In Shocking Debt Spiral, Singapore Man's Rs 1.7 Crore Loan Balloons To Rs 147 Crore. Here's How

In a case that highlights the dangers of exorbitant interest rates and late payment fees, a Singapore man's S$250,000 (Rs 1.75 crore) loan from a licensed moneylender ballooned to $21 million (Rs 147 crore). Unable to repay, he was forced to sell his $2 million home to the moneylender's director. Now, he and his family rent the same house for $7,000 -$8,500 a month, Straits Times reported. 

The unnamed man's financial ordeal began in 2010 when he borrowed S$250,000 from a licensed moneylending company. The loan came with a steep monthly interest rate of 4% per month and late payment interest of 8% per month. He was also charged a late payment processing fee of S$2,500 per month for the initial loan. Over the course of just four years, the debt spiraled out of control, ballooning from the original S$250,000 to S$3 million due to the high charges and compounding interest.

By July 2016, struggling to manage the repayments, he sold his home to the director of the moneylending firm for S$2.1 million (approximately Rs 14 crore) to keep his family sheltered. He then entered into a rental agreement with the same director, agreeing to pay a monthly rent ranging between S$7,000 and S$8,500.

The debt spiral continued, and by the end of 2021, it ballooned to Rs 146 crore ($21 million).

The man's situation came to the limelight when he clashed with the moneylender's director in court over rent and eviction from his sold home. The High Court ordered a retrial, citing grounds for further investigation into potential illegality in the loan and rental agreements.

Judge Philip Jeyeratnam found merit in the appeal. "In my judgment, it shocks the conscience that borrowing S$250,000 has led to (the borrower) being indebted - through the accumulation of interest and so-called late payment fees – in the tens of millions," the judge said.

However, the moneylender's director disagreed, claiming the borrower was responsible for his situation and the court lacked context. 

The judge observed that the debtor had alleged the tenancy agreement was merely a facade and raised concerns that the loan agreements might involve fraud, deception, or violations of statutory duties. The judge stated that it was necessary to examine the circumstances under which the man ended up selling his home to the moneylender's director and subsequently becoming his tenant.

The court is investigating potential illegality in the loan and rental agreements, as the interest rates may have breached statutory protections against usurious practices.