Differences between a licensed moneylender and a loan shark

Singapore is a hotbed of financial crime. Loan sharks are lurking at every corner. Your data is already available to them. They will contact you in various creative ways, making it hard for you to tell them apart from a licensed moneylender.

Consequently, you will end up losing your hard-earned money and in some cases, also your personal information that will be used to bombard you with even more scams or worse yet, for extorting more money out of you by means of leverage.

Loan sharks are a type of illegal business. You should never deal with them.

It’s critical, therefore, to know the differences between a licensed moneylender and a loan shark. We are going to talk about 11 differences between a licensed moneylender and a loan shark.

Common information

First of all, let’s have a look at three common pieces of information.

Note that part of this information is freely available and any loan shark can copy this information if they wish to. Always prioritize face-to-face visits or double-check with the official phone number if someone claims to be a licensed moneylender from a particular firm.

#1. Listing on the Ministry of Law website

The first step is checking whether or not a moneylender is licensed. All licensed moneylenders are listed on the Ministry of Law website. You can find the list here.

Only deal with licensed moneylenders. Loan sharks will not be listed on this portal.

Note that this listing isn’t updated instantaneously. Some moneylenders might have got their license very recently and therefore, aren’t on the ministry website yet. If this is the case then you can call the Ministry of Law at 1800 2255 529 to double-check their status.

#2. Having a registered address

All licensed moneylenders are obliged to have a registered office address. A loan shark might have a registered address but it won’t be listed on the Ministry website. If someone claims to be calling from the legit address of a licensed moneylender then you can set up a meeting with them in their office.

The offices of licensed moneylenders are well maintained and much like those of a lawyer. A loan shark’s office can range from a makeshift arrangement to a sharecropping space in a not-so-welcoming place.

#3. License number

Licensed moneylenders all have a unique license number. Check if the license numbers match those present on the Ministry website.

Again, if someone claims to have a legit license number that you can find on the Ministry website – it doesn’t necessarily make them legit. Always call the official line and get the number checked for whether it was an official representative of the moneylender or a loan shark scammer.

Other differences

There are certain differences that cannot be fabricated or are at least easy to spot. We’ll talk about eight such differences between licensed moneylenders and loan sharks.

#4. Scam numbers

The caller IDs of loan sharks and scammers will likely come marked as junk, scam, or spam. That’s not the case with legitimate moneylenders.

It might be a good time to install Truecaller on your phone if you haven’t already. Apart from Truecaller, the phone’s native app also has some caller identification in some capacity. Numbers widely reported as spam or scams will come up as such so you will get a heads up when you accept the call if you do.

It’s vital to identify scam numbers. A caller ID app is the need of the hour right now. Knowing which numbers are suspected junk callers and scammers will allow you to better protect your finances.

Also, when you receive a call and you are sure it’s a loan shark spam call, you should report the number not just on an app but also to the police.

#5. Lack of details

Licensed moneylenders are selling a service professionally. Consequently, they know in detail about their loan and its terms, repayments, timelines, regulations, minimum criteria, and so on. That’s not the case with loan sharks.

Loan sharks are either looking to prey on you with high interest rates or dupe you in some other way. As such, they don’t really have a detailed answer to any in-depth question.

You can ask in-depth questions to test whether it’s a loan shark or a licensed moneylender. If they try to shrug you off when you approach details then it’s a sign that they are only interested in extorting money from you as soon as possible without going through any procedures. Needless to say, this isn’t ideal.

#6. Unrealistic amounts

Loan sharks can promise unrealistic amounts regardless of what your salary or income is. A licensed moneylender will never do this.

Loan sharks mostly make their money off high interest rates or scams. They are not really running an economical loan-based business. This is evident if someone is promising a very large sum even if you have a relatively low salary, unsteady income, or a bad credit score.

Don’t think of this as an opportunity to fix all your problems. You will only get ripped off later on in such an arrangement.

Loan sharks can promise high amounts, which means that they don’t really care for repayments or your ability to pay off your debt within the stipulated timeline. They have other agendas – such as harassing you, extorting more money, charging a very high interest over the long term, obtaining your personal data, and so on. That’s how they lure people in – with a promise of a large sum.

This isn’t the case with licensed moneylenders. They have to run a sustainable business so they will only loan you an amount they think will be okay for you to manage within the timeline.

#7. High interest rates

Loan sharks often charge high interest rates bordering on sheer exploitation. Licensed moneylenders are regulated by the law and cannot charge above-market interest rates.

Licensed moneylenders are different in that they have to follow the Singapore law and guidelines on interest rates. The maximum interest rate is 4% per month. Licensed moneylenders will never charge more than that.

As for loan sharks, it’s not rare to find some charging a whopping 40%.

#8. Bad communication

Loan sharks want to get you in their clutches as soon as possible. Making sure that you understand the ramifications of the loan isn’t a priority for them. They want you to become inferiorly tethered to them as quickly as possible.

Consequently, their communication is often bad. They will not explain the terms of the loan, might not talk in proper English, might not be able to understand your questions, or might even dismiss your queries as insignificant.

Steer clear of such people.

Licensed moneylenders will make sure that you understand every little aspect even if it takes a while for a loan to go through. They will also communicate professionally and troubleshoot all your doubts before you proceed. They are in no rush.

#9. Not signing a contract

Licensed moneylenders are required to work on contracts by law. That’s not the case with loan sharks. Getting a loan from a loan shark means there’s no contract. Lack of a contract means they can change terms or extort money from you using a variety of unconventional means at any time they wish.

Never get a loan without a logical agreement or contract.

Contracts establish the repayment timelines, late payment fees, interest rate, and so on. Without a contract, you are at the mercy of the creditor and their whims.

#10. Charging additional fees

A licensed moneylender can only charge three types of fees. Loan sharks will often charge more fees as well as higher for each fee.

The three fees (apart from the interest rate) are as follows:

  1. Legal fees for court challenges: In the event of a court challenge between the debtor and the creditor, the moneylender will often charge legal fees to compensate their legal costs from the debtor.
  2. Service fees: These can be dubbed service, admin, or maintenance fees and cannot exceed 10% of the loan value.
  3. Late payment fees: If a loan goes into default then the moneylender can charge a late payment fee. This is capped at S$60 per month or 4% per month only on the outstanding amount. Note that the late payment fees don’t compound. They are always charged at the outstanding amount.

#11. Using abusive language and threats

If you get on their nerves by asking too many questions or calling them out as loan sharks, loan sharks will usually lose their cool and resort to abusive language and even threats in some cases.

That’s not what happens with licensed moneylenders. Moneylending firms can always be expected to stay professional and calm while answering all your queries.