Despite the economic crisis that struck many countries worldwide, Singapore’s moneylending industry thrives today. Regardless of the alarming inflation rates, higher taxes, employment crisis, and salary demands, people feel secure knowing they can rely on licensed moneylenders. Yet, how do these lenders work?
More and more people seek and want to understand how Singapore’s registered lenders work. If you feel the same way and want quick funds, uncover why you must understand the moneylending industry. Learn the legal practices of moneylenders, types of loans to acquire and more below!
Monthly Income in Singapore
Singapore Citizens, Permanent Residents, and foreign work pass holders in the country are the prominent individuals relying on the lending industry. Singapore’s community is doing its best to make ends meet.
The average monthly salary rate of S$5,783. Households with full-time employees of Singapore residents may acquire the Median Gross Monthly Income of S$4,456 with the inclusion of employer CPF contributions.
Nevertheless, these are reasonable salary rates. But it can be an exceptionally delicate matter for those with a much lower monthly gross income. Managing personal finances will be challenging for those who may not get a salary increase or better employment.
People with low monthly earnings usually don’t have extra funds for urgent financial emergencies. Singapore’s authorised moneylenders grant loans to people with monetary needs. Yet, how can you know their legal responsibilities to you as a borrower?
Licensed Moneylenders’ Legal Lending Practices
Singapore is famous not only for the country being a livable city with exceptional community dynamics but it is also renowned as a financial hub as well. Despite the current economic struggles, it maintains a sturdy and reliable financing industry.
Banks, monetary businesses, and moneylenders encompass Singapore’s financing and moneylending market.
Banks, monetary businesses or financial institutions, and moneylenders are the industry that proffers legal financing practices to their clients. They can lend borrowers funds or loans by completing the necessary business documentation and licensing steps.
The Banking Act regulates banks and financial institutions. Moneylenders in Singapore are under the Moneylenders Act.
Banks and financial institutions grant loans and have similar methods with a licensed moneylender. However, these companies’ laws and legal obligations cannot be balanced. Thus, financial institutions and banks are not permitted moneylenders in Singapore.
Due to the distinctiveness of a licensed moneylender in Singapore, many people prefer the moneylending industry. What are the specifics of this market?
What is Moneylending in Singapore?
It is the financial business practice employed by individuals or groups who provide cash, services, or goods to interested or willing borrowers. Moneylending in Singapore has immensely impacted the country for many decades, from its initial introduction in the early 1800s.
Today, the modern-day approach to proffering moneylending services to borrowers in the country is highly recognised and sternly regulated by the Moneylenders Act. A person with a moneylending business in the country is known as a licensed moneylender.
Moneylenders in Singapore
As aforementioned, moneylenders are people or groups who administer and conduct all the mandatory laws and ordinances from the Moneylenders Act. The Act mentions three specific classifications of a licensed moneylender in the country. Another category belongs to the Ah longs, loan sharks, more formally known as the unlicensed moneylenders.
The Act encourages further awareness of the differences between unlicensed and authorised moneylenders in Singapore to guarantee security and protection from unlicensed lenders.
Thus, the Ministry of Law’s Registry of Moneylenders has since enlisted all the business names and details of every licensed moneylender in Singapore. Any interested party or borrower who wishes to obtain information may refer to the Ministry of Law’s website for full disclosure.
The Ministry of Law legally acknowledges that only moneylenders who’ve proposals are approved and have gained their licenses. These are excluded moneylenders, exempt moneylenders, and licensed moneylenders.
1. Exempt Moneylenders
Exempt moneylenders can claim the title if they are considered qualified for the application under the Moneylenders Act sections 91 and 92.
The stipulations regarding their exemption are more often by the Registry. The Registry of Moneylenders is responsible for assessing, evaluating, and issuing or revoking licences to every moneylender in Singapore.
If the proposal to become an exempt moneylender was in the manner demanded by the Registry, thus a person shall be an exempt moneylender.
Exempted moneylenders in Singapore do not have moneylending licenses as they’re under specific legislation and licensing. These financing organisations are financing companies and pawnbrokers.
2. Excluded Moneylenders
Excluded moneylenders are a body which belongs explicitly to a different sector of moneylending in Singapore.
The institutions often associated with excluded moneylenders are pawnbrokers, co-operatives, or credit societies. Each must comply with their respective laws and regulations to continue their services as an excluded moneylender. Pawnbrokers should abide by the Act, and credit societies must follow the Co-operatives Act’s directives.
Excluded moneylenders have precise clients or borrowers to attend to, such as corporations, limited liability partnerships, trustees for real estate investment, trustees or trustee-managers connected to businesses, and accredited investors.
Companies in Singapore that also grant loans to their employees are excluded moneylenders. They’re excluded from the Moneylending Act and do not require moneylending licensing.
3. Licensed Moneylenders
Among the three moneylenders in Singapore, the most identified are licensed moneylenders. It is because the moneylenders’ businesses and financing practices have been around the country for many years.
Whenever people in Singapore hear about moneylenders, they immediately associate it with fast and more accessible personal loans, financing products and transactions. It’s a massive difference between banks and other financial institutions.
Moneylenders who desire their licences must undergo a series of tests before qualifying to become licensed. In addition, even though a person passes the moneylender’s trial, they need someone who has passed the Test-Qualified Manager test to operate the moneylending business accordingly.
Upon receiving their licence, moneylending applicants must register with the Registry of Moneylenders. In this manner, borrowers seeking trustworthy and reliable approved moneylenders may choose from those listed in the Registry.
Of the three specific moneylenders in Singapore, only certified moneylenders grant diverse loan choices to their borrowers.
Types of Loans from Licensed Moneylenders
Excluded moneylenders and exempted moneylenders may legally lend money to their borrowers. But licensed moneylenders offer massive loan selections that’ll fit your financial requirements. This specification makes registered moneylenders a more appealing choice.
Here are several types of loans you can apply for from a licensed moneylender:
What if you face financial urgencies or need extra funds for your plans? A personal loan is a helpful tool to assist you in such situations. You can apply for it and utilise it for various purposes, whether to cover home repairs, medical bills, unexpected expenses, weddings, or education expenses.
Personal loans can be secured or unsecured loans. However, licensed moneylenders grant unsecured personal loans more due to the need for more collateral. Which makes it an accessible loan option for you.
Interest Rates: Your creditworthiness is assessed when calculating the personal loan interest rate. But, the typical range is from 1% to 4% per month.
Repayment Period: The repayment period is usually between one to five years.
Applicants: Singapore Citizens, Permanent Residents, and foreigners with valid work permits may apply for a personal loan.
Loan Requirements: The standard requirements for a personal loan are presenting proof of income, identification, employment, credit score, repayment plans and loan purpose.
Singapore’s top short-term loans are payday loans. It’s ideally utilised for paying unexpected expenses or relieving expenses between salaries. The amount accessible from a payday loan is small and must be repaid on the next wage.
Interest Rates: Licensed moneylenders offer payday loans for a 1% to 4% maximum interest rate.
Repayment Period: As a short-term loan, the repayment period is between 14 and 30 days. However, a licensed moneylender may grant the extension. Thus, you must discuss the terms with your lender.
Applicants: Singapore Citizens and Permanent Residents may apply for a payday loan. Also, foreigners with working permits and employment passes could get a payday loan.
Loan Requirements: All applicants must comply, meet minimum income, and present valid proof of identity and employment.
Debt Consolidation Loans
It’s the type of loan utilised to consolidate and pay off multiple debts, such as personal loans, credit card debts, and other high-interest debts. When consolidating these debts into a single loan, thus letting you simplify your repayment process and potentially lower your total interest rate.
Interest Rates: Singapore’s debt consolidation loan has an average interest rate is around 4% to 12% per annum.
Repayment Period: The usual repayment period for debt consolidation loans is around one to five years.
Applicants: Foreigners with valid employment passes and work permits, Singapore Citizens, and Permanent Residents can apply for this loan in Singapore.
Loan Requirements: All applicants must comply, meet minimum income, and present valid proof of identity and employment.
A licensed moneylender offers its business loans to its SMEs and entrepreneur borrowers. It’s the ideal loan product providing funds for companies to assist growth, expansion, and managing cash flow.
Singapore’s business loans can either be secured or unsecured loans. Interest rates and terms vary on the lender’s policies, borrower’s creditworthiness, and type of loan.
Interest Rates: The Ministry of Law encourages every licensed moneylender to impose a maximum 4% monthly interest rate. But it doesn’t apply to business loans. The interest rate is subject to the lender’s final assessment yet would generally range between 4% to 14%.
Repayment Period: The business loans’ repayment period can range between one to ten years.
Applicants: The only eligible applicants are businesses based and registered in Singapore.
Loan Requirements: Application for a business loan requires financial statements, income, proof of identity, and business plans.
How Do Licensed Moneylenders Work?
As soon as they have acquired their titles as a licensed moneylender in Singapore, how do they work their way with their business?
The work of a licensed moneylender is to function as the primary manager of the business that concentrates on lending money to its borrowers. Furthermore, registered moneylenders cannot do as they please in their companies. Everything they do, from the most minor to most significant changes in the business, to maximum interest rates, fees, charges, customer service and other obligations, must comply with the Moneylenders Act and Rules.
What is the diverse scope of operations, services, and tasks a licensed moneylender must present to the Singapore government and community?
Multi-ethnic, Multi-lingual, and Multicultural Obligation
The borrowers’ demographics in the country are unique, dynamic, and inclusive. Singapore is a country with an exquisitely divergent ethnicity. Licensed moneylenders in Singapore cater to a multi-ethnic, multi-lingual, and multicultural community.
Due to this crucial fact, registered moneylenders must pass the Test-Qualified Manager test. They have completed the programs and acquired accreditation for their multilingual competencies.
With the diversities in culture, ethnicity, and mother tongue, a licensed moneylender must know which language to use to communicate with the borrower properly. Suppose they fail to do the particular task.
In that case, the borrower who didn’t receive proper assistance and explanation regarding the loan terms and conditions can file a complaint against them to the authorities.
Their moral and business obligation as registered moneylenders in Singapore is to satisfy their borrowers’ need for full loan information disclosure in the dialect they feel most comfortable with.
Compliance with the Moneylenders Act
The Moneylenders Act was shaped after the English Moneylenders Act of 1900 and 1927. Back in 1936, the Act was referred to as the Moneylenders Ordinance.
In this modern age, the Moneylenders Act underwent many amendments to meet its stakeholders’ requirements and demands. It is still the legal innuendo for moneylending laws and statutes in the country. Every licensed moneylender should stay within the directives in this Act. If they do, they will also be punished per the Act.
What regulations and laws do authorised moneylenders need to adapt efficiently and effectively?
Requirement Fulfilment for Moneylender’s Licence
The main direction approved moneylenders have to secure is their licences. As per the Act, no moneylending activities may be pursued or should proceed except under licence. Included in the clause are the designated and legitimate moneylenders in Singapore.
All operations by certified moneylenders may go forth upon the licence’s validity for 12 months unless there’s a prescribed period specified in the recommendation.
The Registrar has the authority to revoke the licence of moneylenders in Singapore if they’ve provided incomplete, misleading or false information, don’t fulfil the requirements for licence classification, lack of Accountant-General as security for proper business conduct and a $20,000 deposit for each place of business.
Stipulations for approved moneylenders to work appropriately in the country include licence fees, approval of places of business, security deposit, approval and notification of change of profile, and list of publications.
Advertising and Marketing
Every licensed moneylender in Singapore must abide by the Act’s regulated advertising and marketing privileges. The modulated advertising and marketing methods that authorised moneylenders may do are through their business’ official website, outside of their offices, or within business directories accessible to the public like the Yellow Pages.
The signage authorised moneylenders may use for their businesses should be easily seen by the public, bear their business name, and be in English.
If a licensed moneylender attempts to reach a borrower and lure it with a loan via text messages, private messages on messenger apps, calls or any means of communication online, they will be punished.
When found guilty of a compliance failure, the permitted moneylenders must pay a fine of not exceeding $20,000 or jail time for at least six months or both.
Licensed Moneylenders’ Informing Borrowers about Loan Terms and Conditions
Borrowing money from any financial institution can be nerve-wracking for some people, especially those who need to get used to the process. Other borrowers might be aware but must fully comprehend the loan terms and conditions.
Authorized moneylenders must legally inform borrowers about the loan terms and conditions in writing, and it must be in the language the latter quickly understands.
The attending licensed moneylender in Singapore and its borrower must sign every loan contract. Signing contracts and other documents should be done inside the licensed moneylender’s office. On the other hand, borrowers can apply for a loan online via a licensed moneylender’s official website.
In addition to these bylaws, approved moneylenders must give the borrower a separate written cautionary statement.
Other responsibilities authorised moneylenders should accomplish are issuing receipts for all repayment attained by the borrower towards their existing loan. Also, the former has to grant the latter with their statement of accounts scheduled during the half year, either in January or July.
If the process or grant of the loan transaction’s outside the moneylending business premises, the licensee, when found guilty, will face the payment of a fine not going beyond $20,000, up to six months imprisonment, or both.
Licensed Moneylenders Maximum Loanable Amount
In the past, certified moneylenders allowed their borrowers to loan excessively. At times, it was due to the borrower’s request. Because of the repetitive practice that caused issues between the borrowers and registered moneylenders, the Ministry of Law and Ministry of Manpower implemented loan caps.
As a result, authorised moneylenders shall pursue the maximum loanable amount to all their clients as follows:
- Singapore Citizens and Permanent Residents with annual earnings of less than $10,000 may take out a total of $3,000. Foreign nationals with work passes may get a $500 total amount.
- Singapore Citizens, Permanent Residents, and foreigners residing in the country with a yearly income of $10,000; at most, $20,000 acquire $3,000.
- Singapore Citizens, Permanent Residents, and foreign work pass holders with annual earnings reaching at least $20,000 may take out six times their monthly income.
Regulated Interest Rates and Charges
Interest rates, fees, and charges are how registered moneylenders acquire their return on investment. In the past, moneylenders in Singapore could impose interest rates, fees, and costs of up to 20% to 30% per month.
The Moneylenders Act prohibits these actions; any moneylender found guilty is punishable. The Ministry of Law wishes to better the permitted moneylenders’ reputation. Thus, since 1 October 2015, they can charge interest and fees at fixed rates.
The rates are as follows;
- The administrative fee chargeable from the loan must not exceed 10% and is applicable for one-time only.
- The interest rate certified moneylenders may acquire from the transaction should be the 4% monthly fixed rate.
- Late interest rates are subject to the same amount as the current interest rate of 4% and implement for each month of late repayment.
- Fees associated with late payments are $60 per month and not more than the mentioned amount.
Legal Actions Against Licensed Moneylenders and Borrowers
Licensed moneylenders must commit to their legal obligations to the Moneylenders Act and Rules. Circumstances may happen when a borrower has committed repetitive offences about repayment.
They will not threaten or harass their borrowers and may only send notices and reminders. If they show unprofessional behaviour, their borrowers can report them to the Registry or the Singapore Police Force.
However, if a borrower commits a default, becomes missing in action, or intentionally ignores the permitted moneylenders’ notices, the latter can take legal action against the former.
It complies with the authorised moneylenders’ work in the moneylending industry and their legal rights. Though problems may arise between certified moneylenders and their borrowers, all tensions ease when both parties understand loan terms, conditions, and agreements well-communicated and understood.
And this is how authorised moneylenders work in Singapore. Approved moneylenders in Singapore is an honourable and respectable profession with a highly profitable business.
Their financial service and assistance to people who need funds are irrefutable; thus, the industry’s well-acknowledged and trusted in the country.