No one is immune to financial crises. Unexpected situations can happen at any time where your savings might not be enough. This is where taking a personal loan can come in handy. And one of the most crucial factors to consider is the interest rate.
Aside from traditional banks and financial institutions, Singaporeans can also rely on licensed money lenders for financial assistance. But what is the average interest rate charged by legal lenders in Singapore?
The interest rate will vary between 1% and 4%, depending on your income. Regulated by the Registry of Moneylenders, the maximum interest rate that moneylenders can charge is 4% per month.
What Is the Interest Rate for a Licensed Money Lender?
Banks and licensed moneylenders will measure the risk that they are taking by providing a loan to an individual. That said, the personal loan interest rates charged to borrowers will vary depending on the loan provider. These loan providers take into account several factors including:
- Borrower’s annual income
- Loan amount
- Loan tenure
So what is a good personal loan interest rate?
A decent interest rate can be different for everyone. Some banks offer personal loan interest rates that range between 3.5% and 11% per year. Licensed moneylenders, on the other hand, can charge 12% to 48% per year.
If you’re comparing different loan plans, you might have come across with two different interest rates: the annual interest rate and the effective interest rate.
- Annual Interest Rate: This is the interest rate advertised by the bank. This will decide how much you have to pay to the bank every month.
- Effective Interest Rate (EIR): This rate is often higher than the annual interest rate because it includes other costs, such as transaction fees and administrative fees. The EIR reflects the true cost of the personal loan.
In Singapore, most banks and financial institutions charge an annual flat interest rate of approximately 5.6% per year on the principal of the loan.
Let’s take a look at this example:
Say you’re borrowing S$75,000 at a flat rate of 6% for three years. The annual interest rate will be S$4,500.
(0.06/12) x 75,000 = S$375 (interest you’ll have to pay for the first month)
S$375 x 12 months = S$4,500 annual interest rate
Banks vs. Licensed Money Lenders
Applying for a personal loan can be helpful when you’re tight on financials. Personal loans can help with credit card bills, medical bills, or debt consolidation. When it comes to taking out loans, most Singaporeans choose to borrow from banks.
However, banks tend to have longer and more stringent approval processes. This may not be appealing to those who need urgent cash. Licensed money lenders, on the other hand, have faster approval and less stringent requirements.
That’s why some people turn to borrowing payday loans or personal loans from licensed money lenders.
But is private money lending legal in Singapore?
In Singapore, private money lending companies need to be registered with the Registry of Moneylenders to get a license to operate. Licensed money lenders are strictly regulated by the government. This is to ensure that they offer fair rates to borrowers. As a result, it prevents people from taking on more debt than they can afford.
How do banks and licensed money lenders differ?
| Licensed Money Lender Singapore | Banks | |
| Loan Amount | Less than S$3,0006x monthly income if your annual income is at least S$20,000 | 2-6x monthly salary up to S$200,000 |
| Speed | Extremely fast, 30 minutes to a few hours | 1-2 days |
| Interest rates | Up to 4% per month | 3.5% and 11% per year |
| Lending Standards | Low | High |
Here’s a comparison of the top 5 banks offering personal loans in Singapore
| Bank | Interest Rate (p.a.) | Maximum Loan Tenure | Minimum Yearly Income | Processing Fee |
| Standard Chartered CashOne | 3.48% p.a. | 5 years | S$20,000 | S$0 |
| Citi Quick Cash (New Loan Customers | 3.54% | 5 years | S$30,000 | S$0 |
| UOB Personal Loan | 3.4% p.a. | 5 years | S$30,000 | S$0 |
| HSBC Personal Loan | 3.2% p.a. | 7 years | S$30,000 | S$0 |
| DBS Personal Loan | 3.88% | 5 years | S$30,000 | S$100 |
How Much Can You Borrow From a Licensed Money Lender?
You can borrow any amount for secured loans. For unsecured loans, please refer to the table below:
| Borrower’s annual income | Singapore Citizens and Permanent Residents | Foreigners residing in Singapore |
| Less than $10,000 | $3,000 | $500 |
| At least $10,000and less than $20,000 | $3,000 | $3,000 |
| At least $20,000 | 6 times monthly income | 6 times monthly income |
What Are the Charges and Fees?
All licensed money lenders in Singapore can only impose the following charges and fees:
- Late repayment fee not more than S$60
- Loan approval fee of not more than 10% of the principal loan amount when a loan is granted
- Legal costs ordered by the court for a successful claim by the money lender for the recovery of the loan
Note: The total charges imposed by the licensed money lender (including interest, late interest, upfront administrative fee, and late fee) must not exceed the principal loan amount.
Best Licensed Moneylenders in Singapore by Location (2023)
- Bugis – Bugis Credit
- Raffles – 1 Fullerton Credit, Raffles Credit
- Chinatown – A1 Credit
- Bras Basah – Fortune Credit
- Orchard – 365 Credit Solutions
How To Avoid Illegal Loan Providers
1. Verify that the money lender is licensed
Before you deal with any money lender in Singapore, make sure to verify that they are registered on MinLaw’s Registry. Check the list of licensed moneylenders. You can access the complete list here.
Each month, the Registry of Moneylenders provides an updated list of licensed money lenders. This way, you can avoid blacklisted or unlicensed money lenders when taking a personal loan.
2. Check the licensed moneylender’s advertisem*nts
If you come across loan advertisem*nts through phone calls, emails, or text messages, you’re probably dealing with loan sharks.
Licensed money lenders are only allowed to advertise through the following channels:
- Business or consumer directories
- The money lender’s business website
- Advertisem*nts are placed within the licensed lender’s place of business, such as walls, doors, shutters, gates, or windows.
3. Make sure that the money lender has a physical address
When checking the list of licensed money lenders, you will notice that it will also contain the money lender’s physical business address. Verify the information listed there by visiting their office.
When borrowing from a legal money lender, you are required to go to their physical business address for the verification process. If you are approved for a personal loan without going to their office, you may be dealing with illegal money lenders.
4. Face-to-face verification with a legal money lender
Licensed money lenders are required to perform face-to-face verification before approving any loan application. They need to exercise due diligence.
During the appointment, the loan officer is required to explain in clear detail the terms and conditions of the loan. Lastly, the legal lender is required to provide you with a filled-in loan contract.
5. Be aware of the following red flags:
- Using abusive language or behave in a threatening manner
- Asking for your SingPass ID and/or password
- Refuse to give back your NRIC card or other personal ID documents, such as passport or employment pass
- Asking you to sign a blank or incomplete loan contract
- Granting you a loan without providing a copy of the loan contract.
- Withholding any part of your principal amount for any reason
MinLaw’s Reminder to Borrowers
Before going to a money lender, consider alternative Government financial assistance schemes and grants. But if you have decided to take out a personal loan with a legal money lender, here are a few things to remember:
- You are legally obligated to fulfill any loan contract you signed with a legal money lender
- Can you comfortably afford the loan? Take into account your income and other financial obligations and borrow only what you need.
- Licensed money lenders are required by law to properly explain the terms and conditions of the loan in a language you understand.
- Make sure that you understand the repayment schedule, the interest rate charged, and other fees.
- Read the fine print. Be mindful of contracts that allow a money lender to lodge a caveat on the sale proceeds of your real estate property in the event you default on the loan repayment.
– Compare loan plans from different legal money lenders before committing to one.
How To Apply?
Eligibility:
- At least 21 years old
- Singaporean, Permanent Resident, or Foreigner
- Minimum Salary:
- Singaporean or Permanent Resident: S$2,000
- Foreigners: S$3,000
Requirements:
Singaporean or Permanent Residents:
- Identity card
- Proof of residence such as a utility bill, a letter addressed to you, or a tenancy agreement
- Proof of employment, such as a certificate of employment or recent 3 months’ worth of payslip
- SingPass (to log into CPF, HDB, IRAS website)
Foreigners
- Passport
- Work Permit / S Pass / E Pass
- Proof of residence such as a utility bill, a letter addressed to you, or a tenancy agreement
- Proof of employment, such as a certificate of employment or recent 3 months’ worth of payslip
- Recent 3 months payslip
- Proof of income, such as bank or account statement
- SingPass (to log into IRAS website)
Closing
When you’re facing financial difficulties in Singapore, rest assured that you will not run out of options. Aside from banks and government agencies, you can also rely on licensed money lenders to get through tough financial situations. However, make sure to borrow only what you need at an interest rate you can afford.
Key takeaways
- Some banks offer personal loan interest rates that range between 3.5% and 11% per year.
- A licensed moneylender can charge between 1% to 4% interest rate per month, this amount to 12% to 48% per year.
- Private money lending companies need to be registered with the Registry of Moneylenders to get a license to operate.
- Verify that the money lender is registered and licensed by checking the list of licensed moneylenders on MinLaw’s website
In need of urgent cash? Find the best unsecured personal loans in Singapore with the help of loan comparison websites, such as Moneylender Review. Request for a quote today and receive up to three suitable loan plans from the top licensed money lenders in Singapore.
