Before approaching a moneylender, consider other alternatives, such as the various financial assistance schemes offered by various Government agencies. You may contact the agencies to find out more about their schemes.
You are legally obliged to fulfil any loan contract you enter into with a licensed moneylender.
Consider whether you are able to abide by the contractual terms, bearing in mind your income and financial obligations. Borrow only what you need and are able to repay. Be mindful that if you are unable to meet the contractual terms, the late payment fees and interest payment will be a financial strain not just on yourself but also on your family.
The law requires moneylenders to explain the terms of a loan to you in a language you understand and to provide you with a copy of the loan contract. Make sure you fully understand the terms of the contract, in particular, the repayment schedule, the interest rate charged and the fees applicable.
Consider carefully before agreeing to any contractual term which allows a moneylender to lodge a caveat on the sale proceeds of your real estate property upon default of the loan repayment. When a caveat is lodged against your property, you will not be able to sell it without first repaying the moneylender in full. If the repayment is taken from the net proceeds from the sale of the property, it can wipe out all or a substantial portion of the proceeds.
You should shop around different moneylenders for the most favourable terms. You should not rush into and commit yourself to a loan until you are satisfied with the terms and conditions.
For secured loans, you can obtain a loan of any amount. For unsecured loans, you can obtain:
- Up to $3,000, if your annual income is less than $20,000;
- Up to 2 months’ income, if your annual income is $20,000 or more but less than $30,000;
- Up to 4 months’ income, if your annual income is $30,000 or more but less than $120,000; and
- Any amount, if your annual income is $120,000 or more.
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% per month. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one. If a borrower fails to repay the loan on time, the maximum rate of late interest a moneylender can charge is 4% per month for each month the loan is repaid late.
The computation of interest charged on the loan must be based on the amount of principal remaining after deducting from the original principal the total payments made by or on behalf of the borrower which are appropriated to principal. [To illustrate, if X takes a loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken into account for the computation of interest.]
With effect from 1 October 2015, all moneylenders are only permitted to impose the following charges and expenses:
- a fee not exceeding $60 for each month of late repayment;
- a fee not exceeding 10% of the principal of the loan when a loan is granted; and
- legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan.The total charges imposed by a moneylender on any loan, consisting of interest, late interest, upfront administrative and late fee also cannot exceed an amount equivalent to the principal of the loan. [To illustrate, if X takes a loan of $10,000, then the interest, late interest, 10% administrative fee and monthly $60 late fees cannot exceed $10,000.]
Do not borrow from unlicensed moneylenders. Verify that a moneylender is licensed by checking the list of licensed moneylenders at https://www.mlaw.gov.sg/content/rom. Notwithstanding that the moneylenders are licensed, be mindful if they:
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- Use abusive language, or behave in a threatening manner towards you.
- Ask for your SingPass user ID and/or password.
- Retain your NRIC card or any other personal ID documents (e.g. driver’s licence, passport, work permit, employment pass or ATM card).
- Ask you to sign on a blank or incomplete Note of Contract for the loan.
- Grant you a loan without giving you a copy of the Note of contract for the loan and/or without properly explaining to you all the terms and conditions.
- Grant you a loan without exercising due diligence (e.g. approving a loan over the phone, SMS or email before even receiving your loan application form and supporting documents, such as the income tax assessment and payslips).
- Withhold any part of your principal loan amount for any reason.
- Such practices are not acceptable. If you encounter them, you should report the moneylender to the Registry of Moneylenders, with information such as the moneylender’s business name, licence and contact numbers. Please see Question 10 for more details.