How to Differentiate Unlicensed Moneylenders from Licensed Lenders?

Unexpected expenses force us to seek financial assistance from external sources. The most practical solution is to take out a loan from a lender. The moneylender list includes both licensed and unlicensed lenders. Unlicensed moneylenders may offer funds easily but pose several risks.

If you need a loan, you must learn the significant differences between licensed and unlicensed money lenders in the industry. Read on to know more.

1)  A Physical Office

Every licensed moneylender is required to have a physical office space by law. You can complete the application process online, but the contract signing happens face-to-face at the office. If you come across a moneylender who offers all transactions through the online medium, there is a high chance he may be an unlicensed lender.

2) A Valid License

Licensed moneylenders showcase their registered license in a visible spot within their office premises. A license is clear proof to indicate the responsibility of the moneylender. If you do not see the license, you can ask for their license registration number. Every licensed lender is registered with a regulatory agency. By using the number, you can confirm their registration status from the agency’s website.

3) Proper Limits of Interest Rates

Licensed moneylenders follow the legal limit on the interest rate (which is 4% per month) for all loans. They may charge an additional amount for late payment or discrepancies in creditworthiness. The late payment interest rate is applicable only for the amount that is yet to be paid. Unlicensed lenders can charge interest rates above the legal limit. They may also demand too much money for processing the loan and for other miscellaneous expenses.

4) Advertising Through Proper Channels

A licensed company from the moneylender list will never market itself through channels like flyers, random cold calling, or messages. The law permits licensed moneylenders to advertise through business directories, company websites, and advertisements placed within their business premises.

Experts recommend that it is best to find a moneylender through a friend or acquaintance. When you know that another person has had a safe experience with a company, you feel more comfortable trusting the lending organization. Enquire about such lenders from your friends and family members and pick one with the best reviews.

5) Clear Contract Terms

A legal contract is essential to regulate the transaction between the borrower and lender. The contract includes the conditions of the loan in simple terms. The moneylender takes the time and effort to explain every clause. The most important details included in the contract are the repayment period, interest rate, repayment options, etc. If your contract includes too many unclear terms and unwanted clauses, it is a red flag. If your moneylender is not open to explaining the contract terms or addressing your loan-related queries, it is better not to get involved any further.

6)  Unsecured Loan Amount

There are no limits on secured loan amounts in Singapore. But when you opt for an unsecured loan, there is a limit of the amount you are eligible to borrow. Your monthly income directly impacts your eligibility to get a loan. It is for this reason that a license asks for documents about your employment and salary.

According to the law, if you are a citizen or permanent resident of the country and earn more than $20,000 a year, you are eligible to borrow six times your monthly income.

People earning less than $20,000 a year cannot borrow more than $3000 at one time. Companies that belong to the unlicensed list follow no such limitations. They are open to lending any amount of money at any unreasonable interest rate.

7) No Pressure, No Delays

When dealing with a licensed moneylender, they do not pressure you to increase or lower your loan amount. They discuss the terms and conditions of the contract to make sure you are comfortable with the contract. The paperwork is laid before you, and once the terms have been finalized, the requested amount is sanctioned.

When you are with someone from the unlicensed moneylender list, the vibe mostly gives them away. There is a lack of professionalism, paperwork that is hard to comprehend, and pressure to commit to the agreement immediately. These signs are clear red flags that you must always avoid.


Unlicensed money lenders may lure you with attractive interest rates and unlimited loan plans. But remember, they are not legal entities and can cause various issues in the long run. Pay attention to all minute details before going ahead with your decision. Always find a licensed moneylender to address your financial troubles.


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