Moneylenders Vs. Loan Sharks: What Are Their Differences?

Moneylenders Vs. Loan Sharks: What Are Their Differences?

Taking a loan when you require financial assistance is a brilliant way to offset financial needs. Loans come in various forms – personal loans, instant cash loans, payday loans, business loans, debt consolidation loans, and so on. Knowing the differences between each type of loan would be best in terms of making an informed decision when it comes to choosing a suitable loan for you.

Aside from learning the differences between these types of loans, it is also essential to be aware of where these loans come from and where to get the right loan. If you find that major financial institutions such as banks may be out of reach, licensed moneylenders are a terrific option that you may consider.

However, licensed moneylenders may often look similar to their evil counterparts – loan sharks. To avoid falling victim to these loan sharks’ harmful practices and tactics, it would be best to learn the differences between them and licensed moneylenders. If not careful, loan sharks might put you into a vicious cycle of debts instead of assisting you in clearing them.

So before you ultimately decide on a loan and where to get it from, read on to discover the 3 primary differences between the two.

Moneylenders are legal, while loan sharks maintain illegal operations

Licensed moneylenders are approved by the Ministry of Law in Singapore; thus, they are a legal option. They are authorised to provide a variety of loans to Singapore citizens, permanent residents, as well as foreigners with valid employment passes. In contrast, loan sharks are unlicensed moneylenders whose operations are often illegal, in addition to the other activities they undertake that are deemed illegal. Although you might have managed to pay your debts diligently, the money that loan sharks took from you will likely be used to fund other unlawful activities that you should ideally not be financing.

If supporting illegal activities is something you wish to avoid doing, then it would be good to steer clear of loan sharks altogether. In addition to being legal and having valid licenses, licensed moneylenders are also required to maintain a physical office space approved by the Ministry of Law. In contrast, loan sharks usually do not operate from a physical office space. For an exhaustive list of licensed moneylenders in Singapore, one can view the list on the Singapore Ministry of Law’s website.

Moneylenders are transparent in ways that loan sharks are not

Transparency makes for a significant difference between licensed moneylenders and loan sharks. A reliable, licensed moneylender gives out their physical address, contact information, and clarifies in detail about the ways in which their business operates. On the other hand, a loan shark is highly likely reluctant to disclose their pertinent information to you, as doing so can reveal the true nature of their business. In essence, a person about to commit fraud usually has no interest in giving you all the valuable information you might require regarding your desired loan.

Aside from being transparent about relevant information, licensed moneylenders are always transparent about the terms of their loans. They will thoroughly explain your loan so that you can fully understand its terms – the amount of the loan, repayment terms, and late payment fees. In comparison, loan sharks are usually not transparent when it comes to your loan’s terms and are often entirely comfortable with charging hidden fees and penalties that you are most likely unaware of.

Moneylenders require you to sign a loan contract, while loan sharks may not offer you one

The loan you receive from a licensed moneylender operates on legally binding terms, so there is naturally a need for documentation. The loan contract states all that you should ideally know about your loan, including the monthly interest charge that comes with the loan. And since it is a requirement for licensed moneylenders in Singapore to verify your identification physically before approving and disbursing your loan, you will first need to sign a loan contract at their registered business address before collecting the loan in person.

On the other hand, loan sharks will most likely disregard a loan contract. In an instance where they do, its conditions might be vague, or the contract might be incomplete. Since the operations of these loan sharks are not bound by the law, they can introduce extra fees as well as increase penalties as and when they please.


Recognising the differences between licensed moneylenders and loan sharks is vital in ensuring that your loan helps you meet your current financial needs instead of increasing your economic burdens. Whether you might need a personal loan to pay for your expenses or an instant cash loan to deal with an emergency, borrowing from a licensed moneylender will undoubtedly provide you with the financial assistance you need.