tenures and very expensive monthly installments. On the other hand, you may also find loans with with slightly higher interest rates but the tenures are better especially if you have a tighter monthly budget.

Fees Charged By Money Lenders in Singapore

Money lenders can charge an administrative fee of up to 10% of the loan principal when the loan is granted. For example, Crawfort, a licensed money lender in Singapore, charges a 10% admin fee which means that if you borrow $1,000, the admin fee would be $100. This will be collected upon disbursement so there’s no need to shell out an extra amount of cash before you even get granted a personal loan.

If you fail to make your monthly payment on time, money lenders can charge a late payment fee of up to $60 for each month.

As a borrower, you must understand that the total charges imposed by the establishment cannot exceed the principal loan amount. If so, what’s the point of getting the loan anyway?

Factors to Consider When Taking Out a Loan from a Licensed Money Lender

Loan Amount and Purpose

Assess how much money you actually need to borrow. After this, answer for what purpose the loan is for. Licensed money lenders can provide loans for so many purposes but you need to be clear about what you realistically need and can afford to pay back every month.

Interest Rates

As mentioned above, licensed money lenders in Singapore can charge up to a maximum of 4% interest per month so take time in comparing the interest rates from different lenders to find the best offer for you.

Loan Tenure

Knowing what is the interest rate for moneylenders is not enough. You must also assess the loan tenure. It’s normal for money lenders to have a shorter loan tenure compared to banks so expect this to be up to 12 months.

Your Repayment Ability

Do you have any existing debts and financial obligations that may prevent you from paying back the loan? Or maybe your income isn’t enough? Make sure to think about these things.

Lender’s Credibility

It is the duty of borrowers to verify that they are dealing with a licensed money lender. You can do this by checking the complete list of licensed money lenders on the Ministry of Law’s website. Protect yourself from ah longs.

Loan Terms and Conditions

Finally, read and understand the loan contract terms. Take note of everything – from the schedule of monthly payment, interest rates, fees and charges, and even any penalty clauses. All of these must be explained to you in a language you understand.

How to Know if a Money Lender is Legit or Not

Verify the money lender’s contact information

Licensed money lenders must have a registered address and use a landline phone number that is registered with the Ministry of Law.

Be cautious of unsolicited loan offers

Did you know that real money lenders are not allowed to solicit loans via text messages, phone calls, or social media platforms? If you get any unsolicited loan offers through these channels, that’s a red flag.

Look for signs of professionalism

A real licensed money lender will have a professional website. They will also have a physical office, and most importantly, staff who can answer your questions. They will not use high-pressure tactics or make unrealistic promises.

Always trust your instincts – if something feels off or seems too good to be true, look for another lender.

If you think that a money lender is unlicensed, report them to the Registry of Moneylenders or the police immediately to protect yourself and other people. Vigilance is key.

Closing Thoughts

Taking time to understand what is the interest rate for moneylenders is something that shouldn’t be skipped by all borrowers.

For those who need a reliable and user-friendly platform to compare loan offers from licensed money lenders in Singapore, LenderSG can help. LenderSG helps Singaporeans find the best loans for their needs by connecting them with licensed money lenders. Apply for a loan here.

Always borrow responsibly and within your means. This will help you achieve financial stability.

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