So easy to borrow money

The Sunday Times
Joyce Lim
15/9/2013

When it comes to getting easy money, desperate borrowers can get what they need almost instantly from licensed moneylenders.

The Monetary Authority of Singapore's (MAS) new curbs on unsecured loans do not affect licensed moneylenders as they come under the purview of the Ministry of Law, not the central bank.

Even though unsecured loans granted by moneylenders made up less than 3 per cent of overall debt here, the Law Ministry said last week it is looking to align its rules with those of the MAS.

Last week, The Sunday Times called 20 licensed moneylenders and all were prepared to offer this reporter instant cash of up to three months' salary. They did warn that the easy loans would come with high interest rates of 150 to 420 per cent per annum.

Three were willing to offer a loan of four times the borrower's monthly income if the borrower earned between $30,000 and $120,000 per annum.

All asked basic questions about the borrower's monthly income, length of employment and type of property owned.

An employee of one moneylender explained that if the borrower defaulted on repaying, a $20,000 loan could incur an interest of $20,000 with a interest rate of 25 per cent per month charged and paid over four months.

That aside, the loan could be approved right away. "I just need you to show me your identity card and use your SingPass to retrieve your income statements online," he said.

One man who came to financial grief after borrowing from a licensed moneylender told The Sunday Times that his $8,000 loan snowballed to a $60,000 debt over a period of 10 months last year.

John (not his real name), a 29-year-old sales manager, said: "I was charged 30 per cent interest for the $8,000 loan. When I defaulted on my instalment, I was charged a late fee of 240 per cent of the instalment amount."

He said he borrowed from loan sharks to repay the moneylender.

High-risk borrowers like John are not uncommon, as moneylenders have been seeing more bad debt in recent years, said Mr David Poh, president of the Moneylenders' Association of Singapore.

"Moneylenders need to charge high interest rates to cover their losses with such borrowers. But if there are more rules to protect them, the interest rates may be reduced," he said.

Statistics from the Subordinate Courts showed that civil cases relating to moneylending more than doubled last year, with 260 cases compared to just 96 cases in 2011. In the first half of this year, there were 102 such civil cases.

These cases include those involving licensed moneylenders as well as banks and other institutions.

joycel@sph.com.sg