With the reputation that loan sharks have in Singapore, most of us wouldn’t want to encounter them in the first place. But ah longs are clever, putting on a friendly face and enticing you with attractive loan terms to get you to bite the bait.
You can find ah longs anywhere in Singapore. And with the economic turmoil caused by the COVID-19 pandemic, loan shark operations have increased, despite the government’s attempt to suppress them. These unlicensed lenders prey on people who desperately need cash fast.
Ah longs can be hard to spot. Many of them disguise themselves as part of a legitimate credit organisation with professional looking websites. To protect yourself from loan sharks, you have to learn how to identify them. Here are five common signs to watch out for:
- Advertise their loans through flyers, emails and SMS
Legal moneylenders in Singapore can advertise only through the following channels:
- Business or consumer directories (online or print)
- Their own business website
- Print ads placed within or on the exterior of their business premises
So, if you see a moneylender advertising through any medium other than these three, chances are they’re a loan shark. Many ah longs offer a quick and easy loan approval process through WhatsApp or SMS. If you receive anything similar, block and report the number as spam immediately.
- Offer you a loan without looking at your income
Loan sharks typically target people who need money fast but don’t qualify for loans through banks and other financial institutions. These borrowers often have low credit scores or poor repayment history.
If a moneylender doesn’t look at your income or offers a large amount of money despite your modest income, that’s a red flag. The trade-off is most likely an exorbitant interest rate.
A general rule: if the loan offer is too good to be true, don’t take it. Licensed moneylenders can only offer specific loan amounts depending on your annual income. Withdraw your application immediately if a lender is promising money that’s more than what you should get.
- Approve loans remotely
Ah longs approve loans remotely as part of their quick and easy application process. For many borrowers, remote loan approval doesn’t seem suspicious, since we are living in a digital age.
However, licensed moneylenders are required to do a face-to-face meeting with you before approving your application. Even if they process and approve your loan virtually, they need to set an in-person appointment with you for two purposes: to verify your identity and to explain the loan terms one by one.
Meanwhile, illegitimate lenders will process and approve your loan through email, phone call or SMS. Most of them don’t offer any kind of documentation. Although some sharks do give you a loan contract, they don’t explain the terms to you in person. They’ll disburse the amount straight to your account without any face-to-face meeting.
Be wary of lenders who do remote approvals. This tactic has been more common recently during the pandemic, with loan sharks citing social distancing to justify their virtual process.
- Doesn’t offer a loan contract
Loan sharks like to keep you in the dark about your loan terms and repayments. This scheme allows them to change the terms of your loan on a whim, saying that you must have misunderstood in the first place
The lack of transparency puts you at a huge disadvantage. It can make it difficult for you to repay the loan, putting you in more debt. Not having a record of your repayments also opens you up for exploitation. Loan sharks can claim that you haven’t completed your payments yet even if you already have, forcing you to pay them more than what you owe.
- Ask for a loan processing fee before approving your loan
The last sign to watch out for is when the lender asks for an upfront fee before approving your loan. According to the Ministry of Law, licensed moneylenders can only charge you a processing fee not exceeding 10 percent of your principal loan amount after approval.
Also, the total charges of your loan, including late interest, admin fee and late fees, shouldn’t exceed your principal amount. If you’re taking out a loan of $15,000, the total fees attached to your loan shouldn’t exceed $15,000.
Before signing any loan contract, make sure you closely scrutinize the lender and their practices. Taking out a loan is supposed to help your financial situation, not make it worse. To be sure you’re dealing with an authorized moneylender, you can check the Ministry of Law’s list of licensed moneylenders in Singapore.