New laws curbing how much interest licensed moneylenders can charge customers have reduced the amount that some borrowers owe, organisations assisting borrowers with debt problems said.
Even so, other debtors still struggle because they borrowed more instead, thinking they can afford the lower interest rates, according to some of these organisations.
Among the rules introduced in October last year was a cap on interest and late fees at 4 per cent a month.
Moneylenders were also allowed to charge only an upfront administrative fee of no more than 10 per cent of the loan principal.
Some organisations noted that the laws reduced the indebtedness of those seeking help over the money they owed.
Mr Billy Lee, founder and executive director of Blessed Grace Social Services, said that before October last year, a person approaching his organisation for help with his debts would normally owe a moneylender between $3,000 and $5,000, excluding interest.
A director at a licensed moneylending firm said a larger percentage of his borrowers are defaulting on their loans as they have borrowed larger amounts of money. "Now, people tend to borrow more because they think they are able to service the loan," he said.
However, a person seeking help now owes a moneylender about $1,500, minus interest, said Mr Lee. His organisation counsels about 25 people on debt issues a month.
"I think this is because the moneylenders do not want to give out so much (in loans) nowadays. Interest is only 4 per cent and if anyone were to run away, (the moneylenders) would lose a lot," said Mr Lee.
At the Debt Advisory Centre, set up by the Association of Muslim Professionals, the average amount, less interest, that people owe a moneylender has remained at about $1,000 to $2,500.
However, the number of moneylenders a debtor owes has fallen. This used to be 10 to 15 prior to October last year. But debtors who visit the centre now tend to owe money to just five to eight moneylenders on average. As a result, the total amount they owe moneylenders is less than before, the centre told The Straits Times.
It said moneylenders are not lending as much likely because the interest rates are low and do not justify the risk of non-repayment.
Ms Jolene Ong, chairman and founder of The Silver Lining Community Services, which provides debt counselling, noted that for people earning less than $2,000 a month, the amount of debt owed to legal moneylenders has fallen because moneylenders are being more wary.
Butsome borrowers have turned to illegal moneylenders instead, she said.
As a result, the number of new cases from this group seeking help every month for loan shark problems has gone up by about 15 per cent since last October.
More higher-income workers having difficulty with debt are coming in, too, because they borrow more, thinking they can afford the lower interest rates.
For people earning above $3,000, the number of new cases seeking help at Silver Lining over debts to licensed moneylenders has almost doubled to about nine a month, Ms Ong said.
In at least 80 per cent of these new cases, debt levels are higher than before the new laws.
The amount owed used to be about $4,000 per moneylender, but has risen to about $6,500. Also, the people in these cases owe money to more moneylenders.
Mr Wong Kee Soon, president of Adullam Life Counselling, said since the new laws, people needing help have larger loan amounts compared with before.
The loan principal of a person seeking help has increased by more than 20 per cent, he said.
This is because they think that the interest, capped at 4 per cent, is low.
Sales manager S.K. Tan is an example of such a case. He first borrowed $10,000 from licensed moneylenders in 2014.
But after the new laws, he took out another $20,000 from them, thinking he could afford the interest.
His interest payment, before he took out the extra loans, was about $3,000. With the extra loans, he has to pay moneylenders about $4,000 in interest and administrative fees a month.
A director at a licensed moneylending firm, who wanted to be known only as Sam, said a larger percentage of his borrowers are defaulting on their loans as they have borrowed larger amounts of money.
"Now, people tend to borrow more because they think they are able to service the loan," he said.
The new laws have caused his company to be more stringent in checking who he lends money to.
He said he now concentrates on lending to previous customers, as opposed to new ones, because lending to people he does not know is too risky.
"I believe the loan sharks are benefiting from this because (for) the licensed moneylenders, nobody wants to give out loans to new customers," he said.