Money lending is a thriving industry in Singapore since the demand for instant cash loans has been increasing in recent years amidst the higher cost of living. Because of such high demand, it has become necessary for the government to adopt regulatory measures that will ensure the protection of both money lenders and borrowers in the country.
While money lending itself is not regulated, the business of money lending is regulated by law, specifically the Money Lenders Act of 2008. Whether you are a frequent or firsttime borrower, it is important for you to understand how money lending is controlled in the country to avoid falling victim to fraud or incurring penalties. In this article, let us delve deeper into how the business of money lending is regulated in Singapore.
The Money Lenders Act Singapore
As mentioned earlier, the business of money lending in Singapore is primarily governed by the Money Lenders Act, which was introduced in 2008 and serves to protect the rights of money lenders and borrowers in the country. It achieves this through a legal framework that provides a clear definition of authorised business activities, borrowing restrictions, and avenues for recourse.
Among the most essential functions of the Money Lenders Act is to define the parties that are authorised to perform money lending activities in Singapore. According to the law, anyone who wishes to lend money legally should belong to one of the following groups:
- Licensed money lenders: These are money lenders who have been granted a licence or authority to lend money by the Registrar under the Money Lenders Act.
- Exempt money lenders: These are money lenders who are exempted from holding a licence or authority to lend money.
- Excluded money lenders: These are money lenders who are permitted to lend money under the law, such as credit societies under the Cooperative Societies Act and pawnbrokers under the Pawnbrokers Act.
The maximum amount of loan an individual can borrow
To determine the maximum amount of loan you can borrow, it is necessary to distinguish between secured and unsecured easy cash loans. When it comes to secured loans, you are able to acquire any amount of loan. On the other hand, if you are planning to obtain unsecured loans, the overall maximum amount that you could borrow at any time across all money lenders is as follows:
- If your annual income is less than $10,000, you may borrow a maximum of $3,000 if you are a Singapore citizen or permanent resident or $500 if you are a foreigner residing in the country.
- If your annual income is at least $10,000 and not exceeding $20,000, you may borrow a maximum of $3,000 if you are a Singapore citizen or permanent resident or $3,000 if you are a foreigner residing in the country.
- If your annual income is at least $20,000, you may borrow six times your monthly income at maximum, regardless of whether you are a Singapore citizen or permanent resident, or a foreigner residing in the country.
Interest rates money lenders can charge for personal loan
Effective from October 1, 2015, money lenders in Singapore can only charge a maximum interest rate of 4% per month. This limit applies irrespective of the income of the borrower and whether the loan is secured or unsecured. If you fail to repay your debt on time, the maximum rate of late interest that your money lender can charge is 4% for every month the debt is repaid late.
Computing the interest charged on your loan should be based on the amount of principal you have left after deducting from the initial principal the overall payments you made, which are appropriated to the principal. Moreover, keep in mind that your money lender can only charge the late interest on the amount that you repaid late. They cannot charge on amounts that are outstanding but are not yet due to be repaid.
Fees that money lenders are authorised to charge for personal loan
Effective from October 1, 2015, all money lenders in Singapore are only authorised to impose the following expenses and charges:
- A fee not beyond $60 for every month of late repayment.
- A fee not beyond 10% of the loan principal when the loan is granted.
- Legal costs allowed and ordered by the court for a successful claim by the money lender for loan recovery.
That said, the overall charges that a money lender imposes on any loan, consisting of upfront late and administrative fees, interest, and late interest, is not allowed to go beyond an amount that is equivalent to the loan’s principal. For instance, if you take a loan of $10,000, then the 10% administrative fee, interest, late interest, and monthly $60 late fees cannot go beyond $10,000.
Conclusion
There is no doubt that money lending is a thriving business in Singapore. Since more and more people are being enticed to lend and borrow money, it is only proper for the Singapore government to regulate the industry to make sure that the rights of both borrowers and money lenders are protected. As a borrower, it is important for you to understand how money lending is regulated by law to avoid being victimised by fraud or incurring penalties.
Should you need a reliable loan from a legitimate money lender in town, Orange Credit has its door open for you! We are a trusted licenced money lender that provides a wide array of valuable loans for different needs, ranging from personal loans and payday loans to renovation loans and debt consolidation loans in Singapore. Please do not hesitate to contact us anytime to learn more about our loans.
