Bugis Credit Pte Ltd is a licensed moneylender (License No. 25/2024) listed in the Registry of Moneylenders, under the Ministry of Law in Singapore.

How to Borrow Money in Singapore Legally: Tips and Insights for Borrowers

Man Signing Loan With a Legal Money Lender

Navigating the borrowing process wisely is crucial given rising costs and wages that struggle to keep pace. As highlighted by Charlie Wise from TransUnion, there’s a growing reliance on loans to manage finances. The key is to opt for reputable, licensed moneylenders. 

Between 2020 and 2022, only a small number of FDWs borrowed from licensed sources annually, while many others fell into the traps of unlicensed lenders, incurring debts sometimes exceeding the principal due to high late charges. 

This article guides you on how to borrow responsibly, the advantages of licensed lenders, and ways to avoid financial pitfalls.

Who are Licensed Money Lenders in Singapore

In Singapore, a licensed money lender is one who is licensed under the Moneylenders Act 2008. The Registry of Moneylenders, under the Ministry of Law, oversees and regulates the licensing of these money lenders to ensure they adhere to strict guidelines. 

Licensed money lenders are required to display their licenses prominently and comply with caps on interest rates and fees. Check the Registry of Moneylenders for authorized lenders.

Benefits of Choosing Licensed Money Lenders

Considering the risks associated with unregulated borrowing, opting for licensed money lenders in Singapore offers several significant advantages:

  • Lower Interest Rates: Licensed money lenders are required to cap their interest rates at 4% per month for borrowers earning less than $20,000 per year, preventing exorbitant interest rates common with unlicensed lenders.
  • Transparency: Borrowers receive a comprehensive breakdown of the loan terms, including all fees and charges, ensuring there are no surprises.
  • Legal Protections: Regulations under the Moneylenders Act ensure that borrowers are treated fairly, with protections against harassment and unfair collection practices.
  • Clear Repayment Plans: Licensed lenders offer structured repayment plans that help borrowers manage their finances and avoid falling into debt traps.

How Licensed Moneylenders Protect Borrowers

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From stringent licensing requirements to strict interest rate caps and clear repayment plans, every measure ensures that borrowers are treated fairly and ethically. This protective framework not only establishes a standard for professional conduct among moneylenders but also fortifies the financial confidence of borrowers.

Licensing and Conduct

  • Licensing Requirements: All moneylenders must be licensed by the Registry of Moneylenders, a division of the Ministry of Law.
  • Fit and Proper Person Criteria: Applicants for a moneylending license must meet strict criteria, including being fit and proper persons, to be granted a license.
  • Professional Conduct: Licensed moneylenders are required to conduct themselves professionally and adhere to ethical practices.

Loan Terms and Conditions

  • Interest Rate Caps: There are caps on the interest rates that moneylenders can charge. As of October 2015, the maximum interest rate is 4% per month, regardless of the borrower’s income.
  • Fees: Moneylenders can charge only certain fees, including a late interest fee (capped at 4% per month on the overdue amount) and a one-time administrative fee (capped at 10% of the principal loan amount).
  • Borrowing Limits Based on Income: For borrowers earning less than $20,000 annually, the total maximum loan amount borrowed from all licensed moneylenders is capped at $3,000. For those earning between $20,000 and $30,000, the cap is $6,000. There is no borrowing limit for those earning more than $30,000 annually.
  • Advertising Restrictions: Moneylenders are subject to strict advertising regulations to prevent misleading advertisements.

Borrower Protection

  • Loan Contracts: Moneylenders must provide borrowers with a clear and detailed loan contract, outlining the terms and conditions of the loan.
  • Repayment Plans: Borrowers have the right to a clear repayment schedule. Moneylenders must explain the repayment plan and ensure borrowers understand it.
  • Harassment Prohibition: Moneylenders are prohibited from using harassment or any form of coercion to collect debts.

How Much Money Can I Borrow?

The amount of means you can borrow highly depends on your annual income. Also, loans with collateral are unlimited, whereas those without any form of security are limited. Here’s a table summarizing how much you can borrow from a licensed money lender:

Borrower’s annual income Permanent Residents and Singapore Citizens Foreigners who live in Singapore
Less than $10 000 $3000 $500
Minimum $10000 but less than $20 000 $3000 $3000
Minimum of $20 000 6 times monthly income 6 times monthly income

When it comes to interest, a money lender may not charge more than 4% per month and the same applies to late interest. Furthermore, your licensed money lender can only charge interest on the remaining amount, not the total initial principal amount.

There are various fees attached to receiving a loan, however, when it’s granted, your licensed moneylender may not charge you more than 10% of the principal amount for the administrative fee. All this information should be clearly stated in the loan contract.

Types of Loans You Can Borrow

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There are various types of loans available to meet different financial needs. These include personal loans, business loans, payday loans, wedding loans, and renovation loans. Each loan type is designed to cater to specific situations, offering tailored solutions for borrowers.

Loan Type Interest Rate Loan Limit Purpose
Personal Loan 1-4% per month Up to 6 times monthly income Debt consolidation, medical expenses, education
Payday Loan 1-4% per month Up to 1 month of monthly income Emergency expenses before payday
Foreigner Loan 1-4% per month Up to 6 times monthly income Settling in expenses, emergencies
Wedding Loan 1-4% per month Up to 6 times monthly income Wedding expenses
Renovation Loan 1-4% per month Up to 6 times monthly income Home improvements and repairs
Monthly Loan 1-4% per month Up to 6 times monthly income Spreading costs over months
Business Loan 5-15% Up to S200,000 Business expansion, cash flow management
CPF Loan 1-4% per month Eligible to Withdraw At Least S$5,000 from Special or Ordinary Account Savings Leveraging CPF funds without liquidation

Personal Loan

A personal loan falls under the category of unsecured loans because you don’t need to provide any type of collateral with your loan application. What’s more, with this loan you’re likely to get an appealing interest rate.

The personal loan is a smart choice if you have very specific needs that need to be met and you require something that is more adapted to solve your financial issues.

Ideal for general financial needs such as:

  • Medical expenses
  • Education
  • Debt consolidation

Real-life Scenario:

John needs to consolidate his high-interest credit card debts into a single, lower-interest loan to manage his finances better. A personal loan allows him to simplify his payments and reduce overall interest costs, helping him regain financial stability.

Payday Loan

Emergencies occur everywhere and sometimes they result in you needing an amount of cash that you don’t have on hand. The payday loan is the ideal solution for this issue, it’s quick, it has low interest and it’s also available to those with bad credit.

The payday allows you to bridge the gap between your current needs and your next salary payment when you’ve gone way over budget and you need a bit of assistance in making ends meet. This loan is suitable for urgent, small-scale expenses but comes with higher interest rates due to their short-term nature.

Real-life Scenario:

Sarah’s car breaks down just a week before her payday, and she needs immediate funds for repairs to get to work. A payday loan provides her with quick cash to cover the repair costs, ensuring she can continue commuting without disruption.

Foreigner Loan

Foreigners face many hurdles, especially when they happen to immigrate to expensive countries like Singapore. To make matters worse, most aren’t allowed to get proper loans and in instances where they are, the process and paperwork are too lengthy.

The Foreigner loan is therefore a great way for foreigners to get access to additional funds for personal use or to start small businesses on the side.

Real-life Scenario:

David, an expatriate working in Singapore, faces unexpected medical expenses not covered by his insurance. A foreigner loan provides him with the necessary funds quickly, allowing him to manage the medical bills and focus on recovery without financial stress.

Wedding Loans

Specifically for wedding-related expenses, these loans help cover costs such as venue booking, catering, and other festivities, allowing couples to manage their finances more effectively during their special day.

Real-life Scenario:

Emma and Jake want to have their dream wedding but need extra funds to cover the cost of the venue, catering, and photography. A wedding loan provides them with the financial support needed to make their special day memorable without compromising on their plans.

Renovation Loans

Tailored for home improvement projects, renovation loans finance the costs associated with refurbishing or upgrading a property. These loans are typically offered at lower interest rates compared to personal loans due to their specific purpose.

Real-life Scenario:

Maria and Tom want to remodel their outdated kitchen to increase their home’s value and improve functionality. A renovation loan provides the necessary funds to hire contractors and purchase materials, enabling them to complete the project without draining their savings.

Monthly Loan

It’s similar to a Payday, but this one stretches over a longer period of time, typically months. It’s also a good alternative to using conventional credit that features higher interest rates and multiple credit cards.

Real-life Scenario:

Alex needs to pay for his child’s school fees but doesn’t have the full amount available upfront. A monthly loan allows him to spread the cost over several months, making the payments more manageable within his monthly budget.

Business Loan

This type of loan offers financial support to small and medium-sized enterprises (SMEs) and entrepreneurs. These loans can be used for various business needs, such as expanding operations, purchasing inventory, or managing cash flow. With flexible repayment terms and faster approval processes compared to traditional bank loans, moneylender business loans provide accessible funding solutions for businesses seeking immediate capital.

This type of financing is ideal for businesses that may not qualify for bank loans due to stringent requirements or lack of collateral. By offering tailored loan amounts and repayment schedules, moneylender business loans help businesses maintain operations and seize growth opportunities.

Real-life Scenario:

Tom’s café has seen a surge in customers, and he needs additional funds to purchase new equipment and hire more staff. A business loan from a licensed moneylender provides him with the quick capital needed to expand his operations and meet customer demand. This allows Tom to grow his business without lengthy bank loan approval processes.

CPF Loan

These loans are designed to bridge financial gaps for CPF account holders, enabling them to meet immediate cash needs without having to liquidate their CPF investments. It is a viable option for individuals looking to leverage their CPF savings for financial flexibility.

Borrowers can use CPF Personal Loans for various purposes, such as emergency expenses, large purchases, or consolidating existing debts. The loan approval process is generally straightforward, with moneylenders assessing the borrower’s CPF savings and repayment ability.

Real-life Scenario:

Rachel, a 54-year old online seller, needs to cover unexpected medical expenses and prefers not to deplete her CPF savings directly. A CPF Personal Loan allows her to access the necessary funds quickly, ensuring she can manage her healthcare costs while preserving her retirement savings.

Loan Eligibility Criteria and Common Requirements for Borrowing

Eligibility:

  • You need to be 21 years old or older
  • A minimum salary of SGD2,000 for local and permanent residents
  • A minimum of SGD3,000 for foreigners

Requirements:

Citizens & Permanent Residents

  • Minimum monthly income of SGD2,000
  • SingPass (to log into CPF, HDB ,IRAS website)
  • Proof of employment
  • Identity card
  • Proof of residence

Foreigners

  • Minimum salary of SGD3,000
  • SingPass (to log into IRAS statement)
  • Proof of income/account statement
  • Passport
  • Employment pass/ work permit
  • Proof of employment
  • Recent three month’s payslip

Business Loans 

Eligibility

  • You need to be 21 years old or older and your business should be registered in Singapore
  • Your business should have been operating for a minimum of one year
  • The minimum turnover of SGD60 000 Per annum

Requirements / documents to provide

  • A recent 6-month bank statement
  • A list of all assets owned by the business
  • Recent utility bills pf the company
  • The business office lease agreement
  • Recent financial statement
  • Recent income tax assessment notice
  • Recent contracts signed by business/invoices

Step-by-Step Guide on How to Apply for a Loan

  1. Determine Your Loan Type and Amount Needed: Assess your financial needs and choose the appropriate loan type (personal, business, payday, etc.).
  2. Research Licensed Money Lenders: Ensure the lender is licensed by checking the Registry of Moneylenders.
  3. Prepare Necessary Documentation: Gather required documents such as proof of identity, income statements, employment details, and bank statements.
  4. Submit the Application: Fill out the loan application form, either online or at the lender’s office, and attach the necessary documents.
  5. Wait for Approval: The lender will review your application and documents. This process may take a few days.
  6. Review the Loan Agreement: Once approved, carefully review the loan agreement, paying attention to interest rates, fees, and repayment terms.
  7. Sign the Agreement: If you agree with the terms, sign the loan agreement.
  8. Receive Funds: The loan amount will be disbursed to your bank account or given as a cheque, depending on the lender’s policies.

Applying for a Loan Online

Many licensed money lenders offer online applications, allowing borrowers to apply from the comfort of their homes. These platforms enable the uploading of documents, instant verification of details, and faster approval times.

Digital applications often feature automated systems that provide real-time updates on application status, reducing the waiting period and enhancing the overall efficiency of the loan application process.

Customer Testimonials and Success Stories

Elliot’s Journey:

Elliot Chen approached a money lender with a need for a personal loan. Despite some initial discrepancies in his paperwork, the staff patiently guided him through the process, ensuring all documents were correctly signed and reprinted as necessary. Elliot was impressed with the professionalism and patience shown, leading to a smooth transaction. 

“Very patient, friendly, and professional when preparing my paperwork. I had some discrepancies in my signatures which required multiple re-printing, but she wasn’t fazed at all. Overall, a very smooth transaction.”

Clarie’s Experience:

Clarie was looking for a loan but was concerned about being pressured into borrowing more than she needed. She was relieved to find that the licensed moneylending staff were helpful, provided clear options, and respected her decision without pushing for a higher loan amount. Clarie appreciated the transparency and post-repayment peace, knowing she wouldn’t be harassed for more loans once she had paid back.

“The transaction was smooth. They do not force you to take a higher loan amount, always helpful and explain what options I can choose from. And once you pay back, they won’t call you or ask you to take more loans.”

Sam’s Success:

As a first-time borrower, Sam Lin felt anxious about the loan process. However, the friendly and supportive legal moneylending staff made him feel at ease, ensuring he understood every step and could manage his payments comfortably. The efficiency of the accounts team in providing timely receipts and reminders further contributed to Sam’s stress-free borrowing experience, demonstrating our dedication to customer satisfaction and effective communication.

“Their friendly and helpful staff made me feel at ease as a first-time borrower. They made every effort to ensure that I could make payments without stress and their efficient accounts team kept me updated with receipts and reminders.”

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Avoiding Overborrowing: Tips and Best Practices

Here are some key tips and best practices for avoiding overborrowing, helping ensure your financial stability:

  • Borrow Only What You Need: Assess your financial situation and borrow only the amount necessary to meet your needs.
  • Understand Loan Terms: Carefully review the loan agreement, including interest rates, fees, and repayment schedules, before signing.
  • Create a Repayment Plan: Develop a realistic repayment plan that aligns with your monthly income and expenses to ensure timely payments.
  • Avoid Multiple Loans: Bankrate advises that while multiple loans can help cover significant expenses, they may also negatively affect your credit score and overall financial health. 
  • Maintain Open Communication: Stay in contact with your lender, especially if you face difficulties in making payments, to explore possible solutions.
  • Consider alternatives: Financial experts at Bankrate also recommend – before incurring additional debt, consider alternatives like using credit cards or building up your savings.

FAQs About Borrowing Money in Singapore

1. How to Get Quick Cash in Singapore?

To get quick cash in Singapore, consider borrowing from licensed money lenders. These lenders are regulated by the Ministry of Law and offer a streamlined application process. Many licensed money lenders provide online application options, allowing you to apply and receive approval quickly, often within the same day. Ensure you have all required documents ready, such as proof of identity and income, to expedite the process.

2. What is the Borrow Money App Instantly Singapore?

Several licensed money lenders in Singapore offer websites and mobile apps that operate 24/7, allowing borrowers to apply for loans at any time. These platforms simplify the loan application process by enabling users to submit their information and documents digitally. Some popular licensed money lender websites, such as Bugis Credit, provide instant cash loan approvals and disbursements within hours.

3. Is Money Lending Illegal in Singapore?

Money lending itself is not illegal in Singapore. However, lending activities must be conducted by licensed money lenders under the regulations of the Moneylenders Act 2008. Unlicensed money lending is illegal and can lead to severe penalties for both the lender and borrower. Borrowing from licensed money lenders ensures you are protected by legal regulations and avoids the risks associated with loan sharks.

Conclusion

Borrowing money in Singapore can be a prudent financial move if done correctly. Understanding the types of loans available, the legal protections in place, and the benefits of using licensed money lenders can help you navigate the process safely. By following the tips and best practices outlined, you can manage loans responsibly and avoid potential pitfalls.

Key Takeaways:

  • All loans from licensed moneylenders have their interest rates capped at 4% per month, which protects borrowers from exorbitant fees and helps maintain manageable repayment terms.
  • Singapore offers a wide range of loan types, from personal and payday loans to specialized loans like renovation and wedding loans, each designed to meet specific financial needs and circumstances of different borrowers.
  • Borrowing from licensed moneylenders ensures that you are covered under the Moneylenders Act, which offers protections such as clear loan contracts, structured repayment plans, and safeguards against unfair collection practices.

Start your journey towards financial stability with Bugis Credit, a trusted licensed moneylender. Apply now and unlock a range of tailored loan solutions designed to meet your unique financial needs.

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