Unlicensed Money Lenders: How To Deal With Loan Sharks

Despite the sheer number of banks and legalised money lenders in Singapore, unlicensed money lenders (also known as loan sharks) are not as uncommon as you might think. It’s important that you stay safe when searching for a suitable loan to tide over your financial needs because illegal money lenders in Singapore do have their ways to lure unsuspecting individuals in.

It’s crucial to avoid unlicensed moneylending at all costs, no matter how desperate you may be for a loan.

Read on to learn about the simple tips and tricks on identifying unlicensed money lenders, why borrowing from unlicensed money lenders is dangerous, what you should do to deal with these illegal money lenders in Singapore, how to report unlicensed money lenders, etc.

Why some fall prey to unlicensed moneylending

In a country like Singapore where over 90% of the population is literate, it is hard to believe that many still fall into the trap that illegal money lenders in Singapore set. The loan shark industry is still prevalent as those in dire situations tend to think less rationally and are inherently more vulnerable to seemingly attractive illegal loan offers.

This is why having a clear understanding of where the possible traps are laid and taking mindful steps to avoid them are of utmost importance when it comes to avoiding unlicensed moneylending.

Why borrowing from unlicensed money lenders is dangerous

These unlicensed money lenders are ruthless and they try to scam you into handing over your hard-earned money for loans that have deceptive terms and conditions.

Unlicensed money lenders are dangerous because they trick borrowers into taking up loans at exorbitant interest rates and utilise unregulated harassment methods when recovering debts from borrowers. Their methods often cause distress or even harm to borrowers, their families, their employers, and even disrupt the neighbourhood.

What’s more, unscrupulous lenders like loan sharks in Singapore have a knack to make people’s lives miserable. Even if you are able to punctually repay your scheduled repayments in full, loan sharks can still come up with new terms to extort more money from you. These methods include imposing additional fees or suddenly changing your loan tenure to a shorter one, making it impossible for you to fully repay the loan on time — keeping you in their vicious debt cycle.

What are some telltale signs of unlicensed money lenders?

Here are several telltale signs of unlicensed money lenders you should be aware of:

1. Unsolicited loans via text messages and social media platforms

One obvious sign is the way unlicensed money lenders advertise their services. A business that’s conducting any form of unlicensed moneylending will advertise via flyers, SMSes, WhatsApp messages, social media platforms, etc.

These forms of communication are not within the three permissible rules of advertising for legal lenders:

• Official business and consumer directories (in print or online media);
• The money lender’s website(s); and
• Promotional materials or advertisements placed inside the lender’s office or on the outside of the premises (e.g. external wall, doors, shutters, gates, and windows).

2. An online-only loan process

Another indicator is the money lender not having a legitimate and approved place of business where you can sign the loan contract in person. As a result, unlicensed money lenders will attempt to have an application and funds disbursal process that’s fully online or remote.

A licensed money lender in Singapore has to verify the identity of the borrower and do a simple credit assessment at its place of business before granting the loan. Do check the address of the money lender’s office via the Registry of Moneylenders’ list of licensed lenders if you aren’t sure about a particular loan company.

3. Charging processing fees before the loan is approved or granted

A licensed lender in Singapore cannot ask you to make any form of payment before loan approval, such as an upfront fee to get the loan process started or expedited. Also, licensed lenders’ processing fees are legally limited to 10% of the loan principal at most.

Any administrative fee should only be paid after the loan is approved,just before the loan is disbursed. This payment is often deducted from the principal amount itself.

Should a money lender request or demand for these fees to be paid ahead of loan approval and/or funds disbursal, you’re most likely borrowing from unlicensed money lenders or illegal money lenders in Singapore.

4. Exorbitant interest rates and charges

Unlicensed money lenders tend to charge extremely high interest rates and cut-throat fees and charges that are far higher than what legal lenders are allowed to levy on a loan.

That’s not all. Illegal money lenders in Singapore may even go the extra mile to hide the real interest rate they are charging using complex calculation methods that aim to confuse —and con— unsuspecting borrowers.

In case you didn’t already know, legal lenders can only impose an interest rate —as well as a late interest rate— of up to 4% monthly for personal loans. This applies no matter if the loan is a secured loan or unsecured loan.

As for permissible fees and charges, legal lenders’ late repayment fees are capped at a maximum of S$60 for each month of late repayment.

On the whole, the total aggregate amount charged by legal lenders for all interest, late interest, administrative fees and late repayment charges cannot be more than the borrower’s loan principal.

5. Not doing any credit assessment

Unlicensed money lenders are unlikely to do any thorough credit assessment before offering you a loan. On the other hand, although licensed lenders do offer no credit score check loans, they are still obliged to check on borrowers’ borrowing limits before any loan offer can be granted.

Most likely than not, illegal money lenders in Singapore are hasty in this regard — they are more than happy to tie down unsuspecting borrowers as soon as they can.

6. Not imposing any borrowing limit

Extending from the above point, unlicensed money lenders are unlikely to impose any borrowing limit when it comes to their loans. The more money a borrower borrows from these loan sharks, the more they can milk out of the borrower.

On the contrary, licensed lenders are only allowed to offer an aggregated loan amount of up to 6x a borrower’s income at any given time.

7. Lack of clear, transparent loan contract

Unlicensed money lenders do not bother to provide borrowers with transparent loan contracts that clearly detail everything about the loan in black and white. Some don’t provide any loan contract, while others may offer an incomplete contract fraught with questionable terms and conditions — both of which are not ideal cases.

Money lenders that conduct unlicensed moneylending practices tend to avoid answering your queries directly, as opposed to legal lenders.

A licensed lender will provide you with proper information regarding the terms and conditions of any loan contract —including the loan’s interest rate, tenure, repayment schedule, and any other additional fees and charges— plus take the time to answer all your queries about the loan terms.

Thereafter, they will check if you would like to proceed with the loan. It’s only when you’re clear and agreeable that you commit and sign on the legally binding agreement. There shouldn’t be any pressure or hard-selling involved at all.

8. Rude, threatening language and behaviour

Unlicensed money lenders are known for their tendency to be loud and rude. It is not uncommon for them to use threatening language and behaviour, along with vulgarities when dealing with borrowers. Many loan sharks in Singapore even harass or use violence on their borrowers during debt collection!

But if you’re dealing with a legal lender and yet they’re showing signs of hostile behaviour, you may be experiencing licensed money lender harassment. If this is the case, you should lodge a complaint against the lender with the Registry of Moneylenders and they will assist in doing a thorough investigation.

Steps to take to tackle illegal money lenders in Singapore

The Singapore Police Force has always emphasised the threat of unlicensed money lenders to the community. Additionally, the police have been actively clamping down on these syndicates to reduce the rising number of loan scam cases. However, more needs to be done within the community to fight against these negative occurrences.

Here’s what you can do, pronto:

1. Ignore advertisements from unlicensed money lenders: Do not respond to such messages or give out your personal information to anyone. This includes your NRIC, Singpass login details, and bank account information.
2. Delete, block, and report: Don’t leave it at just deleting unsolicited unlicensed money lender messages from your mobile phone — block and report these scammers immediately. Even personal and group WhatsApp messages can be reported within the app itself.
3. Make a report: Report unlicensed money lenders and all loansharking activities to the police by calling 999.
4. Contact the relevant hotline: Call the X-Ah Long hotline at 1800-924-5664 to report the unlicensed money lender.
5. Use I-Witness to provide information about suspicious unlicensed money lender activities: An online submission platform managed by the Singapore Police Force where you can choose to remain anonymous, you can safely supply relevant information to the police on this platform.
6. Be a helping hand to others: Educate your foreign domestic worker about unlicensed money lender scams and the consequences of taking up a loan with them or assisting them in loan sharking activities.

Bottom line: Only borrow from legitimate lenders in Singapore

If you’re looking for personal loans but are wary of your options, do know that there are plenty of authorised lenders in Singapore you can consider. You simply need to make sure that the lender is registered and be aware of the telltale signs of unlicensed money lenders illustrated above.

Take Dio Credit for instance. We’re a reputable loan company in Singapore that offers a variety of loan options. This includes debt consolidation loans that allow you to consolidate all your debt into a single plan for easier loan management.

Contact us for a personalised loan quote or to find out more information. Meanwhile, if you’ve already settled on a particular loan, feel free to apply for the loan with us today.