6777 7775
Sim Lim Tower, 10 Jalan Besar Sim Lim Tower #01-01, 208787
Licensed Money Lenders vs. Banks: Which Should You Choose?
6 Jun 2025 | Monetium Credit
Choosing who to borrow money from can be a complicated decision. Licensed money lenders will say they are the best option, but banks will say the same thing about themselves. This article gets into these two types of lenders, and it discusses the advantages and disadvantages of choosing one or the other. There are many elements you should consider when making this decision, and the purpose of this article is to present those things. By the end of your reading, it should be clear which lender to choose. But it’s fundamental to understand that borrowing is a different experience for everyone.
Borrowing from Licensed Money Lenders
Believe it or not, money lenders existed way before banks, but indeed, they were not licensed then! Now, on the other hand, licensed money lenders work in almost an identical way to banks. But, there are a few differences between the two. At their core, their purpose and structure are the same. They are lending you money, and you have to pay it back in a certain period. The difference between the two is mainly in a few elements:
- Interest rate – Moneylenders usually have higher interest rates than banks.
- Less strict regulations – While, banks and licensed money lenders are regulated by financial authorities, the regulations are not as strict.
- Less strict requirements – The eligibility requirements are easier to fulfill than those of a bank; e.g. you don’t need a fantastic credit score. (Learn how to calculate your eligibility for a Personal Loan with the help of our article.)
- Unsecured – You have a higher chance of getting an unsecured loan.
Advantages of Choosing Licensed Money Lenders
There are some advantages if you choose to borrow money from a moneylender. The fast approval is one of those things that convinces a lot of people. If you need money quickly, you cannot afford to wait for the long process that banks usually have. Then, another amazing thing is that the application process itself is easier. The lender doesn’t ask for as many documents, and you don’t need to have a perfect credit score. There are people without a credit score, and their only chance to borrow is with a licensed lender in Singapore.
But, back to the documents, you usually only need: your ID, some proof of income, and to sign the contract. As for the eligibility, for a legal money lender in Singapore, you need to be over 21, be a citizen of Singapore, and you need to be employed (full-time or part-time). Don’t worry, you can also apply if you are self-employed, but you just need to provide some proof of income. The thing is that the whole process is a lot simpler, and it doesn’t feel as scary as with a bank. You need someone open to communicating and explaining things to you without acting superior; most people say that that’s hard to find when working with banks.
Disadvantages of Choosing Licensed Money Lenders
One of the reasons why people choose to go to banks rather than money lenders is mainly because of the fear of being scammed. And, it is a very real and valid fear! Scammers are scary, especially when they are pretending to lend you money. If you are getting scammed, there are many ways in which the situation might end, and none of them are good. So, making sure that you have nothing to do with scammers is best. If you are in Singapore, you should be aware of the list made by The Ministry of Law, which shows all of the licensed money lenders in the country. You should check this list before choosing a lender. We, Monetium Credit are on the list, but you should not just take us on our word, check it for yourself!
The second disadvantage would be the fact that the interest rates are usually a little higher. This is compensated by the fact that the repayment period is short and more flexible. But, also because of this, the monthly payments are usually higher. So, it depends on how quickly you want to get rid of the loan. Then, some lenders might add some processing fees or other fees that banks don’t usually have. The list of disadvantages will slightly differ depending on the lender. This is why it’s important to read the contract very carefully before signing. If you don’t agree to something, bring it up, and even try to negotiate the terms.
Borrowing from a Bank
Borrowing from a bank comes with advantages and disadvantages; but, first, let’s talk about the borrowing process. Banks typically have a few loan types available (that we also have). Depending on the type of loan that you need, things like: interest rate, and requirements, can differ slightly. Also, things will differ depending on the country you are in, if you are a citizen or not, the specific bank or lender, and the type of loan you want to take. So, the information that is presented is only approximate; you should always check the information based on your specific case. Now, just to be sure we are on the same page; you are borrowing a sum of money, that you have to pay back, plus the interest rate and you must respect the bank’s conditions.
As mentioned, there are several loan types that you might take from a bank. Depending on the type, collateral might or not be needed, the repayment period might be longer or shorter, and so on. As an example, you often don’t need collateral for a personal loan; but you need one for a home loan. A collateral is an asset that you pledge as security that you will be repaying the loan; it can be a house or a car. It’s not often that you can take any type of loan from a bank without a collateral, which is something that most people cannot afford to do.
Advantages of Choosing a Bank
Now that the general concept is clear, what exactly are the advantages of choosing the bank? The first advantage that’s worth mentioning is the fact that banks are highly regulated by the government. They cannot do what they want when it comes to their interest rates, fees, and so on. You have a strong level of protection compared to other types of lenders. Then, the second one would be the fact that they can offer the largest loans; after all, no one has money like a bank does. And, last but not least, borrowing from a bank helps your credit score.
One of the advantages, which is not actually real, is the fact that it seems safer. And while safety is important, banks are no longer the only option. Don’t let other people tell you that only banks can lend you money legally, because that is completely untrue.
Disadvantages of Choosing a Bank
The advantages are great, but there is also the other side of the coin too! One of the things that often makes people not choose the bank is the strict eligibility requirements. People with no credit, poor credit, or unstable income have no chance of getting a loan from a bank. Many of the people who need a loan, need it because they don’t have money, and it appears that banks only lend to people who are already rich! Then, the repayment plans are often too long and too structured, meaning that you don’t have a say when it comes to this.
Another big disadvantage is the fact that the application and approval process takes longer. A bank will often require way more documents than a money lender. And, the time you wait to see if you are approved or not, is usually a lot longer. And, many of the people who need a loan, need it pretty fast. While these elements might not seem like a reason not to choose a bank to some people, to others, it’s enough to start looking in other places.
Learn to Borrow Responsibly: Tips and Tricks
The situation of each person is completely different, especially when it comes to things like taking a loan or anything that’s related to money. So, one thing that you might think of is if you really need the loan; and what is sum that you actually need. When taking a loan, many people take a little more than they need. And while it might not seem like a big deal, it can be the reason why you end up in debt. You should borrow only the amount that you need. And, before even borrowing, you should know where every cent of that loan will go.
Make a plan, and stick to it no matter what. Analyse the situation, and write everything down. Seeing things written down can help with seeing the bigger picture. The thing you need to do with the money, the amount you need, and the repayment plan. It would be ideal to have an approximate idea of all of your monthly expenses; this way, you can ensure that you will be able to pay the loan back. Remember to consider emergency events (medical emergency, funeral, etc.). Something else that not a lot of people do is have savings before borrowing. It might sound counterintuitive, but the savings might help you if you lose your job, or cannot pay your monthly instalment because of another reason.
Now, you should never borrow from unlicensed moneylenders, under no circumstances. You can lose thousands of dollars that you will never be able to get back. The authorities cannot help you in this situation, as these scammers have a lot of experience and know how to operate. That’s why you should always check the list provided by the Ministry of Law. Also, we have an article that teaches you more about identifying and avoiding getting scammed.
What Is the Best Option for You?
Ultimately, you truly know best, because you know your situation better than anyone else. But, it’s true that there are some things that you might want to take into consideration while making this decision. Your financial situation, repayment ability, and urgency should all play an important role when choosing your lender. Nowadays, many moneylenders function exactly like banks, and have similar policies; but there are some differences between the two. As mentioned throughout this article, the difference is mostly in the urgency with which your application is approved, the eligibility criteria, the repayment period, and even the sum you want to borrow.
If you find it hard to get approved by a bank, because you have a poor or no credit score, you might want to try a money lender. But if you require a very large sum of money, you might have more luck with a bank. It just depends on what you need. Doing your own research about both banks and other types of lenders, is the first step towards borrowing wisely. You might have people around you who will encourage you to choose one or the other, and while it might sound tempting, you should make a decision on your own.
At Monetium Credit, we are more than open to discussing with you! There will be no pressure to choose us. We know that sometimes, you just need a professional to give you some advice. If the application process raises any questions, or you are not sure what loan you should take, we are here to help. Know that we also have a page dedicated to Frequently Asked Questions, which you might want to check before anything else. You will find answers about the application, eligibility, repayment, fees, and some other topics.
Recent News
Recommended Read
Choosing between emergency funds and personal loans depends on the urgency and size of an expense.
Why Wait? Take Control of Your Financial Future Today!
At Monetium Credit, our goal is to help you navigate life’s financial demands with ease and confidence. Our quick personal loan deals are crafted to offer both speed and flexibility, ensuring that you receive the support you need exactly when you need it.
Quick Links
Login to your bank’s PayNow App & Scan the QR Code to make Payment
Monetium Credit (S) Pte Ltd (201326118D)
DBS Current Account
Copyright @ 2024 Monetium Credit (s) Pte Ltd. All Rights Reserved. License No 149/2024.
Disclaimer | Privacy Policy | Responsible Borrowing
Monetium Credit (s) Pte Ltd (UEN No. 201326118D) is a registered company under the laws of Singapore. Customers are strongly advised to take a look at our privacy policy & disclaimer sections. If you have any queries or concerns in regards to personal data, please kindly contact [email protected]
