There are times when we find ourselves in a situation where we are in dire need of some cash and the only solution is to apply for a loan. While approaching licensed money lenders or banks would be the safe and legal way to obtain emergency funds, some people may resort to unlicensed money lenders because of their seemingly attractive interest rates.
If certain personal loans seem unbelievably affordable to repay, you may want to rethink applying for them. With the rise of loan scams in Singapore, more individuals are falling prey to the tactics of unlicensed money lenders. The result is the loss of a large sum of hard-earned money to a laundry list of illegal fees and charges.
Before applying for your first personal loan, check out the top five examples of loan scams in Singapore and how you can safeguard yourself against these frauds.
What is a loan scam?
While most loan scams in Singapore are easy to spot, some individuals who are desperate for a cheap loan may fall into the trap that unlicensed money lenders set. Loan scams usually promise quick loan approval, shorter tenures, and suspiciously low interest rates. If you’re on the lookout for a loan with a short tenure, getting a payday loan is possible through licensed establishments. All you need to prepare is the relevant supporting documents before getting the green light.
Loan scams usually promise personal loans that can be easily applied for and approved online, with funds disbursal being done remotely as well. This is the biggest red flag as licensed money lenders require you to visit their business premises in person to verify your identity and review the loan contract before signing it.
Only then can they release the funds to you in cash or via a bank transfer to your preferred account. Now, onto the top five examples of loan scams in Singapore.
Top 5 examples of loan scams in Singapore
1. Loans that are offered via text message or email
A clear example of a loan scam would be that the loan itself is advertised via text message or email. Licensed money lenders are legally prohibited from advertising through SMS, email, social media, and instant messaging services.
Moreover, licensed money lenders usually contact their clients through a Singapore-based office landline. Loan scammers would use a mobile number, more often than not.
2. Loans that require a deposit before funds disbursal
This has recently become a popular way for loan scammers to draw out cash from their victims. In 2019 alone, S$6.8 million was lost thanks to this tactic as applicants were tricked into believing that this would guarantee loan approval. Licensed money lenders will never ask for a deposit to be made. And remember, all loan contract reviews and confirmations have to be performed in person.
3. Lenders demanding to keep your original personal identity documents
Loan scammers may ask to keep the original version of your personal documents, whether it’s your work pass or NRIC. However, please keep in mind that this is strictly prohibited.
Licensed money lenders would ask you to bring your original personal identification before approving your loan, but your identity card would always be returned immediately after verification and documentation.
4. Loans that do not require any form of supporting documents
Some licensed money lenders can provide quick approval for personal loans–clients may receive their funds within an hour or two. However, no matter the type of loan, any licensed business will need proof of your monthly income at the very least.
Your monthly income will help the lender determine the maximum loan amount that you are eligible for. However, if the lender that you approach approves any loan amount without verifying your income statements or overall financial capability, that is a clear sign of a loan scam.
5. Loans with suspiciously low interest rates
Many licensed money lenders will have competitive rates for their loans to stand out from the competition.
If the lender you approach proposes a rate that seems too good to be true, it probably is. Additionally, the interest rates from banks are known to be slightly lower than independent businesses. However, if the interest rates your lender is advertising are as low as or even lower than a local bank, it’s definitely a red flag.
A good way to gauge interest rates is by enquiring with other licensed money lenders and comparing the overall cost of a loan.
How to protect yourself from loan scams
Loan advertisement messages from anonymous numbers have been increasing rapidly and the best way to protect yourself from these loan scams in Singapore is by ignoring and blocking these messages that you get.
Additionally, you could also report these numbers and email addresses to the police. If you ever find yourself stuck in a loan scam with lost cash, please report the lender to the police by calling ‘999’ or the X-Ah Long hotline at 1800-924-5664.
Lastly, the best way to protect yourself from a loan scam would be to always take up loans from a reputable licensed money lender. Dio Credit is a prime example of one and we have been operating ever since 2013. Applying for a loan from us is quick and simple. Simply contact us here to begin your application and our loan executives will reach out to you as soon as possible.