A central repository of information on loans from licensed moneylenders will be set up next year in a bid to curb excessive borrowing.
Moneylenders will have to provide information about loans they have made and customers' payment behaviour to the Moneylenders Credit Bureau, which will be developed and run by DP Information Group (DP Info).
The bureau will allow licensed moneylenders to view a debtor's unsecured loans from other moneylenders and provide up-to-date details about a borrower's creditworthiness and indebtedness.
If the extension of more credit pushes the debtor's borrowing beyond acceptable risk levels, the moneylender could refuse a request for credit.
The move is part of a slate of tougher new rules on moneylending, which includes an interest rate cap of 4 per cent.
The aim is to protect borrowers, following complaints about excessive borrowing and exorbitant interest rates.
Licensed moneylenders said they welcome the establishment of the bureau as it will provide a clearer picture of a debtor's total borrowings.
"We'll be able to know how much a borrower has borrowed from other moneylenders, so that we won't over-extend the loan," said Mr Peter Tan, vice-president of the Moneylender's Association of Singapore.
"This will help make sure that borrowers don't bite off more than they can chew... Some borrowers go on a borrowing spree, and after that find that they're not able to service their loans, so they run into a lot of difficulty."
Mr Tan also noted that borrowers will be subject to a loan cap of six times their monthly salary.
Mr Lincoln Teo, chief operating officer of DP Info, said licensed moneylenders and borrowers will benefit from the increased transparency the credit bureau will provide.
"The information will help promote responsible borrowing," said Mr Teo.
"The transparency also means that individuals, when seeking to buy a credit product from a moneylender, will be more likely to take their personal and financial circumstances into account when making their decision.
"This initiative will eventually see a reduction in the number of defaults."