Differences Between Borrowing From Banks And Licensed Moneylenders


Firstly is a licensed moneylender the same as an “ah long”?
Unlicensed moneylenders, or widely referred to as “ah long”, or loan sharks, are known for their sky high interest rates and harassment tactics. Think: Pig heads and vandalism.
Licensed moneylenders, on the other hand, are restricted by the amount they can lend, the fees they can charge, and the acceptable interest rate.
You can find a full list of licensed moneylenders on the Ministry of Law’s website here – https://rom.mlaw.gov.sg/information-for-borrowers/list-of-licensed-moneylenders-in-singapore./

As of September 2021, there are 156 licensed moneylenders in Singapore. This list changes, so before you take a loan, check the website again to make sure that your moneylender’s license is still valid.

Moneylenders Act and Rules Singapore
Did you know that if you borrow from unlicensed moneylenders, you are also breaking the law? Yes, as if there can be anything worse than being hounded at your own home and compromising the safety of your loved ones.
The Moneylenders Act & Rules protects borrowers by imposing a maximum interest and late interest rate, which licensed moneylenders must not exceed.
As unlicensed moneylenders are already illegal, most of them do not care about breaking the law when trying to recover their debts. For example, it is against the law to use threatening, abusive words, behaviour, writing and so on, or commit any acts that are likely to cause harm to the borrower or his family. But loan sharks (unlicensed moneylenders) may not care.
Licensed moneylenders also have to uphold certain responsibilities towards the borrower, such as maintaining the confidentiality of borrower information. You won’t have to worry about the moneylender putting up banners in your neighbourhood naming and shaming you for not repaying your debts.

Personal loans from a bank versus a licensed moneylender
Licensed money lenders tend to offer only small loans. They are typically small businesses that can’t afford to lose millions if a borrower defaults. With banks, you can get higher personal loans of at least $10,000.
The pros to borrowing from a licensed moneylender are that they’re faster and with fewer restrictions with regard to your citizenship or income. Usually, banks would only extend personal loans to Singaporeans or PRs with an income of a minimum of $30,000 or if you’re a foreigner with an income of more than $45,000

With licensed moneylenders, you can get the loan approved and released within minutes.
For this privileges, however, you usually end up paying higher interest rates than you would at a bank.
So don’t treat personal loans as a way to help you get through the last week of the month without having to eat instant noodles at every meal. It should be for a specific purpose, with a focused plan on repayment.

How much can you loan from a licensed moneylender?

If your annual income is less than $20,000, it’s almost impossible for you to find a bank that is willing to give you an unsecured loan, even with the best personal loan rates.

If you earn more than $20,000 annually, a licensed money lender can give you a loan of up to 6 months of your salary. That doesn’t mean they will, of course. Ultimately, it depends on how much they trust you to repay them back.
That makes money lenders ideal for small, urgent fees, such as getting your car fixed, paying a clinic, or paying for a budget plane ticket. Moneylenders are not an alternative for large business or renovation loans.

For more information, you may visit Moneylenders Credit Bureau at www.mlcb.com.sg

Written by Credit Bureau Singapore

Credit Bureau (Singapore) Pte Ltd (CBS) is Singapore's most comprehensive consumer credit bureau that has full-industry uploads from all retail banks and major financial institutions. It is a joint venture between The Association of Banks in Singapore (ABS) and Infocredit Holdings Pte Ltd.

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