Key Takeaways
- If you cannot repay a licensed money lender, contact the lender early to discuss restructuring or extending your repayment plan.
- Licensed money lenders in Singapore can legally charge up to 4% interest per month, with total charges capped at the original loan principal.
- Borrowers struggling to settle debts can seek help through government programmes like the Debt Repayment Scheme or Credit Counselling Singapore.
- Defaulting on a loan may lead to legal action and damaged credit, so proactive communication and timely restructuring are critical.
- Always borrow within your means, verify the lender’s licence on the Ministry of Law’s Registry, and avoid illegal or unregulated lenders.
Imagine this. You are in a tight spot because you don’t have the cash on hand to pay back your loan from a licensed money lender.
You could use a personal loan, but they’ll want collateral, you’ll have to put up your home or car title as a guarantee that you’ll repay the debt.
What do you do if you can’t afford to put up these valuable assets for one reason or another? In this article, we’ll explain what options are available to you when you can’t settle your loan with a licensed money lender.
What Licensed Money Lenders Are
Licensed money lenders are approved to provide borrowers with instant loans. In Singapore, they are regulated by the Ministry of Law.
They offer loans to citizens, permanent residents, and foreigners with valid employment passes.
Licensed money lenders are the best alternative if you are looking for a quick loan and a less stringent application process.
But it’s important to confirm whether your preferred money lender is in the Registry of Moneylenders’ list of licensed money lenders.
What Types of Loans Can You Borrow from a Licensed Money Lender?
Licensed money lenders in Singapore provide unsecured loans only. This means borrowers are not required to pledge assets such as property, vehicles, or jewellery as collateral when taking up a loan.
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Instead of relying on collateral, licensed money lenders assess a borrower’s income level, employment stability, and overall repayment capacity before approving a loan. This regulatory approach is designed to protect borrowers from risking essential assets when borrowing short-term funds.
As unsecured loans are governed by strict income-based borrowing limits, the amount you can borrow depends on how much you earn rather than what you own.
Licensed money lenders typically offer the following types of unsecured loans:
- Personal loans
- Business loans
- Renovation loans
- Medical loans
- Wedding loans
- Debt consolidation loans
In Singapore, the total amount you can borrow from licensed money lenders across all lenders is capped by law. For borrowers earning less than $10,000 annually, the maximum unsecured loan amount is $3,000. Those earning $20,000 or more per year may borrow up to six times their monthly income.
Before proceeding, it is important to check your eligibility and understand how much you can realistically afford to repay, especially given the shorter repayment tenures typically associated with licensed money lender loans.
Advantages of Borrowing Money from Licensed Lenders
Most licensed money lenders will disburse the money you need instantly once you sign the loan contract and after they carry out the physical verification. In some cases, you can get the loan within 30 minutes.
You can apply for a loan by visiting your preferred lender’s office or through its website. The application process is straightforward and usually does not require extensive documentation.
Licensed lenders are mandated by law to ensure you understand all the terms and conditions before signing for the loan.
They also lend based on your income, which helps prevent borrowers from taking on more debt than they can reasonably manage.
Disadvantages of Borrowing from Licensed Lenders
Licensed lenders are allowed to charge an interest rate of up to 4% per month. This translates to more than 40% per year, which is significantly higher than bank loans.
Loan tenures are typically shorter, often ranging from one to three months, resulting in higher monthly repayments.
If you default on your loan, the lender is allowed to charge late interest on outstanding amounts, along with a monthly late fee of up to $60 and legal costs if applicable.
Failing to repay on time can also negatively affect your credit profile, making future borrowing more difficult.
How Are You Protected by the Law When Borrowing from a Licensed Money Lender?
Under the Moneylenders Act, borrowers are protected from unfair practices. Licensed money lenders must explain all loan terms clearly before disbursement.
Interest is capped at 4% per month, and late fees are regulated. Total charges, including interest and fees, cannot exceed the original principal.
Licensed money lenders are also prohibited from harassment, intimidation, or excessive advertising.
What If You Can’t Settle the Loan with a Licensed Money Lender?
If you are unable to pay your debt, you should speak to your lender as early as possible. Many lenders are open to granting extensions or restructuring repayments.
Restructuring allows you to repay the loan in smaller instalments over a longer period, easing short-term cash flow pressure. To stay organised, borrowers can use the Lending Bee® loan app to track instalments, monitor their repayment schedule, and manage their loan more effectively.
If you are managing multiple high-interest debts, consolidating them into a single structured repayment may help. A debt consolidation loan can simplify repayments and provide clearer oversight of your obligations.
Apply for a Debt Repayment Scheme
The debt repayment scheme is a government-administered programme that consolidates unsecured debts into one repayment plan, typically spread over up to five years, subject to eligibility.
Go for Credit Counselling
Credit counselling helps borrowers understand debt management and repayment strategies. Counsellors can assist with budgeting, prioritisation, and negotiations.
File for Bankruptcy
If you owe more than $15,000 and are unable to repay, bankruptcy may be an option of last resort. While it stops interest accumulation, it carries long-term consequences for credit and employment.
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What Happens If You Default on the Loan?
Defaulting on a loan can significantly damage your credit standing. Lenders may pursue legal action or appoint debt collectors, and secured collateral may be at risk.
It is crucial to borrow responsibly and ensure you can meet repayment obligations.
How Credit Counselling Singapore Can Help
Credit Counselling Singapore provides financial guidance and debt management support to help borrowers understand their financial position and explore sustainable repayment options.
Counsellors work with borrowers to restructure repayments and restore long-term financial stability.
Other Ways to Get Help
- Seek interest-free assistance from trusted family or friends to prevent further interest accumulation.
- Sell assets or property to clear outstanding balances where appropriate.
If you find yourself unable to settle your loan, contact your lender early, explain your situation, and work out a feasible repayment plan.
Lending Bee offers loan packages tailored to different income groups, with structured repayment options that help borrowers regain control of their finances. You can also use the Lending Bee® loan app to manage your repayments, check your balance, and stay in control of your loan after approval.
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.
