The Pros And Cons Of Taking Out A Payday Loan In Singapore

You have received your paycheck for the month and are on track to paying off your monthly expenses with it. Suddenly your car breaks down or an unexpected household expense crops up, and you’re left with a huge dent in your budget. What do you do?

Good thing a payday loan in Singapore exists for this very purpose.

What Is A Payday Loan?

First off, what is a payday loan? It is a short-term, unsecured loan with a high interest rate that we can use to cover rent, bills, along with other emergencies before the next payday. Normally, you can get a payday loan in Singapore as long as you have a stable job with a fixed monthly income and a bank account.

Payday loans do not work like traditional bank loans that usually advertise lending 2 to 3 times the monthly salary. Rather, the maximum amount that you can get with a payday loan is equivalent to your monthly income.

Before you consider a payday loan, it is beneficial to take a look at the pros and cons.

Pros Of Taking Out A Payday Loan

A payday loan in Singapore is quite similar to taking out a traditional loan. The key difference is it is designed for short-term borrowing i.e. less than a month, and you have to pay it back quickly. As long as you follow the rules of repayment before the due date, payday loans can help get you through temporary cash problems.

1. You Get Cash Quickly

The point of payday loans is obtaining fast cash, usually in less than 24 hours. Compare this with a traditional bank loan that can take several working days for processing and cash disbursement.

2. It is Safe and Legal

Provided you deal with an authorised money lender in Singapore, payday loans are safe and completely legal. Unlike loan sharks, all legal lenders in Singapore are regulated by the Ministry of Law and there is a list of licensed money lenders you can refer to before deciding on one.

3. You Do Not Need to Have A Good Credit Score

The reason why the loan approval rates for traditional bank loans take so long is because they require a thorough search of your financial background since it is an unsecured loan. However, licensed moneylenders in Singapore are not too concerned with your credit health when approving your payday loan.

Cons Of Taking Out A Payday Loan

Of course, it’s not all good news. Here are some less desirable factors of a payday loan.

1. High Interest Rates

If you think that credit card interest rates are the highest, think again. Payday loans attract about the same interest rates as credit cards but in this instance, the repayment duration is a one-time repayment amount due on your next payday.

2. Probability Of A Vicious Financial Cycle

If you are not careful, payday loans can ruin your financial future. Even after paying off your last payday loan, you might find yourself in another sticky situation that prompts another loan. If this becomes a habitual quick solution, you can be staring down a black hole of financial uncertainty and piling on more debt in the long run.

3. You Can Destroy Your Credit Score

Just because payday loan lenders do not run credit checks does not mean that they do not report non-repayment or late payment of the loan. If you fall behind on your payday loan payment, the default payment or debt can be seen through the Moneylenders Credit Bureau report, which will then ruin your credit score just like with any other loan.

All in all, taking out a payday loan in Singapore is still a good bet, provided that you plan your finances carefully, and refrain from treating it as a constant quick way out. Using payday loans wisely can be a life-saving option and positive financial reinforcement. However, use them as a last resort and when you absolutely need to.

If you are considering a payday loan, our loan officers are always ready to offer the best loan solutions. Contact us today for a consultation!

About the Author

With over 5,756 5-star Google reviews and counting since our inception in 2010, Galaxy Credit is more than well-equipped to share our insights on all aspects of loans, both through the content we publish and in conversations with borrowers.