Licensed Moneylender vs Credit Card: Which Costs Less?

Key Takeaways

• Licensed moneylender loans and credit cards are designed for different borrowing needs, so the cheaper option depends on how you intend to use the funds.
• Credit cards can be cost-effective if you repay the full outstanding balance during the interest-free period.
• If you need a larger lump sum or structured monthly repayments, a licensed moneylender loan may be a more suitable option.
• Credit card cash advances often attract immediate interest charges and additional fees, making them more expensive than many borrowers realise.
• Before borrowing, compare the interest rates, fees, repayment terms and total borrowing cost rather than focusing on a single factor.
• Choosing the right borrowing option can help you manage repayments more comfortably and avoid unnecessary financial stress.

Applying for credit is easier than ever in Singapore. Whether you need funds for an unexpected expense, home repairs or a planned purchase, two common options are using a credit card or borrowing from a licensed moneylender.

At first glance, a credit card may seem cheaper because many cards advertise interest-free periods and reward programmes. On the other hand, licensed moneylenders provide structured loan repayments and fixed loan amounts that may better suit borrowers who need a lump sum.

The better option depends on how you intend to borrow, how quickly you can repay the money and the overall cost of financing.

In this guide, we compare licensed moneylenders and credit cards, explain the costs involved and help you determine which option may be more suitable for your financial situation.

Licensed Moneylender vs Credit Card: What’s the Difference?

Although both provide access to credit, they work in very different ways.

A licensed moneylender provides a loan with a fixed repayment schedule. Once your application is approved, you receive an agreed loan amount and repay it over an agreed period through regular instalments.

A credit card, however, provides a revolving credit limit. You can continue using the available credit as long as repayments are made and your account remains in good standing.

The table below summarises the key differences.

If you are unfamiliar with how licensed moneylenders operate, you may first wish to read our guide on what a licensed moneylender is. You may also find our comparison of a licensed moneylender vs bank loan useful when exploring different borrowing options.

When Does a Credit Card Cost Less?

A credit card can be the cheaper option if you repay the full outstanding balance before interest is charged.

Many credit cards in Singapore offer an interest-free period for retail purchases. If you clear the full statement balance on time every month, you may not pay any interest at all.

Credit cards are generally suitable for:

• Everyday purchases and household spending.
• Online shopping.
• Travel bookings.
• Short-term borrowing that can be repaid quickly.
• Earning cashback, reward points or travel miles.

However, problems often arise when borrowers are unable to pay the full balance.

Once interest begins accumulating, the overall borrowing cost can increase significantly, especially if only the minimum monthly payment is made.

Before relying on a credit card for financing, it is worth understanding how credit cards work and how interest is calculated.

When Is a Licensed Moneylender the Better Choice?

A licensed moneylender may be a more suitable option when you need a larger lump sum with a structured repayment plan.

Unlike a credit card, where outstanding balances can continue accumulating if only minimum payments are made, a licensed moneylender loan has a fixed repayment schedule agreed upon before the loan is disbursed. This allows borrowers to know exactly how much they need to repay each month.

A licensed moneylender loan may be suitable if you:

• Need a larger amount than your available credit card limit.
• Prefer fixed monthly repayments.
• Need funds for a planned expense such as medical bills, education or home repairs.
• Want greater certainty over your repayment schedule.
• Do not qualify for a bank loan but still require a regulated borrowing option.

Licensed moneylenders in Singapore are regulated under the Moneylenders Act and must comply with rules governing interest rates, fees and responsible lending practices.

If you are considering borrowing from a licensed moneylender for the first time, you may also find our First-Time Borrower Guide in Singapore helpful.

Licensed Moneylender Loan vs Credit Card Cash Advance

Many borrowers assume that taking a cash advance from their credit card is similar to taking a personal loan. In reality, they work quite differently.

A credit card cash advance allows you to withdraw cash from your available credit limit. However, unlike ordinary card purchases, cash advances typically begin accruing interest immediately and may also incur a cash advance fee.

A licensed moneylender loan, on the other hand, is assessed before approval and comes with a repayment schedule that is explained before you sign the loan agreement.

If you are considering withdrawing cash from your credit card, you may first wish to read our guide on why you shouldn’t rely on credit card cash advances.

Factors to Compare Before Choosing Either Option

Rather than asking which option is cheaper, it is better to compare the overall borrowing cost based on your own financial situation.

Before deciding between a licensed moneylender loan and a credit card, consider:

• The total amount you need to borrow.
• How long you expect to take to repay the debt.
• The applicable interest rates and fees.
• Your monthly repayment ability.
• Whether you prefer fixed repayments or flexible repayments.
• Whether the borrowing is for a short-term purchase or a larger planned expense.

Asking yourself these questions can help you choose the borrowing option that best matches your financial needs instead of simply selecting the one that appears cheaper initially.

If you are comparing different borrowing options, you may also find our guide on how to compare loan offers from different licensed moneylenders useful before making your decision.

Common Mistakes Borrowers Make

Many borrowers focus only on the advertised interest rate without considering the overall cost of borrowing.

Some of the most common mistakes include:

• Using a credit card for long-term borrowing.
• Making only the minimum monthly credit card payment.
• Taking a cash advance without understanding the fees involved.
• Borrowing more than necessary.
• Choosing a loan without comparing different options.
• Not reviewing the repayment schedule before accepting a loan.

Whichever borrowing option you choose, it is important to borrow responsibly and ensure that the repayments comfortably fit within your monthly budget.

Frequently Asked Questions

Is a licensed moneylender cheaper than using a credit card?

It depends on how you borrow and repay the money. If you repay your credit card balance in full during the interest-free period, a credit card may cost less. However, if you carry a balance over several months or take a cash advance, a licensed moneylender loan with structured repayments may be the more cost-effective option.

Should I use a credit card cash advance instead of taking a loan?

Credit card cash advances often attract immediate interest charges and additional fees. Before using one, compare the total borrowing cost with other financing options. You may also read our guide on why you shouldn’t rely on credit card cash advances.

Can I use a licensed moneylender loan to pay off credit card debt?

Some borrowers use a personal loan to consolidate or manage outstanding credit card balances. However, this should only be done after carefully comparing the repayment terms and ensuring the new loan is affordable.

Which option is better for emergency expenses?

If you can repay the amount quickly, a credit card may be suitable. However, if you require a larger amount or prefer fixed monthly repayments, a licensed moneylender loan may provide a more structured borrowing solution.

How do I know which borrowing option is right for me?

Consider the amount you need, your repayment ability, the total borrowing cost and how quickly you can repay the money. Comparing different financing options before borrowing can help you make a more informed decision.

Conclusion

Neither a licensed moneylender nor a credit card is automatically the cheaper option. The overall cost depends on how much you borrow, how long you take to repay the debt and the fees or interest that apply.

Credit cards can be an excellent choice for short-term spending when the balance is repaid in full each month. On the other hand, a licensed moneylender loan may be more suitable if you require a larger lump sum and prefer the certainty of fixed monthly repayments.

Before making any borrowing decision, compare the total cost, repayment terms and suitability of each option. Choosing a licensed moneylender in Singapore that practises responsible lending and provides transparent loan terms can help you borrow with greater confidence.

Looking for a More Structured Borrowing Option?

If you need a lump sum with fixed monthly repayments, you can submit your enquiry through the Lending Bee online loan application form.

Our team will explain your available borrowing options, discuss the loan terms clearly and help you determine a financing solution that suits your financial needs. You may also explore our Personal Loan, Short-Term Loan and Instant Fast Cash Loan options before applying.

About Ashley Sim

Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.