The world today is full of people looking to take advantage of others, whether through straightforward methods or dishonest means. Unfortunately, Singapore — one of the world’s busiest business hubs — is not exempt from such activities.
Business owners and families rely on moneylenders for quick credit. However, not all lenders operate honestly. In recent years, financial strain and economic challenges have pushed many people to seek fast cash solutions, making them more vulnerable to scams.
To avoid falling into the trap of illegal moneylenders (commonly known as loan sharks), it is crucial to understand the red flags and know how to identify trustworthy lenders.
At Oasis Credit, we work around the clock to raise awareness about illegal lending activities and help borrowers choose safe and legal financial options.
This guide explains how to differentiate between legal and illegal moneylenders in Singapore and how to make the best choice.
1. Clear Terms and Conditions of the Loan Contract
Legal moneylenders in Singapore operate under strict laws governed by the Ministry of Law. A licensed lender will always:
- Clearly explain all terms and conditions before offering you a loan
- Answer every question you may have regarding interest rates, repayment schedules, and fees
- Provide transparency without rushing you into signing anything
Illegal moneylenders, on the other hand:
- Avoid explaining contract details
- Pressure you to accept a loan without proper documentation
- Use confusing or misleading agreements
Always walk away from lenders who cannot or will not explain the contract clearly.
2. Illegal Moneylenders Have Numerous Hidden Fees
According to the Moneylenders Act, only three types of fees are allowed:
- Administrative fee (up to 10%) – Charged only upon loan disbursement
- Interest rate (maximum 4% per month) – Applies regardless of income or loan type
- Legal fees – Charged only if court-related processes are needed
Illegal moneylenders typically add:
- Extra processing fees
- “Approval” fees
- Random penalties
- High administrative charges
These unnecessary fees help them squeeze as much money as possible from unsuspecting borrowers.
3. Illegal Moneylenders Charge Exorbitant Interest Rates
Legal lenders cannot charge more than 4% interest per month.
Loan sharks, however, often charge outrageous rates such as:
- 20% per month
- 40% per month
- Or even more
If you encounter a lender offering extremely high interest, it is a major red flag. Borrowers should avoid such lenders, as they are looking to exploit you financially.
4. Legal Moneylenders Have a Physical Office and Official Contact Channels
Licensed moneylenders must operate from a physical office, as required by the Ministry of Law. This ensures borrowers can:
- Visit the office for inquiries
- Make repayments safely
- Seek assistance when needed
Illegal moneylenders typically:
- Operate from temporary or “briefcase” offices
- Disappear once they scam victims
- Use untraceable numbers or anonymous channels
Always check that the lender has a valid office, phone number, website, and customer service support.
5. Legal Moneylenders Have Defined Loan Limits
Licensed moneylenders assess:
- Your income
- Your repayment capability
- Your existing financial commitments
They will never lend you an amount that puts you at risk of defaulting.
Loan sharks, however:
- Do not care about your financial situation
- Promise unrealistic loan amounts
- Encourage overborrowing to trap you in higher debt
If a lender offers you “any amount you want,” treat it as a serious warning sign.
7. Request for SingPass (A Major Red Flag)
No licensed moneylender will ever ask you for your:
- SingPass password
- SingPass login details
Illegal moneylenders use SingPass credentials to:
- Access your personal information
- Take loans in your name
- Commit identity fraud
Never give your SingPass details to anyone.
Conclusion
With proper awareness, you can easily identify loan sharks from the very beginning. Protect yourself by avoiding suspicious lending practices and choosing licensed, transparent lenders.
While the Singapore government works hard to safeguard borrowers, you also play a role in making wise and safe financial decisions.