Licensed moneylenders are lifesavers when you require some cash quickly. Sadly, in recent times an unlawful industry of ‘loan sharks’ acting as legal moneylenders is growing fast, preying on unsuspecting borrowers.  Loan sharks are famous for their cruel business practices, charging huge interest rates–and coercing, threatening, and frightening borrowers. Although we may wish that loan sharks declared the true nature of their dealings openly, the reality is that a lot of them claim to be certified moneylenders. Therefore, you should know how to differentiate between licensed moneylenders and loan sharks as you seek for credit from lenders. The below guidelines will help you tell them apart.

Licensed Moneylenders Explain The Loan Terms In A Simple Language

Singaporean law requires licensed moneylenders to explain terms of the personal loan to you using a simple language that is easy to understand. This includes responding to any questions you may have concerning your loan, and also explain the interests, repayment period and repayment method options. When you encounter a moneylender who gives you an agreement without explaining the terms using simple English, it’s best you don’t deal with them as it’s likely that its a loan shark.

Licensed Moneylenders Set Unsecured Loan Amounts Based on Your Income

Singaporean law has set maximum loan amounts depending on your salary for the unsecured personal loans. Since 2016, the rates are: Below $20,000 annually: $3,000 and below Above $20,000 but under $30,000 annually: equal of 2 months’ earnings Above $30,000 but under $120,000 annually: equal of 4 months’ earnings Yearly income $120,000 and above: limitless When you talk to a lender who offers you strangely high amounts (higher than the legally permitted based on your income), consider it a warning sign: this could be a loan shark.

Licensed Moneylenders Will Always Have You Sign a Contract

By law licensed moneylenders are required to have their borrowers sign an agreement. The agreement will be drawn by a lawyer and includes information like Interest rates, late payment charges, Repayment time. When someone offers you a loan without an agreement OR asks that you sign blank or an incomplete agreement, don’t accept their offer. This manner is unlike of a certified moneylender and could be a loan shark.

Licensed Moneylenders Do Not Charge Above-Market Interests

Since the beginning of October 2015, the highest interest rate was put at 4% a month. Licensed moneylenders should never charge more than that. Loan sharks, on the other hand, usually charge way more than this—they could charge 40% a month or even more.

Licensed Moneylenders May Only Charge 3 Types of Fees

According to the Singaporean law, moneylenders should only charge 3 fee types (other than interest): When it happens that a personal loan goes into default: a late payment charge of not more than $60 a month plus late interest fees of 4% a month is charged on your outstanding principal. Up-front service charges (should not go above 10% of the loan value). Legal fees coming up from any court challenge. When you come across a lender who charges fees above the maximums, it’s likely they are a loan shark. For instance, when the lender says that you need to pay $100 each month in late payment charges, these fees are illegal–licensed lenders wouldn’t deliberately do this.

Licensed Moneylenders Are Listed On The Ministry Of Law Website

Singapore’s licensed moneylenders are all listed on the Law Ministry’s website. When in contact with a legal moneylender, ensure you have confirmed from the website that they are listed. When not, it’s very possible they could be a loan shark. One condition that a licensed lender might not be listed is when they have recently received their license and the information on the site hasn’t been updated. When you consider this to be the situation, you can confirm with the ministry on 1800 2255 529.

Licensed Moneylenders Always Have An Office

By Singaporean law, licensed moneylenders need to have an office that has to match with the one registered against their name on the Law Ministry’s website. Your first meeting, as well as contract-signing with a legal moneylender, will always occur in their office space. However, they might communicate by email or phone afterward. Loan sharks, on the other hand, oftentimes will not have an office. It being an illegitimate business, they don’t worry about what’s stated by the law. Therefore, the official requirement of having an office doesn’t affect them. Thus, when you come across someone claiming to be a lender but does his business entirely online and even openly admits to not owning an office, be cautious. They very likely could be a loan shark.

Loan Sharks Mostly Use Abusive Language and Threats

Loan sharks mostly depend on intimidation, abusive language, and threats when collecting fees. Professional rules don’t permit licensed moneylenders to employ any of such procedures. When you come into contact with a ‘moneylender’ who is known for threatening and abusing their borrowers, avoid them. They are possibly a loan shark.

Confirm The Address And License Information With Singaporean Law Ministry

Do recognize that loan sharks may at times use a legal moneylender’s address, name, license number and other details to create a false sense of trust and security with unsuspecting victims. To ensure you are safe, it is highly recommended that you confirm the information given to you by anyone alleging to be a legal moneylender, by following these methods: Confirm that the name, license number, and address match. Conclude the loan process and sign the agreement in person but only at the registered office address held with the Ministry. Legal moneylenders always have you sign the finalized agreement in person and at their registered offices. When they ask you to sign the agreement elsewhere, or even don’t have a contract, be sure that they are a loan shark.

A Closing Word

Being aware of your rights when borrowing money is important for your financial safety. There are very many loan sharks operating in the country who prey on innocent Singaporeans who lack the necessary information to make a good judgment.