Are No-Collateral Loans Money Lender Scams or Legitimate?

Are no-collateral loans legitimate or just another money lender scam in Singapore? Foremost, a no-collateral loan is a type of unsecured personal loan that does not require borrowers to pledge their assets, such as a house, car, or other valuables as security. There are many variations of no-collateral loans used for different purposes, such as loans for medical procedures and wedding loans in Singapore. Contrary to popular belief, no-collateral loans offered by licensed money lenders in Singapore are legitimate and not a money lender scam.

With that being said, it never hurts to stay informed and vigilant, especially with the rising number of loan and money lender scam cases in Singapore.

Keep reading to find out how you can differentiate between legitimate and unlicensed money lenders, and how you can better protect yourself from money lender scams before applying for a loan.

What are Money Lender Scams?

One of the most common forms of money lender scams in Singapore is impersonation scams, where scammers operate under the facade of authorisedlenders offering loans with enticing terms.

Unsuspecting victims may receive unsolicited loan offers via SMS or WhatsApp and, upon accepting those offers, be asked to pay upfront “fees” as a deposit before the loan gets disbursed. Once these deposits are made, the scammers disappear without a trace, leaving the victim with both a financial loss and the failure to obtain a loan.

Another form of money lender scam in Singapore involves illegal lenders posing as licensed money lenders. Similarly, victims may receive unsolicited loan advertisements and be asked to make deposits before the loan can be processed and disbursed.

The difference here is that the victim actually receives the loan, only to get a rude shock when they realise that the money lender is charging exorbitant interest rates far beyond the licensed money lender interest rate cap of 4% per month. Operators of money lender scams may even demand sensitive information like the victim’s Singpass login information or bank account information to harass the victim for more money.

Spot the Difference: Money Lender Scam or Legal Money Lender?

One of the main reasons why no-collateral loans are often regarded with suspicion is their perceived association with money lender scams and illegal moneylending.

Typically, banks and other major lending institutions do not extend loans to anyone with a less-than-perfect financial record; if they do, assets must be pledged as loan collateral.

On the other hand, ‘ah longs’, or illegal money lenders, have a reputation for extending loans to people in need without asking any questions, as part of their modus operandi to entrap as many unsuspecting borrowers as possible. As a result, most people are wary when it comes to taking on no-collateral loans that sound too good to be true.

With an ever-growing number of money lenders on the market, it can get increasingly difficult for borrowers to discern legitimate moneylending services from money lender scams in Singapore.

Here’s a summary of the key differences between licensed and illegitimate money lenders that you need to know:

How to Protect Yourself From Money Lender Scams?

1. Verify the money lender’s details on the official Registry of Moneylenders list. The lender’s licence number, name, business address, and landline number must tally with the information in the list.
2. Watch out for unsolicited contact and aggressive advertising. Remember that legal lenders will never send you unsolicited messages or calls — do not respond if you ever receive them.
3. Insist on an in-person meeting at their registered premises. If the money lender pushes for online-only transactions, phone approvals, or suggests meeting at an unofficial location (such as a public place or your home), that should set off some alarm bells in your head.
4. Be wary of lax application processes. If a money lender promises instant approval without any checks, it is likely a scam.
5. Guard your personal information and documents. Never provide sensitive personal information like your Singpass login details or hand over important identification documents like your NRIC, ATM card, or driver’s licence.
6. Check the loan contract. Ensure that the contract is complete and clearly outlines all terms and conditions, like the principal amount, interest rate (it should be 4% per month or less), repayment schedule, and all fees. Do not let anyone rush or pressure you into signing the contract; if they do, walk away.
7. Recognise and report harassment or intimidation. If you’ve unfortunately engaged an illegal money lender and are subjected to harassment and intimidation, make a police report immediately. Do not engage with the money lender further, as that could escalate the situation.

Stay Vigilant to Avoid Falling Victim to Money Lender Scams in Singapore

Knowing the telltale signs of an illegal money lender and staying alert can help you make informed financial decisions and safeguard you from being entangled in money lender scams.

If you are looking for a trustworthy registered money lender in Singapore, R2D Credit is happy to support your financing journey. Reach out to us today to learn more about our flexible loan solutions tailored to your unique financial situation.