Mandatory Cooling-off Period for Loans Taken from Licensed Moneylenders
1. The Ministry of Law (“MinLaw”) announced today that a mandatory cooling-off period of three business days (i.e. excluding Saturdays, Sundays, and public holidays in Singapore) will be imposed on all unsecured loans (other than a business loan) taken from licensed moneylenders (“LMLs”). During the cooling-off period, borrowers will be allowed to cancel a loan at reduced cost.
2. Currently, LMLs are allowed to keep the full loan approval fee, as well as any interest accrued, if a borrower cancels a loan. With the mandatory cooling-off period, when a borrower cancels a loan during the cooling-off period, the LML will only be allowed to retain a portion of the loan approval fee, up to the limits set out in Table 1. This helps to cover the overhead and due diligence costs incurred by LMLs when granting a loan.
3. This means that the total amount to be repaid by the borrower will be (a) the remaining principal amount of the loan disbursed to the borrower (after deduction of the loan approval fee upfront), and (b) the portion of the loan approval fee which the LML will be allowed to retain (see Annex for illustrations). There will not be any interest charged, and the total amount to be repaid by the borrower cannot exceed the principal amount of the
4. The framework for this cooling-off period was developed by MinLaw, in consultation with the Credit Association of Singapore, which is the professional association representing LMLs. It seeks to strike a balance between affording borrowers an opportunity to reconsider their need for credit, which may sometimes be made on impulse, and ensuring that LMLs are still compensated for the work done when granting a loan.
5. The cooling-off period will be implemented on 15 September 2026, in recognition that LMLs will need time to make the necessary adjustments to their processes and systems. The Registry of Moneylenders (“the Registry”) under MinLaw will continue to work closely with the relevant parties on its smooth implementation.
6. To further promote the interests of borrowers, the Registry had also updated the Professional Service Handbook for LMLs in April 2026 to include the following best practices which LMLs have been encouraged to adopt:
a. Provide incentives (e.g. discounts/rebates on interest and/or fees) for on-time repayments or loans settled ahead of schedule;
b. Establish digital touchpoints to help borrowers better manage their finances (e.g. online portal for borrowers to monitor their loan servicing); and
c. Encourage LMLs to put in place arrangements to proactively assist distressed borrowers by restructuring the loan repayment to one that will suit the borrower’s financial situation, and/or referring them to a Social Service Agency for assistance.
7. MinLaw will continue to maintain a balance between protecting borrowers and ensuring that there is reasonable access to credit from licensed sources..
MINISTRY OF LAW
31 AUGUST 2026
Last updated on 31 August 2026