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Alternative Solutions To Borrowing From Loan Sharks in Singapore

Guest Contributor

Guest Contributor

Last updated 15 July, 2022

Is it an offence to borrow from loan sharks in Singapore? What are other options? 

When you're in a tight spot financially, you may be tempted to look to loan sharks to borrow money. However, there are alternatives, which we’ll run through in this article.  

Table of contents


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What are loan sharks? 

A loan shark is a person or organisation who lends money illegally at extremely high-interest rates. It's important to understand that a loan shark is an unlicensed money lender and often resorts to intimidation and threats to recover their debts.

It is an offence to borrow from loan sharks under the Moneylenders Act. Since they are not licensed by the Singapore government, they are therefore not authorised to lend money.

Why you should never borrow from loan sharks

Borrowing from loan sharks is never a good idea, here is why:

#1: Loan sharks charge very high interest and hidden fees

Loan sharks are known for their high interest rates and hidden fees. They will charge you any amount of money, even if it's just processing or a late fee that can quickly add up to more than what was originally owed. 

Unlicensed money lenders can charge up to 20% monthly interest, which is much higher than the legal limit of 4%. Borrowing from loan sharks can lead to many financial problems for borrowers.

#2: Processing charge even if no loan is approved 

This is a common tactic used by loan sharks. Many people have fallen into this trap, as the loan sharks will often make it sound like your loan has been approved. Once the money is transferred, however, there is no turning back. The loan sharks will refuse to return your money, leaving you in debt.

#3: No loan contracts

Loan sharks often do not have loan contracts, so you will not have any legal protection if something goes wrong. This also makes it very difficult to prove that you borrowed money from the loan sharks in the first place. If you do not have a loan contract, the loan sharks can claim that you never borrowed any money from them.

#4: Withhold part of the payment

Another common tactic loan sharks use is to withhold part of the payment. This can be an effective way to intimidate borrowers and make them feel like they are in debt. The loan sharks will often threaten to withhold more money if the borrower does not comply with their demands.

#5: Harassment and intimidation

Loan sharks often use harassment and intimidation to get their borrowers to comply with their demands. They may call the borrower at all hours of the day and night, or they may show up at their home or workplace.

The loan sharks may also threaten the borrower with violence or even death if they do not comply. This can be a very frightening experience for the borrower, and it can often lead to them borrowing even more money from the loan sharks.


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How to deal with loan shark harassment

In Singapore, loan sharks are considered illegal moneylenders. If you're dealing with loan sharks, here are some tips on how to deal with loan shark harassment:

  • Keep a record of all contact with the loan sharks, including dates, times and what was said. This includes any phone calls, text messages, or emails. If possible, try to get a copy of any loan documents that have been signed. This information can be helpful if you decide to take legal action against the loan shark.
  • Do not confront the loan sharks or try to negotiate with them. This could put you in danger.
  • Contact the police if you're being harassed or threatened by loan sharks.
  • If you're in debt to loan sharks, seek legal help. There are government schemes available that can help you get out of debt without resorting to loan sharks.

Alternative solutions for getting a loan 

If you need money to get through tough financial circumstances, several legal borrowing possibilities exist. 

Family and friends

One of the most common alternatives to borrowing from loan sharks is turning to friends or family.

It may be embarrassing to ask for help, but it can be a much better option than dealing with loan sharks. If you have a friend or family member who is willing and able to loan you money, make sure to create a repayment plan and stick to it. This will help to avoid any hard feelings and ensure that everyone is treated fairly.

Pawn shops

Pawn shops are another alternative to borrowing from loan sharks. Pawn shops allow consumers to pawn items of value in exchange for a loan. The loan is then repaid using the proceeds from the sale of the pawned item.

This can be a useful option for consumers who need access to cash quickly, as loans can be approved, and the money can be available within minutes. However, pawn shops typically charge high interest rates, and there is a risk that the loan will not be repaid.

Related to this topic:

Debt Consolidation Plan: What Is It and How Does It Work?
How Many Personal Loans Can You Have at Once?
The Real Cost: Deferring Your Personal Loan Payment
Best Personal Loans to Ease Cashflow in Singapore (2022)

Personal loans from licensed money lenders

Another alternative to borrowing from loan sharks is obtaining a personal loan from a licensed money lender.

The Singaporean government regulates licensed money lenders, and they are required to follow strict rules regarding the interest rates they charge and how they conduct business. Licensed money lenders typically offer personal loans with interest rates of 4% monthly, which is more affordable than the interest rates charged by loan sharks.

It is important to remember that licensed money lenders are a safer option than borrowing from loan sharks. Licensed money lenders must follow strict rules regarding the interest rates they charge and how they conduct business. This helps protect consumers from predatory lending practices and ensures that borrowers receive fair and affordable loans.

To guarantee that you can repay your obligation easily, the Ministry of Law has set the following maximum lending amounts on moneylenders:

Annual Income Singapore Citizens and Permanent Residents Foreigners in Singapore
Less than S$10,000 S$300 S$500
S$10,001 to S$20,000 S$3,00 S$3,000
More than 20,000 Six times your monthly income Six times your monthly income

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Why borrow from licensed money lenders 

  • Licensed lenders are more likely to offer lower interest rates and fairer repayment terms than loan sharks.
  • If you borrow from a licensed lender, you will be covered by the Consumer Credit Act, which gives you legal protection if something goes wrong.
  • Licensed lenders are more likely to offer personalised service and understand more if you run into financial difficulties.
  • Licensed money lenders also offer fast loan approvals without any collateral needed, so you can get your loan disbursed as soon as the next working day.

Related to this topic:
Licensed Moneylenders Singapore Has and Why They're Different From Loan Sharks
Banks, Pawn Shops, Moneylenders: What's the Difference?

What to consider before taking a loan from a moneylender in Singapore

Before taking out a loan from a moneylender in Singapore, consider a few things. 

  • First, be sure to read the fine print and understand the loan terms. Make sure you know any penalties for late payments or early repayment. 
  • It is also important to shop around and compare interest rates to ensure you get the best deal possible. Be realistic about your ability to repay the loan, and make a budget to ensure you can make the payments on time.
  • Finally, remember that moneylenders are required by law to provide borrowers with a statement of their rights and responsibilities. Be sure to review this information carefully before signing any loan agreement. 

Related to this topic:
Things You Should Know About Licensed Moneylenders in Singapore
What is a Short-Term Loan and Where to Get One?
Best Licensed Moneylenders in Singapore For Low-Interest Loans

Personal loans from a bank

The final option for obtaining a personal loan is from a bank. Banks offer personal loans with interest rates that typically range from 3% onwards. However, banks are not always the best option for obtaining a loan. Banks often require borrowers to have a good credit score, and they may require the borrower to provide collateral to secure the loan.

Read more: Building A Credit Score Early Is Important, Especially If You’re A Young Working Adult. Here’s Why And How.

Instead of borrowing from an illegal lender, look at the best personal loan interest rates in Singapore. Get the money you need without putting your safety at risk.




Use a personal loan to consolidate your outstanding debt at a lower interest rate!

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