By SingSaver.com.sg

Loan sharks in Singapore have been keeping up with the times. Watch out for these scammy tricks to avoid dealing with an unlicensed money lender.

As technology advances, so do criminals. And there’s been a spate of unlicensed money lenders or loan sharks in Singapore who have kept up with the times.

In fact, some of them use tactics so subtle and sneaky, Singaporean borrowers don’t even realise they’re dealing with loan sharks. Here’s what to watch for:

1.The Phone Line Trick

This method is used by loan sharks to dispense small loans (e.g. S$1,000 to S$3,000). Many loan sharks can’t be bothered chasing down loans of this size. It’s too much time and effort to vandalise houses or send threatening letters just for a few thousand dollars. So what do they do?

They let the telephone companies chase you.

Using this method, the loan shark provides you with a small amount of cash, enough to pay for a phone line and a handset. You are then told to go to Singtel, M1, or any other telco, and buy a two-year contract. This usually comes with a new, discounted handphone (the price of the handphone can even go down to $0 with certain plans).

The loan shark will give you some money for the phone – say $1,000 for a S$1,300 phone. They may have you go to different telcos and sign up for three or four more lines, based on how much you need. For instance, if you need S$4,000, then they’ll have you sign up for four phone lines.

After that, you will never see them again. The money for the phones is in your pocket, and the loan sharks are off to resell the phones at higher prices.

Of course, you are now saddled with the bills for multiple phone lines. How you pay that is none of the loan shark’s concern.

Some loan sharks give the scheme a fancy name, such as a “smartphone lease and buyback”, in which you can “make cash now”. This leads some people into thinking they are dealing with a legitimate business.

In reality, it could just be an unlicensed money lender who is using the telcos to absorb the risk of small loans.

2. Gift Card Advance

This happens more frequently in Taiwan and Hong Kong, but be wary in case you encounter it locally. Under this scheme, repayment comes via the purchase gift cards.

For example:The loan shark gives you S$3,000 right now. In return, you promise to purchase five $100 gift cards, every month for a year. Yes, that means effectively paying S$6,000 for a S$3,000 loan. Loan sharks are not known for low interest rates.

The gift cards may be valid cards that you must pass to the loan shark (e.g. AliPay cards), or they may be gift cards bought from the loan shark. In the latter case, the gift cards are worthless, or can be used to “buy” junk like old rice cookers and fans from the loan shark’s “business website”.

You may get this offer over SMS or via email, as a kind of “gift card advance” programme.

Make no mistake, this is loan sharking. The reason gift cards are used is to disguise repayment. One of the issues with loan sharking is that they need to launder money – it’s easy for the authorities to track them via the bank accounts they use. By using gift cards, they are able to receive cash without alerting banks or authorities.

It also tricks some borrowers into thinking it’s some sort of company running a promotion.

3. Masquerading as a Legitimate Financial Institution

In Singapore, every licensed moneylender is required to display their license number. Still, loan sharks these days are a lot slicker. Not all of them speak Singlish and type in broken sentences. Many are eloquent enough to set up professional looking offices, and take out proper newspaper advertisements.

These do not explicitly state that they’re loaning money, and may use phrases such as “flexible financing options”.

Don’t fall for it – no matter how dressed up they are, these are still loan sharks. And as with any other loan shark, it is almost impossible to pay them back. They’re going to keep raising the amount you owe, regardless of the maths involved.

Some may also “attach” themselves to less ethical businesses. For example, they may tie up with a scam seminar that offers fad investment in gold, trees, or diamonds. These loan sharks then hang around the lobby, offering financing (read: loans) to people who lack the capital to “invest”.

Whenever you are offered a loan, always check for some sort of certification. If you don’t see it, you’re dealing with a loan shark.

4. The Sell and Buyback Trick

This was common in Malaysia in the 1980’s, although regulation has now made it more difficult.

Nonetheless, some millennial loan sharks have rediscovered it, and enjoy the veneer of legitimacy it provides.

Under this scheme, the loan shark agrees to buy something from you at a highly inflated price. This is often something like a watch or gold. This is purchased from you at a price equal to the loan you need. For instance, if you need S$10,000, the loan shark buys your watch for S$10,000, even if it’s worth a lot less.

However, you must sign a contract saying you agree to buy back the item from the loan shark at a much higher price later. In the above example, you might sign a contract agreeing to buy back the watch for S$15,000 in 18 months.

If you get rid of the all the window-dressing, like a contract or maybe the fact that the loan shark wears a tie, this is still just a loan. The “sale” to the loan shark is nothing more than you borrowing money, and your “buy back” is just repayment with high interest.

When you fail to make the requisite buyback, you will be harassed as badly as any other debtor. Don’t be fooled into thinking you’re dealing with a legitimate business.

5. Hari-Hari Loans

Hari-hari is Malay for “daily”. This is a “gentle” form of loan sharking, in so far as it can possibly be gentle.

Loan sharks do this for low-income borrowers, such as stall assistants or cleaners who may be paid daily.

Instead of waiting a month for repayment, they will show up every day to collect a portion of the wages.

These loan sharks often have a more amicable relationship with their debtors. They almost never fail to get paid, and can cultivate relationships because they see the debtor daily.

However, they will still resort to harassment if collection becomes impossible.

Furthermore, the collection tends to carry on almost indefinitely. Debtors can end up paying 10 times what they owe, over a period of several years.

Stick to Legitimate Loans From Banks

The interest rate on a personal loan, from a proper bank, is only around six to nine per cent per annum. This can be repaid.

Loan sharks have extortionate interest rates, and some make it flat out impossible to repay them.

Furthermore, if you absolutely cannot repay the bank, physical harm will not come to you. However, a loan shark may not hesitate to beat you up or burn down your house.

No matter how strong the temptation, do not turn to loan sharks. And do not pursue “exotic” financing options from unregulated companies. Remember, not all loan sharks walk around carrying sticks and meeting in back alleys.

If you need to find the cheapest legitimate loans in Singapore, check out the best options at SingSaver.com.sg.

Singsaver.com.sg, Singapore’s go-to personal finance comparison platform, guides consumers on the best money habits with its credit card comparison tool and allows real-time personal loans product comparison.