Adulting: Borrowing from Licensed Moneylenders
This article was contributed by Credit Bureau Singapore and edited by The Blue and Gold.
Did you know that you can apply for personal loans from Licensed Moneylenders (LMLs) other than the usual banks and financial institutions? LMLs are approved lenders governed by the Ministry of Law (MinLaw) with regulations to abide by.
What is the Moneylenders Credit Bureau (MLCB)?
Commencing 1 July 2021, Credit Bureau Singapore (CBS) has been designated by the MinLaw as the new operator of the Moneylenders Credit Bureau (MLCB).
MLCB is a central data repository on borrowers' loans and repayment records with LMLs. It helps lenders make informed decisions when considering loan applications by prospective borrowers. It also helps borrowers better manage their loans and financial situation. The MLCB does not collect data on the borrowers’ bank credit facilities, bank deposit information, or make lending decisions on behalf of LMLs.
What is a Loan Information Report?
Your loan information report is a record of your loan payment history compiled from different LMLs. The report includes:
The borrower’s personal particulars
The details of the active loans –loan type and loan tenure, total outstanding balance across all loans, status of guarantor or surety of any loans and repayment status of each loan
This report can be assessed by borrowers, licensed moneylenders and MinLaw.
LMLs are required to check your loan credit report to assess your creditworthiness prior to approving your loan request. A good loan repayment history or lower aggregate loan cap will make it less challenging for you to qualify for loans. A list of LMLs in Singapore can be found here https://rom.mlaw.gov.sg/information-for-borrowers/list-of-licensed-moneylenders-in-singapore/.
What to look out for if you are borrowing from a LML:
1. Borrowing Guideline for unsecured loans
The guidelines set by MinLaw dictate how much a borrower can borrow from a licensed moneylender for unsecured loans.
A Singapore citizen can borrow up to $3,000 if their annual income is less than $20,000 and can borrow up to 6 times their monthly income if their annual income is $20,000 and above.
For foreigners staying in Singapore, if their annual income is less than $10,000, they can borrow up to $500 only. For those with annual income between $10,000 and $20,000, they can borrow up to $3,000 and if their annual income is at least $20,000, they can borrow up to 6 times their monthly income.
2. What are the interest rates moneylenders can charge?
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% per month. This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one. If a borrower fails to repay the loan on time, the maximum rate of late interest a moneylender can charge is 4% per month for each month the loan is repaid late.
3. What are the fees that moneylenders can charge?
With effect from 1 October 2015, all moneylenders are only permitted to impose the following charges and expenses:
a. A fee not exceeding $60 for each month of late repayment;
b. A fee not exceeding 10% of the principal of the loan when a loan is granted; and
c Legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan.
4. Beware of borrowing from unlicensed moneylenders - licensed moneylenders are permitted to advertise only through these three channels:
a. Business or consumer directories (in print or online media)
b. Websites belonging to the moneylender
c. Advertisements placed within or on the exterior of the moneylender’s business premises.
All other channels are prohibited.
Lastly, Borrow Responsibly
Borrowing beyond your means can leave you struggling financially as you go deeper into debt. Consider all the other existing loans that you have and understand your financial standing before applying for additional loans. Do not borrow for the sake of repaying another debt as you may risk falling into multiple, bigger debts which makes it even more difficult for you to repay in the future. It is also important to do ample research and clear any doubts with the LMLs before you agree to take up the loans.
To purchase a copy of your report, go to MLCB website or walk-in to MLCB office at 2 Shenton Way, #20-02 SGX Centre 1, Singapore 068804. Should you have any questions regarding your Loan Information Report, call us at 6335 5897 or send in an inquiry to email@example.com.
Lastly, be sure to follow and like the MLCB Facebook page @MLCBSG for more useful content and tips to maintain a good credit reputation!
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