Are Licensed Moneylenders Good Alternatives To Bank Loans In Singapore?

Alevin Chan

Alevin Chan

Last updated 20 June, 2024

Licensed moneylender loans can be hard to navigate due to the numerous options available. Get help choosing the best bank-alternative loans with Credible.sg, a digital platform that helps you select the best providers and loans that fit your needs 

Bank personal loans are popular choices for those in need of extra funds. But the catch is they come with tight requirements that not everyone can qualify for. For instance, you’ll need to have a good credit score and a minimum annual income of S$20,000 if you’re a Singaporean or a Permanent Resident. 

For those who are unable to qualify and are looking for alternatives to bank loans, one solution is to opt for a licensed moneylender loan instead. However, there are several key differences between personal loans from banks and personal loans from licensed moneylenders, so you’ll have to pay attention to several factors if you choose to take this route. 

Let’s take a closer look at licensed moneylender loans as an alternative to bank loans. 

Table of contents


Is it safe to borrow from a licensed moneylender?

You may have read reports of illegal lenders carrying out harassment and other threatening activities. However, those are the actions of unlicensed loan sharks who are acting against the law. These criminal elements rely on fear tactics to coerce their victims. In reality, the licensed lending industry is tightly regulated by the Ministry of Law.

The licensed moneylender industry is governed by the Licensed Moneylenders Act of 2008, which has stipulations to better protect borrowers, including caps on interest rates and fees. Licensed moneylenders are also required to adopt professional conduct when processing loans and during debt recovery. Enforcement of this Act is carried out by the Ministry of Law, and the Ministry will not hesitate to suspend the licences of lenders who are found to have infringed on the Act.

In addition, digital platforms have leveraged technology to help borrowers seeking licensed moneylender loans. One such platform is Credible.sg, which helps match borrowers with reliable lenders, but we’ll discuss more about them later. 


Key points to understand about licensed moneylender loans

Higher interest rates

One of the key considerations of a licensed moneylender loan is the interest rate. Under the law, licensed moneylenders are permitted to charge up to 4% interest per month. There are also permitted fees such as an administrative fee for the loan, as well as late fees and late interests in the event of late repayment. 

Licensed moneylender loans are amortised, which means that interest is calculated only on the unpaid portion of the loan. As such, larger amounts paid each month result in lesser interest charges the next month, bringing us to:

Key takeaway no. 1: Always strive to pay off more of your loan each month, above the standard monthly instalment amount and never be late for payment! This will help you save on your interest payments and reduce your cost of borrowing, as well as avoiding any potential late charges

If you are unable to make a bigger payment, at least pay the loan instalment amount each month. If you pay a lesser amount, you will have to pay more interest charges, prolonging your debt. 

Shorter loan tenure

Typically, moneylender loans have shorter loan tenures, ranging up to 24 to 36 months. This means you carry debt for shorter periods compared to bank loans with longer loan tenures. While this may mean that you might pay a higher amount monthly, shorter repayment tenures mean that you’ll be debt-free sooner, potentially saving on the cost of interest.

This brings us to:

Key takeaway no. 2: It is crucial to right-size your loan when borrowing from a licensed moneylender. This means choosing a loan amount and loan tenure with monthly repayment amounts that are well within your ability to pay. 

Advertising rules and regulations

Licensed moneylenders are bound by strict rules and regulations when it comes to advertising their services. Since 1 November 2011, licensed moneylenders are only allowed to advertise through these three channels: 

  • business or consumer directories (in print or online media)
  • websites belonging to the moneylender
  • advertisements placed within or on the exterior of the moneylender’s business premises. 

All other channels are prohibited under the Licensed Moneylenders Act. Knowing this brings us to our third key point to understand about licensed moneylender loans: 

Key takeaway no. 3: If you’re approached on social media, Whatsapp or SMS with a loan offer or via any other channels not listed in the three above, this is very likely not a legitimate lender

Such advertisements are highly likely to have come from illegal moneylenders masquerading as licensed lenders. Should you take a loan from them, you will be at risk of unreasonable interest rates and even harassment.

Hence, you should only take up a loan offer from a licensed moneylender with a physical visit to their office. Do also check the official list of licensed moneylenders maintained by the Ministry of Law. 


Save yourself time and effort with Credible.sg

Knowing how to protect yourself when navigating licensed moneylenders is no doubt important, and the 3 key takeaways we’ve discussed make for a good start. But there’s another step you can take for additional protection and save yourself time and effort in the process. 

You can make use of Credible.sg to help you search for a suitable moneylender loan without having to worry about running into unscrupulous or illegal moneylenders. This is because Credible.sg thoroughly screens the licensed moneylenders they work with, filtering out those with a poor track record and onboarding only those who pass strict criteria.

Lenders on the Credible platform also go through training for process and service quality, so you are assured of a positive borrowing experience.


What Credible.sg can do for you

Get a fairer moneylender loan

Lenders on the platform use Credible’s proprietary credit scoring and pricing engine, ensuring that your loan offer is transparent and fair. On average, loans on Credible.sg have a rate of approximately 1.5% per month. This is significantly lower than the 4% monthly rate, which is the maximum allowed under the law. 

This, alone, is a compelling reason to go through Credible.sg. The savings from the lower interest rate makes a substantial difference in the cost of borrowing and your ability to get out of debt. 

Tenures matching your ability to pay

Earlier, we highlighted the importance of choosing a repayment amount that you can afford and how the tenure of the loan impacts this amount. To recap, the shorter the loan tenure, the larger the monthly payment amount. 

Credible.sg offers moneylender loans with tenures that match your ability to pay. This helps you control your borrowings and better avoid falling into a debt trap. 

Fast loan approval and funds disbursement

When applying for a moneylender loan through Credible.sg, borrowers can look forward to a speedy loan process.

You will get a loan offer within one hour of enquiry. Once accepting the loan offer, you can receive your funds within the same day after signing the loan documents in person. As such, there’s no need to go through long waits and uncertainty with Credible.sg. 


Conclusion: Better licensed moneylender loans with Credible.sg

Credible.sg not only screens out potentially problematic moneylenders, it helps to match you with moneylender loans that are better for you. 

You can look forward to lower interest rates, get loans with tenures tailored to your needs, and enjoy fast loan offers and receive your funds within the same day. 

For those who cannot qualify for a bank loan, Credible.sg is a good alternative.

This article is written in collaboration with Credible.sg.

An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.

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