Licensed Moneylender vs. Loan Sharks: 5 Key Differences Every Borrower Should Know

  • Licensed moneylenders in Singapore are regulated by government authorities and must adhere to strict lending regulations.
  • Loan sharks operate illegally, charging exorbitant interest rates and employing unethical collection practices like harassment.
  • Borrowers should seek transparent loan terms and verify the reputation of lenders through official channels.
  • If victimized by a loan shark, cease payments, report them, seek legal assistance, and find support groups.


In recent years, there has been a significant increase in the number of people seeking personal loans in Singapore. This is due to various reasons, such as the rising cost of living, unexpected expenses, and financial emergencies.

However, with the rise in demand for personal loans, there has also been an increase in the number of unlicensed moneylenders and loan sharks preying on unsuspecting borrowers. This blog will discuss the key differences between licensed moneylenders and loan sharks in Singapore and why it is important for borrowers to know these differences before taking out a loan.

Legal Regulations

One of the most important distinctions between a licensed moneylender in Singapore and a loan shark is their legal status. Licensed moneylenders in Singapore are regulated by government authorities and must adhere to strict rules and regulations when providing loans.

On the other hand, loan sharks operate illegally without any oversight or regulation. This means that borrowers who choose to borrow from loan sharks are at risk of falling victim to unethical practices such as high interest rates and harassment.

Interest Rates

Licensed moneylenders are required to follow guidelines set by regulatory bodies regarding the maximum interest rates they can charge on loans. These rates are typically much lower than what loan sharks charge, making them a safer option for borrowers. Loan sharks often impose exorbitant interest rates that can trap borrowers in a cycle of debt, leading to financial ruin.


Licensed moneylenders are required to provide borrowers with clear and transparent information about the terms and conditions of their loans. This includes details such as interest rates, repayment schedules, and any fees or charges associated with the loan. Loan sharks, on the other hand, often operate in secrecy and may not provide borrowers with all the necessary information upfront, leaving them vulnerable to hidden costs and unfair practices.

Collection Practices

Licensed moneylenders are bound by strict guidelines when it comes to debt collection practices. They are not allowed to use aggressive or unethical methods to collect payments from borrowers, such as harassment or threats of violence. Loan sharks, on the other hand, have no qualms about resorting to illegal tactics to force borrowers to repay their debts, putting them at risk of harm or intimidation.


Licensed moneylenders have established reputations within the financial industry and are held accountable for their actions by regulatory bodies. Borrowers can research licensed moneylenders online or through official channels to ensure that they are dealing with a reputable lender. Loan sharks, on the other hand, operate under the radar and often change their identities frequently to avoid detection by authorities.

Bonus: What To Do If You Fall Victim 

If you find yourself in a situation where you have unknowingly borrowed from a loan shark, it’s important to take immediate action. Here are four steps you can take to protect yourself:

Stop Making Payments

Cease all further payments to the loan shark immediately. You have no legal obligation to continue repaying a loan from an unlicensed lender. You may also want to consider changing your bank account or credit card information to prevent the loan shark from accessing your funds.

Report It

Report the loan shark to the authorities, such as the police or the Consumer Financial Protection Bureau. Providing any information you have on the lender, such as their name, contact information, and loan terms, can help in their investigation and potentially protect others from falling victim to the same lender.

Seek Legal Assistance

Consult with a lawyer who specializes in debt-related issues. They can provide you with legal advice and representation when dealing with the loan shark. You may also consider reaching out to debt counseling agencies for additional assistance.

Reach Out to Support Groups

There are organizations and support groups that specifically help individuals who have fallen victim to loan sharks. Seek their assistance for emotional support and guidance on how to handle your situation. Remember, you are not alone, and help is available.

Remember, always borrow from licensed moneylenders and never engage with loan sharks. By educating yourself and being aware of the risks, you can protect yourself from falling prey to illegal lending practices.

Understanding the differences between licensed moneylenders and loan sharks in Singapore is crucial for protecting yourself from financial harm. Always ensure that you are dealing with reputable and legally regulated lenders to avoid high interest rates, unethical collection practices, and other risks associated with unlicensed entities. By being informed and cautious, you can navigate the complexities of borrowing safely and responsibly.

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