Taking a Personal Loan from Licensed Moneylender vs. Banks

People mostly take personal loans from two major sources. One is banks, and the other is licensed, moneylenders. These are the most popular personal loan providers.

When we talk about moneylenders, people assume they are loan sharks. But we are not talking about loan sharks. Those are unlicensed moneylenders. We are talking about licensed moneylenders.

They are totally different than loan sharks. They operate as per the rules and regulations. They are more sophisticated than sharks.


Banks are financial institutions that deal with money. They take people’s money in the form of a deposit and lend the same money to others in the form of a loan. They pay interest on deposits and charge interest on loans. The difference in the rate of interest is their profit. There are many types of banks in the market, private banks, government banks, foreign banks, overseas bank, etc.

Licensed Moneylender:

They lend money to the people in the form of a loan and charge interest on it. They need to have a specific license to carry out the lending activity. They can lend you money directly or on behalf of a moneylending firm. They have to follow restrictions when it comes to loan amount, interest, and charges. They have to abide by the Act. To check whether a moneylender is licensed, you can check on the website. The listing is given on the ministry of law site. If you borrow money from an unlicensed lender, you may face legal charges.

Personal Loan from a Bank:

You can take a different type of personal loan Singapore from the banks. Multiple banks provide different types of loans to customers. You can simply visit the bank and apply for a personal loan.

Apart from a personal loan, you can take other types of loans like SME business loan Singapore. In short, you get to choose from different types of loans when you approach a bank. Each loan has a different rate of interest.

As you have an account in a bank, you will directly get all the money in the same account. It is very easy to access.

Personal Loan from a Licensed Moneylender:

They provide only personal loans. They don’t provide other types of loans. You don’t get to choose between various loans. You have to stick with one choice only.

The rate of interest is the same as the loan, as they offer only short-term personal loans. They transfer the loan amount in the bank account of your choice. They don’t offer an account to you, unlike banks.

Banks vs. Licensed Moneylenders:

When you take a personal loan from banks and licensed moneylenders, there are many differences. Their services and loan type is different from one another.

Loan Amount:

  • Bank: Banks provide a higher amount of personal loans compared to licensed moneylenders. The minimum amount of personal loan from the bank is $10,000.
  • Licensed Moneylender: They provide only a small amount of personal loans. They run a small business while banks run a huge business. They don’t offer a higher amount of personal loans. The loan they offer depends on your monthly income. You can take a minimum loan of a few hundred dollars and a maximum loan of $3000.

Possessing Speed:

  • Bank: Banks take a lot of time to process your loan. They check the loan application thoroughly, along with the documents. It takes a lot of time. It is a time-consuming process. But you can apply for instant loans with banks to get a personal loan immediately.
  • Licensed Moneylender: They provide the loan is lesser time. They don’t really check the documents. The process of personal loan is more quickly than banks. They will approve the loan d give you the money in a few minutes.


  • Bank: They have various restrictions on personal loans. They don’t provide loans to foreigners. It is only for citizens. They provide personal loans to an outsider if their income is more than$45,000. To normal citizens, they provide loans on the basis of income. If their yearly income is more than $20,000, then only they will get the loan. There are many restrictions on income and citizen status.
  • Licensed Moneylender: They don’t really have any restrictions. They provide loans irrespective of your citizenship and income. They provide personal loans to all. They just check your income to determine your loan value.

Credit History:

  • Bank: They give much importance to credit history. If your credit score is bad, you will not qualify for the loan. A credit score is an important factor in getting a personal loan from a bank.
  • Licensed Moneylender: They don’t pay much attention to your credit history. If your credit score is bad, they will still provide you a personal loan.

Interest Rate:

  • Bank: Banks don’t really charge a very high rate of interest. The interest rate differs from one bank to another. It depends on your credit score and security. It can be from 4$ to 35%.
  • Licensed Moneylender: They charge a really high rate of interest as they don’t consider creditworthiness. The interest rates are 25% to 30%.

Choose Banks:

  • You need to choose a bank for a personal loan if you need a good amount of loan. Banks can provide you more money than a licensed moneylender.
  • You can also choose banks if you want a personal loan for a longer period of time.
  • If you have a good credit history and don’t need an urgent loan, then go with a bank.

Choose Moneylender:

  • If you need a small amount for a loan urgently go with licensed moneylenders.
  • If you have a bad credit score and not getting a loan from a bank, you can borrow money from a licensed moneylender.


When you compare personal loans from banks and personal loans from a licensed moneylender, banks provide a higher loan amount. They also charge less amount of interest and are feasible for all. The only drawback with banks is that they take a lot of time to process the loan, so you have to wait.