Guide to Licensed Money Lenders’ Interest Rate in Singapore

When faced with an urgent financial emergency, a personal loan might be your best bet. As with any kind of loan, most of us would like to opt to borrow from loan providers and authorised money lenders in Singapore with the lowest interest rates to minimise the burden of repaying the debt.

However, the fact of the matter is that not everybody is eligible for loans from traditional lenders like banks and financial institutions, despite the many benefits of personal loans.

In this article, we’ll take a closer look at borrowing from legal lenders, examine everything you need to know about licensed money lender interest rates (such as permitted private money lender interest rates chargeable) and where you can find loan providers and licensed money lenders in Singapore with the lowest interest rates.

Licensed money lender in Singapore: Interest rate cap

Since October 2015, licensed money lenders’ interest rates in Singapore are capped at 4% monthly. This applies to all who take up a personal loan from an authorised lender, no matter their income or nature of the loan (i.e. secured loan or unsecured loan).

Licensed money lender in Singapore: Late interest rate cap

Similarly, licensed money lenders’ late interest rate is limited to an upper limit of 4% monthly. This will kick in the moment a borrower is late on their repayments, levied upon the repayment amount that’s due but yet paid.

Take note that late interest cannot be applied on outstanding amounts that aren’t due for repayment! All law-abiding money lenders mustn’t overcharge and take advantage of borrowers just because they have missed a repayment deadline or two.

How do licensed money lenders’ interest rates translate into chargeable interest amounts?

Many folks may not be aware of this interesting nugget of information — licensed money lenders’ interest amounts are computed using the reducing balance method instead of the simple interest method.

What this means in an easy-to-understand way is that chargeable interest amounts are always calculated based on the balance principal amount after payment towards paying down the principal amount has been made. By extension, if a borrower conscientiously makes repayment on time every month, the interest amount that he will be paying each instalment decreases.

What are the other fees money lenders are allowed to charge?

Apart from licensed money lenders’ interest and late interest charges, authorised lenders are permitted to charge a late repayment fee of up to $60 for each month of overdue repayment recorded.

Known as a processing or administrative fee, authorised lenders are permitted to charge an amount not exceeding 10% of the loan principal for this. The fee varies across lenders, though you may find it helpful to note that most lenders ballpark this figure at around 8-10% of the loan principal.

In the event that a borrower refuses to pay up, money lenders can take the borrower to court as one of the legal ways to recover debt. If and should this happen —and the lender has obtained a successful claim from the court for the recovery of the loan— the borrower will be liable for whatever legal costs the court orders. Note that this is in addition to the rightful owed sums!

Is there a ceiling on chargeable money lender interest and late interest amounts?

The answer isn’t as straightforward as you might think, but yes, authorised lenders have to keenly keep an eye out for the money lender interest and late interest amounts charged to a borrower.

In any case, rules and regulations mandate that an authorised lender is only allowed to charge an aggregated amount that’s equal to the loan principal at most. This aggregated amount comprises the loan’s interest and late interest amounts, processing fee and all late fees accumulated throughout the loan tenure, if any.

Where can you find loan providers and licensed money lenders in Singapore with the lowest interest rates?

There are generally two places where you can safely look for loan providers, including licensed money lenders in Singapore with the lowest interest rates, — banks and authorised lenders.

1. Banks

Banks are amongst the most common places to get a personal loan. If you’re wondering which bank has the lowest interest rate on personal loans, look no further. Some banks, such as SCB, OCBC, HSBC, UOB, and DBS provide personal loans with advertised interest rates starting from 1.90% per year.

There are certain banks that even offer 0% interest rates during promotional periods, but these often come with a catch — they involve high processing charges and other fees, so their effective interest rates (EIR), which include processing or administrative charges, are actually much higher than their advertised interest rates.

In a nutshell, always look at the EIR when borrowing from banks as that will be the more accurate interest rates you will be paying.

2. Authorised lenders

Another legal and reliable option for getting a personal loan is from authorised lenders.

While interest rates offered by authorised lenders (maximum of 4% per month) are higher compared to banks, it must be reiterated that money lenders use the reducing balance method while banks use simple interest rates to compute interest charges.

All else equal, the total interest charges calculated based on the reducing balance method will be lesser than that of the simple interest method.

To add on, the loan application process with money lenders is also less stringent, as lenders are more lenient with credit checks. They will only check your borrowing records and limits with other authorised lenders via the Moneylenders Credit Bureau (MLCB), but not your credit history with banks.

This is especially important for borrowers with bad credit scores who cannot qualify for bank loans.

In addition, authorised lenders also have a faster loan approval process. Of course, if you have a good credit score, it will boost your chances of loan approval with more favourable terms, such as getting a lower interest rate.

Anyhow, even with these higher interest rates compared to banks, there are still plenty of money lenders with low interest rates out there if you know where to look.

How to narrow down your option for a licensed money lender in Singapore with the lowest interest rates?

1. Search the list of legal lenders online, do research on them, and read customers reviews
2. Reach out to the licensed lenders to get hold of non-obligatory loan quotes either in-person at their office or through an online loan application page
3. Compare the loan quotes; pay attention to the interest rates, fees and charges quoted, etc
4. Make an informed decision on the low interest money lender you’d like to borrow from

Note: It’s important to pick the right lender only after you’ve researched all about licensed money lenders’ interest rates in Singapore. This is so you can make an informed decision.

How to apply for a personal loan with fair money lender interest rates?

Once you’ve settled on a licensed lender you’d like to borrow from based on the loan quotes received, reach out to your chosen lender to arrange for a face-to-face meeting with their loan executive at their registered business premise. Your chosen lender will happily guide you through the process.

Be sure to bring along all necessary documents to your appointment to ensure the most speedy loan experience possible!

Bottom line: R2D Credit is a licensed money lender in Singapore with competitive interest rates

We hope that we’ve helped you gain a better understanding of how private lender interest rates work and how to find low interest money lenders. Next, is to find yourself a suitable money lender.

R2D Credit is a trusty loan company in Singapore that offers some of the most competitive rates for personal loans with up to 12 months’ instalment options.

We understand your needs for a fast cash loan and will process your loan application as fast as possible so that you can get your cash within a day for the most part. Reach out to us now to find out more!

About the Author

Weetee Neu

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Weetee Neu is a writer based in Singapore. He has written for MediaCorp, SPH magazines, Tripzilla and others.