Payday Loans in Singapore: What Is It & Should I Be Using It?
Like how many of us resort to personal loans, payday loans are taken on for many reasons including more cash liquidity for your business, emergency medical expenses, etc., which is among the quicker ways to cope with unexpected situations that require more money in a short time.
However, with every loan comes greater responsibilities and liabilities, thus we should be cautious about certain commitments and factors when tied down to repayments for payday loans. To avoid any financial missteps, let’s take a look at some of the considerations on when to take, and when not to take a payday loan and how it compares to a personal loan.
TLDR Summary: What Do I Need To Know About Payday Loans
- Payday loans are simply loans you can take from banks or approved licensed lenders to pay for something even before you get your next pay credited into your account.
- Payday loans often charge high interest rates and are usually used for short term loans.
- When considering interest rates, payday loans have interest rates that range from about 10% to 48%, while personal loans come with rates ranging from 3.5% to 10.8% per annum. The repayment periods and amounts vary quite a lot between these two loan options.
What Is A Payday Loan?
Most of the payday loans available in Singapore are also known as cash advance loans or salary loans, which are short-term, high-cost loans with high interest rates that provide you the cash that you need until you receive your next paycheck. Some of the banks that provide payday loans in Singapore include DBS, OCBC, Standard Chartered, UOB, etc.
How Does A Payday Loan Work?
Loan amount
The loan amount provided through a payday loan is usually a percentage of your monthly income as a borrower. The specific amount offered may vary depending on the bank’s/lender's policies and your income level.
Repayment period and terms
Payday loans have a short repayment period and are typically due on the borrower's next payday or within a few weeks. The loan term is designed to be brief, allowing borrowers to quickly address their immediate financial needs and is typically outlined in the loan agreement.
Most payday loans require you to repay the loan in a lump sum, including the principal amount, interest, and fees, by a specific due date. The repayment is usually done through automatic deductions from your bank account.
Interest rates and fees
Payday loans generally have higher interest rates compared to traditional loans. The interest rate and any applicable fees are disclosed to the borrower upfront, as required by the Monetary Authority of Singapore (MAS). It's crucial to review and understand the terms, including the interest rate, before agreeing to the loan.
Loan approval and disbursement
Once you submit your application, the lender will assess your eligibility and conduct a credit check. If approved, the loan amount will be disbursed to your bank account within a short period, often on the same day or within a few business days.
Can I Use A Payday Loan For Anything?
In Singapore, payday loans are regulated by the Ministry of Law, and there are restrictions and guidelines in place to protect consumers. As payday loans are often not offered by banks and licensed lenders as a long-term financial solution, borrowers tend to use them sparingly due to their high cost.
Thus, you’ve got to carefully assess your ability to repay the loan on time and explore alternative options, such as personal loans from banks as these alternatives can be better to fund your longer term expenses such as home renovations, overseas education, wedding events, cash flow of small businesses or SMEs (small-to-medium enterprises), vice versa.
While the specific terms and conditions may vary among banks and license lenders, payday loans in Singapore can generally be used for various purposes, including:
Emergency expenses
Utility bills
Debt consolidation
Pros and Cons Of Payday Loans
Payday loans can provide quick access to cash, but they also come with certain advantages and disadvantages.
Pros
- Fast loan approval
- Quick access to cash
- Easy application process as minimal documents required
- Minimal eligibility requirements as compared to personal loans
- Easily accessible to borrowers with lower credit scores or those who do not qualify for typical bank loans
- No credit checks required
Cons
- Small loan amounts
- High interest rates
- Risk of debt cycle
- Short repayment terms
- Negative impact on credit scores
Payday Loans vs. Personal Loans
| Payday Loans | Personal Loans | |
|---|---|---|
| Interest rate | Higher | Lower |
| Loan amount and term | Small, short-term loans, ranging from a few weeks to a month long or more | Larger, longer-term loans, ranging from a few months to several years |
| Credit check and eligibility | Not mandatory, no good credit score required | Mandatory, good credit score required |
| Repayment |
|
|
| Approval time | May often be faster than secured loans, as less upfront information is required | May take a longer approval process, as there are more documentation to be submitted for review |
Best Personal Loans In Singapore
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Standard Chartered CashOne
- Interest Rate
- From 2.88%
- Total Amount Payable
- S$10,288
- Processing Fee
- S$0
- Per Month
- S$857
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UOB Personal Loan
- Interest Rate*
- From 2.88%
- Total Amount Payable
- S$10,288
- Processing Fee
- 0%
- Per Month
- S$857
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HSBC Personal Loan
- Interest Rate*
- From 2.92%
- Total Amount Payable
- S$10,292
- Processing Fee
- S$0
- Per Month
- S$858
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- Interest Rate*
- From 2.68%
- Total Amount Payable
- S$10,268
- Processing Fee
- From 1% of Approved Loan Amount
- Per Month
- S$856
CIMB Personal Loan
- Interest Rate
- From 2.80%
- Total Amount Payable
- S$10,400
- Processing Fee
- S$0
- Per Month
- S$867
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Check out other Personal Loans with Low Interest Rates & Fast Approval
Best Payday Loans In Singapore
| Loans | Interest Rate | Maximum loan amount | Annual Fee | Minimum Annual Income |
|---|---|---|---|---|
| 22.90% - 29.80% p.a. | Up to 10X monthly salary | S$120 | S$20,000 | |
| 20.90% - 29.98% p.a. | Up to 6X monthly salary | Up to S$300 | S$30,000 | |
| Up to 10.08% p.a. | Up to 6X monthly salary | Up to S$200 or 2% of approved loan amount | S$20,000 | |
| Up to 48% p.a. | Upon enquiry of application | Upon enquiry of application | Upon enquiry of application | |
| Up to 48% p.a. | Upon enquiry of application | Upon enquiry of application | S$24,000 | |
| Up to 48% p.a. | Upon enquiry of application | Upon enquiry of application | S$24,000 |
Frequently Asked Questions
What is a payday loan?
- A payday loan is also known as cash advance loans or salary loans in Singapore, which are short-term, high-cost loans with high interest rates that provide you the cash that you need until you receive your next paycheck.
Where can I get the best payday loans by banks in Singapore?
- There isn’t really the “best” payday loan as each borrower’s loan needs will differ from another. It is more about finding the right payday loan with terms and conditions that suit your financial needs. Currently, DBS, UOB, OCBC are offering the best interest rates in Singapore for payday loans. To make a better comparison based on loan repayment tenures, interest rates and minimum annual income requirements, you may use tools such as MoneySmart's comparison tool to help you out.
Are payday loans better than personal loans?
- Yes and no. It really depends on your loan needs and financial capability. Payday loans are usually small, short-term loans with tenures ranging from a few weeks to a month long or more and high interest rates while personal loans offer lower interest rates and are more long term for aspects like home loans, car loans, education loans, renovation or business loans.
Can I use a payday loan for my home loan and car loan?
It is unlikely that you can use a payday loan to pay off your home or car repayments. Payday loans are usually for small amounts and home loans and car loans often entail huge amounts.
Is there a difference between a payday loan and personal loan?
- Yes, there are many differences between these two. They differ in terms of interest rates, maximum loan amounts and terms, credit check and eligibility requirements, repayment periods and terms, as well as the loan approval time.