Legalised money lenders in Singapore are important institutions in our local moneylending scene because they provide legal and fair loans to those who need fast cash but are unable to obtain these loans from traditional banks. As they are licensed by the Ministry of Law, such lenders are subject to a myriad of strict money lender rules aimed at protecting borrowers.
In 2018, new money lender rules were announced by the Ministry of Law that targeted borrowers. Let’s take a look at what these licensed money lenders’ new rules are and how they affect you.
What are the key money lender rules in Singapore under the Moneylenders Act?
For those who don’t already know, the Moneylenders Act details how licensed lenders should operate, function and behave. As a highly regulated industry, it is no surprise that the government has instituted money lender rules in Singapore for all licensed lenders to comply with.
Here’s a quick roundup of the key money lender rules in Singapore you should know about.
#1 Ceiling on interest rates and late interest rates chargeable
Licensed lenders do not have free reign when it comes to the interest rates they can charge their borrowers. No matter if the loan is secured or unsecured in nature, all lenders are only allowed to charge an interest rate or up to 4% each month. This ceiling applies to late interest rates, too.
#2 Permissible advertising methods
Lawful lenders can and will only advertise their services on three channels:
- Business directories or consumer directories
- The lenders’ website(s)
- Advertisement materials inside or on the outside of the lender’s business operation premises
All other advertising methods and channels are not legal. They are not allowed to solicit loans on their own free will.
#3 Proper screening of borrowers
Respected licensed lenders are expected to properly screen and verify their borrowers’ identities prior to taking the conversation further and finalising any loan packages.
As such, licensed lenders are mandated to meet their (potential) customers for an in-person, face-to-face verification at their registered business premises. This is a non-negotiable step all borrowers and lenders must go through.
#4 Provision of a copy of the signed loan contract
Licensed lenders are required to provide a copy of the signed loan contract to their borrowers as part of the loan dealing.
Make sure the loan contract contains crucial components such as the interest rate charged, applicable fees and charges, late interest rate, repayment schedule, instalment due dates, etc.
#5 Acceptable and reasonable recovery methods
No matter how serious the debt situation is for the borrower, licensed lenders are not allowed to resort to harassment, aggression, and humiliating tactics in order to press the borrower for payment.
Licensed lenders are only allowed to approach borrowers in good faith and send reminders and warning letters, before moving on to more drastic measures like taking the borrower to court.
Licensed money lenders’ new rules in Singapore
#1 Combined unsecured loan cap across all lenders at any one time
The Moneylenders (Amendment) Act 2018 and Moneylenders (Amendment) Rules 2018 aim to provide better protection for borrowers, according to the Ministry of Law.
As such, aggregate unsecured loan caps were set to control the amount that Singapore Citizens, Permanent Residents, and foreigners living in Singapore can borrow across all licensed lenders in Singapore at any one point in time.
Here’s what you need to know:
Singaporeans and Permanent Residents with a yearly income of less than S$20,000 may borrow a maximum of S$3,000 from all licensed lenders in Singapore added together.
Singaporeans and Permanent Residents with a yearly income of at least S$20,000 may borrow a maximum of six times their monthly income from all licensed lenders in Singapore added together.
For foreigners residing in Singapore, a lower maximum amount of S$500 is set for individuals whose income is lower than S$10,000 per year.
Foreigners whose annual income ranges from S$10,000 to S$19,999 can borrow a maximum of S$3,000. Having an annual income of at least S$20,000 lets the individual borrow a maximum of six times their monthly income from all licensed lenders in Singapore added together.
At a glance: how does this affect borrowers?
| Annual Income | Old Loan Limits (Before 2018) | New Loan Limits (2018 and beyond) |
| S$120,000 and above | No limit | 6x monthly income (aggregate) |
| S$30,000 – S$119,999.99 | 4x monthly income (per money lender) | 6x monthly income (aggregate) |
| S$20,000 – S$29,999.99 | 2x monthly income (per money lender) | 6x monthly income (aggregate) |
| S$10,000 – S$19,999.99 | S$3,000 (per money lender) | S$3,000 (aggregate) |
| Below S$10,000 (Singaporeans and Permanent Residents) | S$3,000 (per money lender) | S$3,000 (aggregate) |
| Below S$10,000 (Foreigners) | S$3,000 (per money lender) | S$500 (aggregate) |
#2 Mandatory checking of borrowers’ Loan Information Report prior to loan granting
All licensed lenders are obliged to obtain and check borrowers’ Loan Information Report from the Moneylenders Credit Bureau (MLCB) before any loan offer can be extended.
Lenders have to check that the borrower in question can get a loan as well as utilise information from the report to determine a suitable loan sum and/or interest rate for the borrower.
#3 Introduction of the self-exclusion framework
As its name suggests, the self-exclusion framework allows individuals who would like to ban themselves from applying for fuss-free, unsecured loans from licensed lenders to do just that. They can submit their application easily online.
Just so you know, lenders are not allowed to extend loans to such individuals. The self-exclusion framework prevents potential borrowers from borrowing and spiralling into a probable debt trap.
How do licensed money lenders’ new rules protect borrowers?
All in all, the licensed money lenders’ new rules were specially crafted to prevent borrowers from over-borrowing and over-stretching their finances. They help to keep would-be borrowers or existing borrowers in check.
Conclusion: licensed money lenders’ new rules safeguard borrowers’ interest
Licensed money lenders’ new rules may seem bothersome if you’re in urgent need of a relatively large sum of money to tide over rough times, but they’re designed to ultimately keep you from borrowing too much beyond your ability to repay comfortably.
MM Credit is one licensed lender you can consider if you need to take up a loan you can manage. We are an experienced loan company in Singapore that offers a variety of loans to suit any financial need.
You can easily apply for a loan on our website by filling out a simple contact form or speeding up the process with Singpass. Our friendly loan officers will get back to you with a personalised quote in no time.
About the Author
Weetee Neu is a writer based in Singapore. He has written for MediaCorp, SPH magazines, Tripzilla and others.
