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Licensed Moneylender New Rules: How They Affect You

To get that loan successfully approved, we should know about the licensed money lender's new rules
To get that loan successfully approved, we should know about the licensed money lender's new rules

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A licensed money lender in Singapore is an important institution because it provides legal and fair loans to those who need fast cash. Because they are licensed by the Ministry of Law, such moneylenders are subject to strict rules to protect borrowers.

In 2018, new 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 would affect you.

Changes to loan caps

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 loan caps were set to control the amount that Singapore Citizens, Permanent Residents, and foreigners living in Singapore can borrow from all licensed money lenders in Singapore.

In other words, there is now a maximum amount that anyone can borrow from a licensed money lender in Singapore.

Here are the updated amounts:

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 money 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 money 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 person borrow a maximum of half their yearly income.

How does this affect locals

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)

While the new rules for licensed money lenders mean that the maximum amount you can borrow is lower, they also afford greater protection to you.

Firstly, let’s explore the negative impacts. A lowered maximum of S$3,000 for those who earn less than S$20,000 a year and six times their monthly income for those who earn at least S$20,000 a year means that certain cash needs cannot be fulfilled.

For instance, if you earn S$36,000 a year, you can borrow only up to S$18,000. If you need S$20,000 to renovate your house, then you will be short of S$2,000. In that case, it presents an inconvenience. Additionally, you are not allowed to take up a loan from another licensed money lender since these limits apply across the board.

On the bright side, a lowered maximum loan limit pegged to your income means that you are more unlikely to find yourself in a situation where you cannot pay the loan back in time. As they say, prevention is better than cure.

This means that you will not find yourself borrowing from loan sharks or illegal money lenders to pay back legal ones as you are likely not to owe more than you can afford to.

This greater protection also extends to protecting your credit scores as you are less likely to default now. Therefore, your ability to continue borrowing safely in the future is protected.

How licensed money lenders are still a good option

Despite the new rules on loan limits, the licensed money lender in Singapore is still a good option when it comes to legal and fair borrowing. Here’s why:

1. Attractive Interest rates

Firstly, licensed moneylenders offer attractive interest rates, with the maximum legal limit being 4% per month. The people behind the desks are everyday folk too, so they understand that loans are often used to finance urgent and important needs like hospitable bills or crucial investments.

Additionally, licensed moneylenders are not allowed to levy a late repayment fee of more than S$60 per month. Ditto for the late payment interest rate, which is capped at 4% per month as well. Lastly, licensed moneylenders cannot require you to pay more than double the principal amount you have borrowed.

2. Personalised service

Secondly, legal moneylenders are known for their personalised services. Throughout your meetings with the loan officers, your financial situation and needs will be carefully listened to and assessed.

Whether you are looking at personal loans, debt consolidation loans, payday loans, or other loan types, rest assured that you will be carefully guided towards financial stability. This is done by setting a comfortable payment structure that fits your financial situation.

3. Easier loan approvals

Lastly, even with the new rules in place, you still have a higher chance of getting your loans approved by licensed money lenders as compared to banks. For one, banks usually only extend loans to people with an annual income of S$20,000 or more.

If your annual income is lower, a licensed money lender in Singapore is a superior alternative. Additionally, you stand to receive your loans in a shorter time as money lenders require fewer documents and they have a less bureaucratic and more streamlined process. What’s more, many licensed money lenders in Singapore do grant loans to borrowers with bad credit scores.

This is a stark difference from banks as your credit score is a huge factor for them in approving your loan and determining the interest rate that it gets.

Therefore, despite the new rules, a licensed money lender in Singapore is still a viable, legal and fair option to consider if you need to boost your cash flow.

Conclusion

To recap, these are the updated limits for individuals who wish to take up loans with licensed moneylenders in Singapore:

Annual Income

Maximum Loan Amount

S$20,000 and above

6x monthly income

S$10,000 – S$19,999.99

S$3,000

Below S$10,000 (Singaporeans and Permanent Residents)

S$3,000

Below S$10,000 (Foreigners)

S$500

The new rules went into effect in 2018 and there have been no amendments since then. Additionally, licence issuances for new moneylenders have been suspended, along with additional places of business for existing licensed moneylenders. Essentially, this means that existing licensed moneylenders are not allowed to open new branches.

One licensed moneylender that you can consider if you need to take up a loan would be MM Credit. This experienced moneylender offers a variety of loans to fit any financial need. Simply fill in the Online Loan Form on our homepage and our friendly loan officers will get back to you with a personalised quote.

Disclaimer

The information contained on this website is not intended as a substitute for advice from a licensed professional. We do not guarantee the accuracy, completeness, suitability, or validity of any information provided on this website. We will not be responsible for any errors or omissions on the site nor will we be liable for any loss or damage caused by reliance on any information obtained through this website.

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