Licensed Moneylender Interest Rates in Singapore

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  • May 3, 2016 4:34 pm

The interest rates charged by different licensed moneylenders in Singapore varied quite dramatically.
The interest was generally on a monthly basis and ranged from 5% per month to approximately 120% per month.
The most commonly cited levels of interest were 18%, 25% and 30% per month.

Many moneylender will not release any information on the fees, the details of which until after the loan had been approved.
Most are lacking transparency about the overall cost of the loan.
Whilst almost all moneylenders charged some sort of late penalty, these were exceptionally wide-ranging in their amounts and approaches.

By far the most common late payment cited was $50 per day, which would equate to $350 per week, approximately $1,500 per month and over $18,000 per year.
Some moneylenders charged lower rates, such as $30 or $40 per day, but these would still add up to a considerable amount if you were unable to repay the loan for a period of time.

The frequency of repayment for some loans is also a major concern if you intend to pcik up a loan from them.
The most common repayments nowadays were on a weekly basis.
As most people in Singapore are paid on a monthly basis, weekly repayments do not appear to have a rational basis for the majority of borrowers,
especially when it’s combined with the exceptionally high late charges issued by many moneylenders.

Another group of moneylenders also provided exceptionally short loans solely to people earning less than $30,000 per annum, which needed to be repaid on a daily basis.

According to registry of moneylenders Singapore:

For loans contracted between 1 June 2012 and 30 September 2015, moneylenders are required to compute and disclose to you the Effective Interest Rate of the loan, before the loan is granted.
If your annual income is less than $30,000, the interest rate which moneylenders can charge, for both secured and unsecured loans, is capped at:

  • 13 per cent Effective Interest Rate for secured loans; and
  • 20 per cent Effective Interest Rate for unsecured loans.

The Effective Interest Rate takes into account the compounding effect of the frequency of instalments over a one-year period.
This means that Effective Interest Rate better reflects the actual cost of borrowing over a one-year period.
Visit https://www.mlaw.gov.sg/content/rom to find out more about how the Effective Interest Rate is calculated from 1 June 2012.

If your annual income is $30,000 or more, the caps above are not applicable and interest rate is to be agreed upon between the moneylender and the borrower.

With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4% per month.
This cap applies regardless of the borrower’s income and whether the loan is an unsecured or secured one.
If a borrower fails to repay the loan on time, the maximum rate of late interest a moneylender can charge is 4% per month for each month the loan is repaid late.

The computation of interest charged on the loan must be based on the amount of principal remaining after deducting from the original principal the total payments made by or on behalf of the borrower which are appropriated to principal. [To illustrate, if X takes a loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken into account for the computation of interest.]

The late interest can only be charged on an amount that is repaid late. The moneylender cannot charge on amounts that are outstanding but not yet due to be repaid.
[To illustrate, if X takes a loan of $10,000, and fails to pay for the first instalment of $2,000, the moneylender may charge the late interest on $2,000 but not on the remaining $8,000 as it is not due yet.]

Information from
https://www.mlaw.gov.sg/content/rom/en/information-for-borrowers/guide-to-borrowing-from-licensed-moneylenders-english.html


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