Almost everyone falls prey to financial hardships from time to time. These situations are where loans come in to play. Loans are mechanisms to help one cope with immediate money needs or those who are in dire need of financial assistance. When you are in this kind of situation, it is natural to check the options available to you. But before you get too excited, let us take a look at one of the most enticing loans offered in the market today, the Payday Loan.
Understanding Payday Loans
A popular type of loan is the “Payday Loan” also known as a short-term loan or salary loan. This kind of credit is one that enables you to get money fast while waiting to receive your next paycheck, as the name suggests. Most salary workers choose Payday loans to make ends meet or to pay off bills at home. However, these people sometimes do not know what they are getting into so understanding how this type of loans works is very important.
Who Are Payday Loans Designed For?
Payday Loans are great for those who are in need of immediate money or when an emergency arises and your savings aren’t enough to cover your bills. You can also consider this kind of loan if you want to buy those running shoes you desperately need but cash is not on-hand until you get paid next week. There are also those who need cash instantly (for urgent car repairs for example) and need it less than 48 hours before making full repayment.
A lot still choose this type of loan because the approval process is faster compared to other kinds of loans. There is no need to join the waiting game for weeks and weeks before getting approved. It usually takes about 24 hrs to a day or two for approval. It also has minimal requirements for approval. Payday loans can therefore be seen as fast and easy ways of getting a loan.
The common criteria you need to meet are valid proof of employment, the age limit of between 21 and 64 years of age, and applicants should be a Singaporean citizen, permanent resident (PR) or valid Singapore employment pass/work permit.
Risks of Taking A Payday Loan
While a Payday loan seems attractive for it’s speed and ease, you should take extra precautions and think twice or even thrice before jumping in and grabbing this opportunity.
Needing to pay very high interest is one of the potential problems one might encounter head-on with this kind of loan. Remember, the interest rate climbs as high as 24x more if you don’t pay on time. That is why it should only be used for VERY short term lending, and on if you have a guaranteed repayment source. Otherwise the cost of the loan will escalate very quickly.
Self -induced financial crisis. If you are not able to pay your loan according to its tenure or based on your contractual agreement with the lender, it will balloon into a bigger amount due to rapidly compounding interest, finance charges and late fees. Guess what? You might never be able to pay it back if you’re not careful!
A potential threat to your credit score/ratings. Yes, you read it right! Just like any other loans, if you don’t pay on time or you disregard payments, it will be reported to credit agencies. So, the next time you need a loan, expect a low approval rate or worse be snubbed by licensed moneylenders because of your bad credit score.
Things to Keep in Mind Before You Apply for a Payday Loan:
- Remember not to borrow from unlicensed moneylenders. You have to verify that a moneylender is licensed by checking the list of licensed moneylenders in Singapore.
- Look around for moneylenders with the least onerous terms. Find terms that will be most favorable to you because after all, it’s your reputation that’s at stake here.
- Be very careful about loans which place a burden on your properties as security for non-payment. These types of loan can takeover your property once a default in payment occurs.
- Read your contract with the moneylender and make sure you understand it well. Remember, you are bound to everything you attach your signature on.
- Lastly, only borrow what you can pay or else you might become a victim of debt.
We hope you found our guide to payday loans in Singapore to be helpful. If you’d like to find the best moneylenders Singapore has to offer then please read our reviews.