Is Taking a Loan From a Licensed Money Lender Safe?

While taking loans is seen as a financial safety net, there remains a strong stigma surrounding it, especially when borrowing money from licensed moneylenders. Frequently misunderstood, they are commonly confused with unlicensed loan sharks despite that not being the case. In reality, licensed moneylenders actually operate under strict regulations in order to ensure safe and transparent lending practices.

In this guide, we debunk the myths and misconceptions regarding licensed moneylenders in Singapore and explain why borrowing from them can be a safe and viable money option.
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Introduction to Licensed Moneylenders in Singapore

In Singapore, there are moments when customers need quick access to liquid cash for emergencies or urgent purchases, but bank loans take too long to be processed and approved due to strict eligibility requirements and extensive paperwork. During such situations, a licensed money lender in Singapore acts as a faster alternative, providing faster cash loan options. 


Nonetheless, it’s still pertinent to understand the terms, loan tenures, interest rates, lender reputation, repayment obligations, and most importantly, your financial status before committing to one.

Understanding the Role of a Licensed Moneylender

While traditional bank loans exist, licensed moneylenders in Singapore exist as an alternative financing option. Essentially, licensed moneylenders cater to individuals who:


  • Unable to meet bank loan eligibility due to low credit scores, irregular income, or other reasons
  • Need urgent cash but want to bypass long bank approval processes
  • Require smaller, shorter term loans that banks may not offer


Quick loans can differ across various types like personal loans, business loans, or fast cash loans for emergency purposes such as medical bills.


Besides that, licensed moneylenders provide structured repayment plans under a clear, legally binding loan contract. This contract must transparently outline important components like:


  • Interest rates,
  • Loan tenure,
  • Total repayment amount,
  • Instalment amounts,
  • Late payment fees, and 
  • Consequences of defaulting.


Additionally, licensed moneylenders are strictly regulated by the Ministry of Law to adhere to fair lending practices. These practices include guidelines like fixed interest rate caps (maximum 4% per month), loan amount limits based on annual income, and clear loan terms to avoid misleading borrowers.


Aggressive debt collection tactics like harassment, intimidation, physical harm, and property vandalism are also strictly prohibited and can lead to license revocation and/or legal actions. Instead, licensed moneylenders must follow ethical debt collection methods like sending reminder notices, charging late payment fees within legal limits, and taking legal action (if needed) through the Small Claims Tribunal or courts.

Key Factors to Consider: Is Taking a Loan From a Licensed Moneylender Safe and Reliable?

In Singapore, the Moneylenders Act regulates the activities of licensed moneylenders, ensuring the security of borrowers to prevent exploitation. The best licensed moneylenders in Singapore ideally operate within these guidelines, following strict rules on interest rates, borrowing limits, and ethical debt collection practices.

Here are some financial factors governing how licensed moneylenders operate in Singapore:

Licensing Requirements

To be legitimised, moneylenders must be registered and licensed under the Registry of Moneylenders. Failure to do so will incur heavy penalties.

Cap on Interest Rates

Licensed moneylenders cannot charge more than 4% interest per month, regardless of borrower’s income level. Any interest imposed on late payments is also capped at 4% interest per month on the overdue amount.

Limits on Borrowing/Loan Amount

For secured loans, there is no established loan cap. The borrower is free to request for any amount of loan subject to the moneylender’s approval. Conversely, unsecured loans have more restrictions according to your annual income level.

For Singaporeans and PRs:
  • Those earning less than S$20,000 per year can borrow a maximum of S$3,000 from all licensed moneylenders.
  • If earning more than S$20,000 per year, the borrowing limit increases to up to 6 times their monthly income.

    • Meanwhile, stricter criteria are imposed on foreigners:
  • If earning less than S$10,000 per year can only borrow up to S$500.
  • If earning at least S$10,000 but less than S$20,000 per year can borrow up to S$3,000.
  • If earning more than S$20,000 per year can borrow up to 6 times their monthly income.


    • Annual income level Maximum loan amount
    Singaporeans & PRs Foreigners
    < S$10,000 S$3,000 S$500
    S$10,000 ≀ x < S$20,000 S$3,000
    ≄ S$20,000 Up to 6x monthly income

    Fees and Charges

    The total fees charged (excluding interest) cannot exceed the borrower’s principal loan amount. These include:

  • Late payment fee: S$60 per month
  • Administrative / Processing fee:Up to 10% of principal loan amount granted
  • Legal costs: Only those ordered by the court for a successful claim by moneylender for loan recovery are permitted


    • For clarity, if a borrower takes up a loan of S$10,000, his/her interest, late interest, admin fee, and S$60 monthly late fee cannot exceed S$10,000.

    Advertising Restrictions

    Licensed moneylenders can only advertise through a few mediums: their official business premises, their registered website, and consumer directories like Yellow Pages. Advertising through unauthorised channels like social media ads, SMS, and cold calls are strictly prohibited.

    Therefore, online ads by licensed money lenders are carefully monitored to maintain transparency and trust.
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    Want to Find Your Best Cash Match?

    Confused about the different types of personal loans in Singapore? You’re not alone—we were too before diving into this guide. 😉 Whether you need fast cash or a long-term solution, we’ve broken it down so you can find the best fit for your needs!
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    Benefits of Borrowing From a Licensed Moneylender

    Comparison: Licensed Moneylenders vs Traditional Bank Loans

    Licensed Moneylenders Bank Loans
    Eligibility criteria More lenient approval—low credit scores and irregular income

    Lower annual income requirement of S$10,000 (foreigners) and S$20,000 (Singaporeans/PRs)    		 Stricter eligibility—needs good credit score and stable annual income between S$20,000 to S$30,000
    Interest rates Higher interest rates at roughly 48% p.a., otherwise capped at 4% per month Lower interest rates, capped between 3% to 8% p.a.
    Loan amount limits Lower loan amounts depending on annual income (e.g. up to 6X monthly income for those earning ≄ S$20,000) Higher loan amounts (e.g. up to 10X monthly income for those earning > S$30,000)
    Approval speed & processes Less paperwork & fast approval (usually within 24 hours) More stringent document verification (e.g. CPF contributions, payslips, etc.) and slower approval
    Loan tenure Shorter repayment periods (~6 to 24 months) Longer repayment periods (~1 to 7 years)
    Fees & charges Higher fees (Up to 10%) Lower fees (~1% to 3%)
    Credit score impact No impact unless defaulted Can either negatively or positively affect credit score (good for future financial applications)
    Borrower protection Regulated under Moneylenders Act More robust protection under MAS

    Fast Approval and Minimal Paperwork

    Loan applications made to licensed moneylenders in Singapore can be approved within hours, as compared to banks with a waiting time of a few days to weeks. Fewer legal documents are also required for verification where basic income proof and ID verification will suffice.

    Easier Eligibility

    Applying for loans from legal money lenders present a lower barrier to entry due to more flexible eligibility requirements. Individuals with lower credit scores or irregular income (like freelancers) can apply with relative ease.

    In contrast, bank loans typically demand applicants to have a good credit history, stable income, and secure employment. As a result, bank loan approvals are more challenging for those from non-traditional financial backgrounds.

    Flexible Borrowing Options

    Loans from licensed moneylenders are available in smaller minimum amounts, and are based on your annual income. These flexible customisations make loans more accessible to lower-income borrowers.

    Cap on Interest Rates

    Although loans from legal money lenders have higher interest rates per annum, at least their interest rates are capped at 4% per month. This prevents moneylenders from unfairly charging borrowers excessively, maintaining fair interest rates and loan terms. Contracts should also clearly illustrate repayment schedules.

    No Impact on Credit Score

    Unless you default on the loan, obtaining a loan from a licensed moneylender in Singapore will not adversely affect your credit score.

    Moneylenders vs Banks: Which Loan Wins? đŸ€”

    While licensed moneylenders offer quick cash, it may still be worth your two cents (pun intended) to consider your traditional bank loan options while you're at it.

    Check out other best personal loans in Singapore with low interest rates and fast approval times in Singapore!
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    About the Author

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    Emma Lam

    Once a clueless Z-llennial herself, Emma understands (and relates) all too well the struggle of juggling savings, credit cards, and everything in between. Having since garnered over 3 years of writing experience in the personal finance space, she now helps others sieve through the noise and break down money matters into clear, bite-sized insights.
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