If you have been comparing licensed moneylenders in Singapore, you have probably seen one number repeatedly: 4% per month.

That is currently the maximum interest rate a licensed moneylender may charge.

But what does 4% per month actually mean in dollars?

Does a S$5,000 loan cost S$200 every month?

Is 4% charged on the original loan amount for the entire tenure?

And what happens after you start reducing the principal?

These are important questions because simply looking at “4%” does not tell you how much you will eventually repay.

Under Singapore’s current rules, licensed-moneylender interest is capped at 4% per month, and interest is calculated on the principal that remains outstanding after repayments have been applied.

This guide breaks down how the calculation works, shows examples across different loan sizes and explains the other fees you need to factor into the real cost of borrowing.

Is 4% Per Month the Standard Licensed Moneylender Rate?

No.

4% per month is the maximum permitted rate.

A licensed moneylender can charge less.

For example, one lender might offer:

• 2.5% per month
• 3% per month
• 3.5% per month

while another may charge the maximum 4%.

This is why borrowers should still compare licensed-moneylender offers rather than assuming every loan costs exactly the same.

If you are comparing several providers, Lendify’s guide to choosing a licensed moneylender in Singapore explains what else to look at besides the interest rate.

How Is Licensed Moneylender Interest Calculated?

This is where the 4% figure is often misunderstood.

Interest should be calculated using the remaining principal.

Suppose you borrow: S$5,000

At 4% monthly interest, the first month’s interest on S$5,000 would be:

S$5,000 × 4% = S$200

Now suppose your repayment reduces the outstanding principal to: S$4,000

The next month’s interest would be:

S$4,000 × 4% = S$160

It should not continue being S$200 simply because S$5,000 was the original amount borrowed.

The Ministry of Law’s borrower guidance states that interest is calculated on the outstanding principal after repayments are applied.

Imagine a S$3,000 loan being repaid with S$500 of principal each month.

At the maximum 4% monthly interest:

Total interest: S$420

Total repayment before permitted fees: S$3,420

This example assumes equal principal repayments and is for illustration only. Actual instalments depend on the contract you sign.

What Does 4% Interest Cost on Different Loan Amounts?

Using the same illustrative equal-principal repayment method, here is what the maximum 4% monthly rate could look like:

The important thing to notice is the tenure.

The same S$5,000 principal in this illustration costs:

S$700 interest over six months

versus

S$1,300 interest over twelve months

A lower monthly repayment achieved by stretching the loan over a longer period may therefore result in a higher total interest cost.

Is 4% Per Month the Same as 48% Per Year?

Not exactly in the way borrowers often calculate it.

Multiplying:

4% × 12 = 48%

shows the simple annualised nominal percentage.

But that does not mean you simply take your original principal and add 48% every year.

Licensed-moneylender interest is charged on the outstanding balance, which should fall as principal is repaid.

That is why the actual dollar cost depends on:

• Principal amount
• Repayment schedule
• Loan tenure
• How quickly principal decreases
• Whether repayments are made on time

It is also why comparing a licensed-moneylender’s monthly reducing-balance rate directly against a bank’s advertised annual flat rate can be misleading.

For the difference between flat rates, EIR and monthly moneylender rates, read Lendify’s Personal Loan Interest Rates Singapore guide.

What About the 10% Administrative Fee?

Interest is not the only cost to consider.

A licensed moneylender may charge an administrative fee of up to:

10% of the principal when the loan is granted.

Suppose your loan principal is:

S$5,000

Maximum administrative fee:

S$500

If the full S$500 fee is deducted when the loan is granted, the amount actually disbursed to you could be:

S$4,500

even though the loan principal is S$5,000.

This is why borrowers should ask two separate questions:

How much am I borrowing?

and

How much cash will I actually receive?

They may not be the same number.

Example: S$5,000 Loan With Maximum Admin Fee

Using our illustrative six-month example:

Principal:

S$5,000

Maximum administrative fee:

S$500

Potential cash received after deduction:

S$4,500

Illustrative interest at 4% monthly with equal principal repayments:

S$700

This means the borrower needs to understand that the headline “S$5,000 loan” does not necessarily mean S$5,000 appears in their bank account.

Before signing, ask the lender to clearly explain:

• Principal amount
• Amount disbursed
• Administrative fee
• Monthly repayment
• Total interest
• Total repayment

What Happens If You Pay Late?

There is a separate rule for late interest.

A licensed moneylender may charge late interest of up to:

4% per month

but only on the amount that is actually overdue. Ministry of Law

Suppose:

Total remaining loan balance: S$5,000

Overdue instalment: S$800

The late interest should apply to the overdue S$800, rather than automatically applying to the entire S$5,000 that has not yet fallen due.

At the maximum rate:

S$800 × 4% = S$32

of late interest for that month on the overdue amount.

Can a Licensed Moneylender Also Charge a Late Fee?

Yes.

In addition to permitted late interest, a licensed moneylender may charge a late fee of up to:

S$60 for each month of late repayment.

That means missing a payment can potentially result in:

Late interest + late fee

on top of the amount you already owe.

This is why the affordability calculation should be done before accepting the loan rather than after the first repayment becomes difficult.

If you are already dealing with an overdue payment, Lendify’s content on loan repayments and licensed-moneylender borrower rights explains the legal limits in more detail.

Is There a Maximum on the Total Charges?

Yes.

This is an important borrower protection.

The total of:

interest + late interest + administrative fee + late fees

cannot exceed an amount equivalent to the original principal.

For example:

Principal:

S$5,000

The total of the regulated charges covered by the cap cannot exceed:

S$5,000

Therefore, those charges cannot keep growing indefinitely.

This does not mean every S$5,000 loan will cost S$10,000.

It means S$5,000 is the maximum combined amount of those specified charges that can be imposed on a S$5,000 principal.

Does a Longer Loan Tenure Always Make Sense?

Not necessarily.

Borrowers often focus on the monthly repayment.

Suppose you have two possible repayment structures.

One requires:

S$950 per month for six months

while another requires:

S$540 per month for twelve months

The second option may feel much easier each month.

But the longer loan may also produce more total interest.

The correct question is therefore not simply:

“Which monthly payment is lower?”

It is:

“Which repayment can I comfortably afford, and what will it cost me in total?”

Should You Always Choose the Lowest Interest Rate?

The interest rate matters, but it is not the only factor.

Consider two hypothetical offers.

Offer A

3% monthly interest
Very short repayment period
High monthly instalment

Offer B

3.5% monthly interest
Longer repayment period
Lower monthly instalment

Offer A may have the lower rate, but it could still be unsuitable if the required payment consumes most of your monthly income.

Compare:

• Interest
• Administrative fee
• Amount actually disbursed
• Repayment frequency
• Monthly instalment
• Loan tenure
• Total repayment
• Late-payment terms

Lendify’s licensed moneylender comparison guide goes into these factors in more detail.

How Much Can You Borrow From a Licensed Moneylender?

The 4% interest cap is separate from Singapore’s unsecured borrowing limits.

For Singapore Citizens and Permanent Residents:

Different limits apply to foreigners earning below S$20,000.

These are maximum statutory amounts across all licensed moneylenders combined rather than a fresh allowance for every lender.

For examples based on different salaries, read Lendify’s How Much Can You Borrow From a Licensed Moneylender? guide.

Does Being Eligible for a Bigger Loan Mean You Should Take It?

No.

Suppose you earn:

S$5,000 per month

and potentially fall within a statutory licensed-moneylender borrowing ceiling of:

S$30,000

That does not mean borrowing S$30,000 is sensible.

Imagine you already spend:

Housing: S$1,500
Food: S$700
Transport: S$400
Family commitments: S$800
Existing repayments: S$700
Insurance and bills: S$400

Total:

S$4,500

That leaves only:

S$500

before savings and unexpected expenses.

A large additional loan repayment could quickly become difficult despite the legal borrowing ceiling.

Borrowing limit and affordable borrowing are not the same thing.

Bank Interest vs Licensed Moneylender Interest

This comparison often causes confusion because the rates are expressed differently.

A bank may advertise:

3.5% p.a.

while a licensed moneylender quotes:

3% per month.

You cannot meaningfully compare the two numbers directly.

Bank personal loans normally also disclose an Effective Interest Rate (EIR), which accounts for factors such as the repayment structure and certain fees.

Licensed moneylender rates are expressed monthly and calculated on the outstanding principal.

For borrowers who qualify for bank financing, bank loans will often offer a lower overall cost for larger amounts and longer tenures.

Licensed moneylenders may serve different borrowing situations, including smaller or shorter-term needs and applicants who do not meet a particular bank’s criteria.

For a broader comparison, see Lendify’s Personal Loan Singapore guide.

Can You Cancel a Licensed Moneylender Loan After Taking It?

For certain loans, yes.

As of 15 September 2026, qualifying unsecured non-business loans from licensed moneylenders come with a three-business-day cooling-off period.

If you cancel an eligible loan within this period:

• No interest is charged.
• You return the remaining amount that was disbursed.
• The lender may retain only the permitted portion of the loan approval fee.
• Your cancellation repayment cannot exceed the original principal. Ministry of Law

For loans of S$5,000 or below, the maximum retainable approval fee is S$50, subject to the actual approval fee paid.

For loans above S$5,000, the maximum retainable amount is 3.5% of the principal, again subject to the actual fee paid.

Lendify has a dedicated explanation here: 3-Day Loan Cooling-Off Period Singapore.

What Should You Ask Before Signing the Contract?

Before accepting a loan, make sure you know:

What is my loan principal?

What amount will actually be disbursed to me?

What monthly interest rate applies?

How is the interest calculated?

What is each repayment?

How many repayments are there?

What is the administrative fee?

What is the total amount I will repay if I pay everything on time?

What happens if I pay late?

If the lender cannot clearly explain these figures, do not rush into signing.

Licensed moneylenders are required to explain loan terms in a language the borrower understands and provide the borrower with a copy of the contract. Ministry of Law

Frequently Asked Questions

What Is the Maximum Licensed Moneylender Interest Rate in Singapore?

The maximum is 4% per month.

A lender may charge less.

Is the 4% Charged on the Original Loan Every Month?

No.

Interest should be calculated on the outstanding principal after repayments are applied.

As your principal falls, the amount used to calculate interest should also fall.

Is 4% Per Month the Same as 48% Per Year?

Four percent multiplied by twelve gives a nominal 48%, but that does not accurately describe the dollar cost of a reducing-balance loan.

Actual interest depends on how quickly your outstanding principal is reduced.

Can a Moneylender Charge More Than 4% If My Credit Is Bad?

No.

The 4% monthly interest cap applies regardless of the borrower’s income and whether the loan is secured or unsecured.

What Is the Maximum Admin Fee?

Up to 10% of the principal when the loan is granted.

What Is the Maximum Late Fee?

Up to S$60 for each month of late repayment.

What Is the Maximum Late Interest?

Up to 4% per month on the amount that is actually overdue

Can a Licensed Moneylender Add Other Processing Fees?

The Ministry of Law limits the fees licensed moneylenders may impose. Borrowers should check any unexpected charge against the official permitted categories and their signed contract.

How Do I Know Whether a Moneylender Is Actually Licensed?

Check the official Registry of Moneylenders rather than relying only on search results or advertisements.

You can also read Lendify’s Licensed Moneylenders in Singapore guide before applying.

How Lendify Can Help You Compare Licensed Moneylender Loans

Knowing that interest is capped at 4% does not mean every licensed-moneylender offer is identical.

Different offers can still vary in:

• Actual interest charged
• Loan amount
• Repayment schedule
• Loan tenure
• Instalment size
• Administrative fee
• Eligibility

Lendify is not a moneylender. It operates as a digital loan-matching platform connecting users with participating licensed and regulated lenders in Singapore.

Instead of comparing only the headline interest rate, compare the actual amount you receive and the total amount you need to repay.

You can review available options through Lendify’s loan comparison page.

If you are ready to check potential matches, you can also proceed through Lendify’s loan application process.

Final Thoughts

The phrase “4% interest” looks simple.

The actual cost is not.

For a licensed moneylender in Singapore, 4% per month is the maximum permitted interest rate, and it should be applied to the remaining principal, not continuously to the original amount borrowed.

Before taking a loan, calculate:

Principal borrowed → amount actually received → monthly interest → number of repayments → total interest → fees → total repayment.

Do not choose based only on the monthly repayment.

A longer tenure may make each instalment smaller while increasing the amount of interest you pay overall.

And do not automatically borrow the maximum amount available.

The better loan is the one whose total cost you understand and whose repayment fits comfortably within your budget.

Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial advice. The examples use simplified repayment assumptions for illustration. Actual loan schedules, interest amounts and fees depend on the individual loan contract. Borrowers should verify current rules with Singapore’s Registry of Moneylenders and review their contract carefully before borrowing.