Guide · Money and debt · 3 min read
Borrowing from a moneylender
Licensed lenders, the interest limits, the paperwork you are owed, and what a court can do about an unfair loan.
In plain English · by mylaw.my · not legal advice· Law as at 30 Sep 2026
The short answer
No one can carry on, or advertise or hold themselves out as carrying on, the business of moneylending unless licensed under the Moneylenders Act.
Interest on a secured loan cannot be more than 12% a year, and interest on an unsecured loan cannot be more than 18% a year.
A moneylending agreement cannot be enforced unless all the parties signed it and the licensee gave the borrower a duly stamped copy before lending the money.
The Act applies to the whole of Malaysia.
On this page · 5 parts
Unlicensed lenders
Carrying on the business of moneylending without a valid licence, or after a licence has expired or been suspended or revoked, is an offence punishable by a fine of RM250,000 to RM1 million, imprisonment of up to 5 years, or both, and also whipping for a second or later offence.
Interest
If a moneylending agreement charges more interest than the 12% or 18% limit, the agreement is void, has no effect and cannot be enforced.
A licensee can never recover more in interest than the principal then due, unless a Court, having regard to all the circumstances, decides otherwise.
An agreement is illegal so far as it provides for compound interest, or for the interest rate or amount to go up because of a default in paying what is due.
The agreement can say that if you miss a payment on its due date, the licensee can charge simple interest on the unpaid sum at 8% a year, from day to day, from the date of default until it is paid.
Your right to information
While the agreement lasts, you can make a reasonable written demand, paying RM3 for expenses, for a statement of account signed by the licensee. It must show the date and amount of the loan and the interest rate or amount charged, what you have paid and when, what is due and unpaid, and what is not yet due and when it will be.
On a reasonable written demand and payment of RM5, the licensee must give you a copy of any document about the loan or any security for it.
If the licensee fails without reasonable excuse to comply within one month of your demand, it cannot sue for or recover any sum due under the agreement while the default continues, and cannot charge interest for the period of the default.
A licensee must give you a receipt when it receives a payment from you under the agreement.
Unfair loans and false promises
If the Court is satisfied by evidence that the interest charged is excessive and the transaction is harsh and unconscionable or substantially unfair, it must reopen the transaction and can relieve the person sued from paying more than the sum it finds fairly due.
A moneylender, or its employee or officer, who fraudulently induces or tries to induce someone to borrow, or to agree to the terms of a loan, by a false, misleading or deceptive statement, representation or promise, or by dishonestly concealing material facts, commits an offence punishable by imprisonment of up to 2 years, a fine of up to RM20,000, or both.
Laws in this guide
- s 5Moneylenders Act 1951
Explained in this guide
- s 17AMoneylenders Act 1951
Explained in this guide
- s 16Moneylenders Act 1951
- s 1Moneylenders Act 1951
- s 17Moneylenders Act 1951
Explained in this guide
- s 19Moneylenders Act 1951
Explained in this guide
- s 21Moneylenders Act 1951
Explained in this guide
- s 29Moneylenders Act 1951
Explained in this guide
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