Nowadays, there are plenty of different types of loans you can consider taking out in a fix. Payday loans are one such example and can be a life-saver in times of emergency. But what exactly is it and might it be the answer to your financial troubles?
What is it?
A payday loan, also known as a short term loan, is a type of loan that allows one to borrow money quickly and pay it back once one’s next monthly paycheck comes in.
Why is it popular?
As most would know, taking out a loan with national banks and other financial organisations often require a good credit score and a long waiting time for access to a large loan. When compared to that, payday loans don’t have a credit score requirement, give access to cash in a matter of minutes or days (depending on the moneylender)—and can come in smaller amounts.
Is it for you?
Payday loans are specifically designed for those who are in need of immediate money—usually when an emergency arises and when one’s savings are unable to cover the bills. During such unforeseen circumstances, when you can barely afford to pay for the upkeep of daily necessities or even fix your vehicle, and yet there’s still some time left before your next paycheck, payday loans can be of great help.
However, when one takes out a payday loan, it’s necessary to have 100% confidence of being able to pay back the loan in full. If you’re careless and don’t pay up in time, the relatively high-interest rates could end up snowballing. This is why payday loans only work out for the short term and for those who have a source of income or a guaranteed repayment source. If you end up in a vicious cycle of outstanding payments due to this, it may potentially affect your credit score—making it less likely for your loan to be approved next time—even if you go somewhere else.
What is the eligibility criteria?
Now that you’ve decided to go through with the loan, worry not. The application process is easy enough, with only 4 documents needed. All you will need to bring along with you is a valid proof of employment, your NRIC, income tax notices of assessment as well as your latest pay slip. Applicants also need to be either a Singaporean citizen or a Permanent Resident.
Additional things to look out for
- Take out a loan only from licensed moneylenders in the Ministry of Law’s compiled list. Some reliable moneylenders with a good long-running track record in Singapore include Orange Credit and Capital Funds Investment.
- Be aware of the interest rate. Do some research and calculate how much repayment you’ll have to make and budget your daily expenses so you can meet the payment deadline on time.
- Only borrow however much you need and can afford to pay back. Don’t end up inadvertently worsening your financial situation.