Do you need cash urgently? There are plenty of loans available if you require emergency funds without a long repayment period, including a payday loan. As the name suggests, a payday loan is a short-term loan that is usually a portion of your following month’s salary. This is a loan that borrowers usually take up to tide them through until their paycheck comes in.
If you’re interested to learn more, this guide to the best payday loan in Singapore has everything that you need to know.
How do payday loans work?
As payday loans are short-term and high-interest loans, lenders typically do not require you to attach any of your assets as collateral. This means that payday loans are unsecured loans. This form of unsecured loan has a higher interest rate due to the absence of a credit score check and the ability for you to receive the funds immediately. For payday loans, the amount that you can apply for depends on your salary. As the principal amount is usually a portion of your following paycheck, the sum that you borrow should not exceed your monthly salary.
What’s the difference between payday loans and personal loans in Singapore?
The obvious difference between payday loans and personal loans is the cost of interest along with the loan tenure. Payday loans have greater flexibility when it comes to loan approval, as compared to the mandatory credit checks that you would need to undergo for personal loans.
However, because payday loans have relatively higher interest rates, you would need to pay them back quickly. Otherwise, you run the risk of falling into debt quickly. A payday loan is only appropriate if you’re absolutely confident that you would be able to pay it back on time once you’ve received your salary.
After all, the purpose of a payday loan is to simply tide you through a short period. That’s why the maximum amount you can borrow is still just a portion of your salary, in contrast with a personal loan’s higher limit.
What are the advantages of payday loans?
Payday loans have three advantages over other loan types. They are:
1. Ease of approval
Applying for a payday loan from licensed money lenders is generally quick and fuss-free. Even if you have multiple loan commitments or a bad credit history, often they aren’t taken into account when the firm decides whether to approve your loan application.
All that matters is proof that you’re drawing a stable income consistently and that you have not breached the legal loan limits for unsecured loans from licensed moneylenders in Singapore.
2. Fewer requirements from lenders
A payday loan is a short-term loan. Therefore, there are fewer hoops for applicants to jump through when applying for this loan type through a licensed money lender. This is an important advantage because payday loans are generally meant for urgent needs. Although the borrowing limit for personal loans is much higher, approval takes longer as well.
3. An easier way to maintain your credit score
Instead of taking up a personal loan from a bank and hurting your credit score whenever you need emergency funds, opt for a payday loan from a licensed money lender instead. This is one loan type that doesn’t impact your credit score, although it’s still best to pay it back on time to prevent your debt from snowballing.
Who provides payday loans in Singapore?
Unfortunately, banks in Singapore do not provide payday loans. This is due to a payday loan’s absence of credit history checks or requirements to pass creditworthiness. Only licensed money lenders provide the best payday loan in Singapore. On the bright side, this isn’t a cause for concern because there are over 150 licensed money lenders operating in the Lion City.
Things to consider before getting the best payday loan in Singapore
There are five important things that you need to consider before applying for a payday loan in Singapore:
1. What are the interest rates and fees imposed?
Interest rates for payday loans are generally higher than other loan types. However, do note that the maximum interest rate that licensed money lenders can charge is 4% per month. Additionally, late repayment and loan approval fees are capped at S$60 per month and 10% of the principal amount respectively.
2. How much can I borrow?
Given the name of this loan type, the maximum amount you can borrow is limited to your monthly income. This applies to both salaried employees and self-employed individuals.
3. How long does it take for my application to be processed?
Loan application approvals and fund disbursals can all be carried out within an hour, especially if you’re applying directly at the licensed money lender’s business premises. These processes can be accelerated if you have the necessary supporting documents on hand and if you’re applying early in a business day.
4. Does my credit score matter?
For payday loans, your credit score is usually not important. What is important is your monthly income as it determines your loan limit and how reliable you’ll be when it comes to repaying your payday loan.
5. Can I repay the loan after I receive my following month’s salary?
Yes, you can. Remember, a payday loan is meant to help you get through an emergency for several weeks. The purpose of the loan is for you to repay it only after you receive your following month’s salary.
Why get a payday loan from us?
Dio Credit is a reputable licensed money lender in Singapore that has been in business since 2013. We offer competitive rates for payday loans and our experienced loan officers are here to guide you through every step of the way. Visit our Payday Loan page and hit the Apply Now button to begin. We will then reach out to you with a personalised quote.