Identifying Illegal and Legal Money Lenders (2021 Update)

The Singaporean economy continues to grow thus attracting investors from all over the world. The lending business has risen tremendously, specifically since the last few years. Unfortunately, some exploitative individuals take advantage of borrower’s ignorance and fraud them. UML is the term used for Unlicensed Money Lending. It is used for an individual who illegally operates the loan business and is often called an ‘Ah Long’ in Singapore or a loanshark who lends money to another individual. UML is a completely non-acceptable practice and very dangerous as it follows non-regulated methods. The loansharks often chase desperate borrowers to scam them. Their actions and methods harm society and are impermissible as they may even resort to violence to get what they want. Most of them do their best to steal, making it appear as if they are legal.

Over the years, loansharks have outgrown the legal moneylenders, thus it should be a rule of thumb to only and only borrow money from legal moneylenders. In some instances, borrowers are aware of an illegal money lender but choose to borrow from him to bypass requirements and legal procedures.

Existing customers, as well as rating pages in Singapore, are reliable sources to check whether it is an illegal or a legal moneylender and verify the qualities of services he has to offer. The surest way to check the legitimacy is to go through the Singapore Ministry of Law website.

There are several ways to differentiate between an illegal and legal money lender in Singapore:

Legal moneylenders will always make you understand all terms and conditions of the loan contract

Under Singapore’s Ministry of Law, all money lenders are obligated to explain each and every term to the borrower in a language that is easy to comprehend. The law also states that they should respond to every question you may have. A legal lender is required to explain all details including the rates charged, the payment approach, and the costs involved along with the due date of repayment of the loan. It is the sole responsibility of the money lender to ensure that the borrower has all the necessary information beforehand.

If you ever come across a money lender who is reluctant to explain to you the details of the loan in clear language, you should just run! There are high possibilities you are dealing with a scammer.

The illegal money lender will charge rates that are above the market interest rates

The law also clearly states that no individual should charge another individual above the asserted rate. The government on 1st October 2015, established that the maximum interest rate should only be 4% per month. You can clearly differentiate between an illegal and a legal money lender because a legal money lender will never charge you above the market rate of 4%. Whereas, there have been instances where borrowers had been charged over 40% per month by some illegal money lenders. Be very alert and in case you are suspicious of a lender, follow your instinct and do not borrow the loan.

The legal money lender will make sure you sign the contract

Singaporean Law requires money lenders to make sure that the borrowers sign the loan contract. The Law specifies that the following should be included:

  • The interest rate
  • Payment schedule
  • All fees including late payment charges 

If you are offered a loan where the money lender is ready to give you funds without asking you to sign a contract, reject it. A legal money lender never conducts himself this way. He makes sure you sign it to keep the transaction as legal as it can be. If you are not asked to sign the contract, chances are you are the next victim of a loanshark. According to the Law, once you sign a contract the lender and borrower have adhered to it and it will be difficult to seek redress in case the lender tries to exploit you.

Illegal money lenders will charge you a number of fees

According to the Moneylenders Act, a borrower should only be charged three types of fees which won’t include the interest rate.

  • In case of loan defaults, a borrower can be charged a late payment fee, which should not exceed $60 a month. And interest rates shouldn’t be more than 4% per month on the outstanding due amount. Also note that late fees are only to be accumulated monthly on the late due balance.
  • The administrative fee. The upfront administrative fee should not be more than 10% of the loan value
  • Legal fees due to a court challenge

If you come across an individual who charges you any other fees than the above-mentioned ones, you are probably dealing with a loanshark or a loan scam.

Legal money lenders have a recognizable office

It is the most simple way to differentiate between an illegal and a legal money lender. In case a lender offers you a loan and doesn’t have a recognizable office, he is not legitimate. According to Singapore Law, all legal money lenders should be registered with the Ministry of Law website. Ideally, legal money lenders should only carry out loan businesses only in their offices. In most cases, illegal money lenders will not have an office and even if they do it is not registered under Singaporean law.

A borrower should conduct proper research, go through the lender’s website, and only then should choose a licensed, legal money lender. Unscrupulous lenders will make sure they harass and chase you or go to an extreme extent, to ensure they steal from you. However, a borrower can easily recognize an illegal money lender through his suspicious actions. Note that it is safe to walk away from an illegal lender, or in the worst scenario, reporting them to the police is a smart option.

If you need further clarification or if you suspect that you have been dealing with a loan scammer, feel free to talk to us for advice!

Accredit Pte Limited has 4 locations island-wide, to bring our transparent services closer to you.


Tampines Branch
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Hougang Branch
(+65 6245 2662)
Clementi Branch
(+65 6261 2662)

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