Licensed Money Lenders vs Banks in Singapore: What You Should Know

Key Takeaways

• Banks and licensed money lenders serve different needs — banks are suited for long-term, planned borrowing, while licensed money lenders provide faster, more flexible financial solutions.
• Licensed money lenders vs banks mainly differ in speed and eligibility, with licensed money lenders providing quicker approvals and more accessible criteria.
• Interest rates are regulated in Singapore — licensed money lenders are capped by law, while banks generally offer lower rates but with stricter requirements.
• Borrowers with poor or limited credit may find licensed money lenders more approachable, as assessments consider factors beyond credit scores.
• Both options are legally regulated, offering borrower protections when you choose a bank or a lender listed on the Registry of Moneylenders.
• The right choice depends on your situation, including urgency, credit profile, and the level of flexibility you need.

Thinking about taking out a loan in Singapore? Whether you’re just exploring your options or need funds quickly, it’s always a good idea to understand the differences between licensed money lenders vs banks before making a decision.

Many borrowers compare these two options because they cater to different needs. Banks typically offer lower interest rates and longer repayment tenures, but come with stricter eligibility requirements. Licensed money lenders, on the other hand, are known for faster approvals and more flexible criteria, making them a practical alternative for borrowers who need urgent financing or have been turned down by banks.

By understanding the core distinctions between licensed money lenders vs banks, you can choose a loan that best fits your financial situation and move forward with greater confidence and control.

What Are Banks?

Banks are traditional financial institutions that offer a broad range of services, including savings accounts, fixed deposits, investments, and loans. In Singapore, all banks are regulated by the Monetary Authority of Singapore (MAS), which safeguards the stability and integrity of the financial system.

Well-known banks in Singapore include DBS Bank, United Overseas Bank (UOB), Standard Chartered, and HSBC. These institutions typically provide personal loans, home loans, and various credit facilities at comparatively lower interest rates.

However, they also impose stricter eligibility criteria, such as credit score requirements and more thorough income assessments, which may limit access for some borrowers.

What Are Licensed Money Lenders?

Licensed money lenders are private financial institutions that provide loans under the Moneylenders Act, which is regulated by the Ministry of Law (MinLaw). Every licensed money lender must be listed on the Registry of Moneylenders in Singapore, ensuring transparency and borrower protection.

Prosper Credit is a licensed money lender that operates fully within these legal requirements. Being licensed means Prosper Credit adheres to strict rules on interest rates, fees, loan documentation, and debt collection practices—offering borrowers clarity, confidence, and legal protection throughout the borrowing process.

Licensed Money Lenders vs Banks: Side-by-Side Comparison

Speed of Approval

One of the key differences between licensed money lenders vs banks is approval speed.

• Licensed money lenders: Loan approvals can often be completed within a few hours or on the same day, making them ideal for borrowers with urgent cash needs.
• Banks: Loan approvals may take several days or even weeks, as applications typically go through more extensive credit checks, documentation, and internal review processes.

Eligibility and Requirements

• Licensed money lenders: More flexible in assessing loan applications. Rather than relying solely on credit scores, they consider factors such as income and repayment ability. This makes them more accessible for borrowers with bad credit.
  
• Banks: Apply stricter eligibility criteria, including stable income, a good credit history, and minimum annual income requirements, which could potentially restrict borrowers with less established credit.

Interest Rates

• Licensed money lenders (LML): LML Interest rates are capped at 4% per month by law in Singapore, regardless of income level. Licensed money lenders in Singapore calculate interest using the reducing balance method, meaning interest is charged only on the outstanding loan amount after each repayment. This can reduce the total interest paid if prompt repayments are made consistently.
• Banks: In contrast, bank personal loan interest rates in Singapore are typically expressed on an annual basis (per annum, or p.a.) and vary depending on the bank, your credit profile, income, and existing promotions. While many major banks advertise flat personal loan interest rates starting from around 1.08% to 1.8% p.a., it is worth noting that these flat rates do not reflect the true cost of borrowing. The actual cost of borrowing is better represented by the effective interest rate (EIR), which takes into account factors such as the compounding effect and applicable fees. As a result, EIRs for bank personal loans generally start around 2.09% to 3.5% p.a. for well-qualified borrowers, making EIR a more accurate figure for comparing loan offers.

While banks tend to be cheaper over the long term, licensed money lenders provide quicker access and more flexibility, making them a practical option when banks are not a feasible choice.

Loan Amount & Tenure

In Singapore, how much you can borrow and how long you can take to repay it are influenced not only by the lender’s internal policies, but also by regulatory limits designed to protect borrowers from taking on unmanageable debt.

Licensed Money Lenders

For licensed money lenders (LMLs) in Singapore, the amount you can borrow for an unsecured personal loan is regulated based on your annual income. Singapore citizens and permanent residents earning less than S$20,000 a year are generally capped at a total of S$3,000 in unsecured loans from all licensed money lenders combined, while those with an annual income of S$20,000 or more may borrow up to six times their monthly income.

Foreigners residing in Singapore are subject to stricter limits: those earning less than $10,000 a year can borrow up to S$500, while those earning between S$10,000 and S$20,000 can loan up to S$3000. Like locals, foreigners with an income of S$20,000 and above may qualify for loans of up to six months’ salary.

Since licensed money lender loans are designed to meet short-term cash flow needs, repayment tenures are shorter too — usually up to 12 months, and in some cases up to 24 months depending on the lender’s assessment of your repayment capacity. This is significantly shorter than the usual tenure of bank personal loans, allowing you to clear your loan quickly without a long-term commitment.

Banks

On the other hand, banks in Singapore — regulated by the Monetary Authority of Singapore (MAS) — generally offer higher loan limits than licensed money lenders. If your income is less than S$120,000 per year, banks typically offer loans of up to four times your monthly salary. For higher earners with an annual income of S$120,000 or more, loan amounts can range from 8 to 10 times your monthly salary, subject to the bank’s assessment of your creditworthiness and overall debt obligations.

Bank loans also come with longer repayment tenures, commonly ranging from 1 to 5 years, and in some cases up to 7 years with certain lenders. These extended repayment periods give you more flexibility to spread your instalments over time and can make monthly payments more manageable, which may be preferable for larger or planned expenses.

Consequences of Defaulting on a Loan

Defaulting on a loan—whether from a bank or a licensed money lender—can impact your credit score and may result in late fees or legal action.

That said, borrowers in Singapore are protected by law. Licensed money lenders must follow strict debt collection rules, and any form of harassment or illegal practices is prohibited. These legal safeguards exist to ensure that borrowers are treated fairly throughout the loan process.

Licensed Money Lenders vs Banks: Pros & Cons

When to Choose Licensed Money Lenders vs Banks

Choosing between licensed money lenders vs banks depends on your situation:

Licensed Money Lenders vs Banks: Legal Considerations

Borrower Protection & Regulations

Licensed money lenders are governed by the Moneylenders Act under the Ministry of Law, while banks fall under the supervision of MAS. The Registry of Moneylenders allows borrowers to verify whether a lender is legally licensed.

These regulations are in place to protect borrowers, cap interest rates, and prevent abusive or unfair practices.

How to Verify a Licensed Money Lender

Before borrowing, always:

• Check the lender’s name against the Registry of Moneylenders to ensure they are legally licensed
• Avoid lenders who advertise through unofficial channels, provide unsolicited offers, or request upfront fees
• Be cautious of any threats, intimidation, or communication outside approved channels

These are common red flags of unlicensed or illegal lenders.

Borrowing from Licensed Money Lenders vs Banks: FAQs

Is borrowing from a licensed money lender safe in Singapore?Yes. As long as the lender is listed on the Registry of Moneylenders, they are required to follow strict laws that protect borrowers, including fair debt collection practices and transparent loan terms.

How do interest rates differ between licensed money lenders vs banks? Licensed money lenders charge interest of up to 4% per month, while banks generally offer lower annual rates but have stricter eligibility criteria.

Can foreigners borrow from banks or licensed money lenders?

Yes. Foreigners can borrow from both banks and licensed money lenders in Singapore, but eligibility criteria vary. Licensed money lenders are generally more flexible with foreign borrowers, while banks typically have stricter income, residency, and credit requirements.

What documents are needed to borrow from a licensed money lender?

Borrowers generally need to provide their NRIC or passport, proof of income, and proof of residence.

Why Choose Prosper Credit: Your Trusted Licensed Money Lender

At Prosper Credit, we understand that not every borrower fits neatly into a bank’s requirements — and that’s okay. As a licensed money lender in Singapore, we offer fast, flexible, and transparent loan options designed to meet real-life financial needs. From same-day approvals to personalised repayment plans, our goal is to help you manage short-term financial gaps with ease and clarity.

If you’re weighing your options between licensed money lenders vs banks and aren’t sure which option suits you better, our friendly team is here to guide you every step of the way.

Apply for a personal loan or speak with a consultant today, and take the next step with confidence.