Should I Get a Payday Loan or Avoid it?

A payday loan or salary loan is one of the most common types of loans offered by banks and licensed moneylenders. This type of loan allows the borrower to get a cash advance on their salary to pay for expenses. From the name itself, borrowers repay their loan in installments every time they receive their salary. However, like in other types of loans, borrowers need to assess their current financial situation before they avail for a payday loan. There are always pros and cons when availing for a loan.

Thus, if you are pondering whether to avail for a payday loan, then here are the pros and cons to consider.

Pros of a Payday Loan

1. Payday loans are unsecured loans.

Borrowers do not need to pledge any asset for payday loans. This feature of a payday loan can attract borrowers who do not want to risk losing their collateral.

2. Payday loans have a fast approval rate.

You can look to avail of a payday loan from different banks and licensed moneylenders in Singapore. However, the rate on which banks and licensed moneylenders can approve a borrower’s loan application vary. Usually, banks take longer to approve a borrower’s loan application compared to a licensed moneylender. Banks may take 2-5 banking days for them to approve a loan, while licensed moneylenders can approve a borrower’s loan application in less than 24 hours.

3. Payday loans are easy to avail.

Most licensed moneylenders have websites that allow borrowers to send an online payday loan application. However, do take note that sending an online application is only a preliminary step, which allows the licensed moneylender to assess whether you are eligible for a loan or not.

If you are eligible, then the licensed moneylender will ask you to bring the required documents to their office where a further assessment will take place. If you are only free on weekends, then do not worry. Some licensed moneylenders in Singapore are open on weekends, which allows borrowers to avail of a loan on weekends. You can set an appointment with a licensed moneylender if you want to avail of a payday loan.

4. Payday loans have only few requirements.

Like the other types of unsecured loans, payday loans have requirements that allow easy compliance. For the eligibility criteria, most licensed moneylenders in Singapore require the borrower to be at least 21 years old, be a Singapore Citizen or Permanent Resident, to be in employment, and to have a steady income or cash flow. For the requirements, licensed moneylenders may require the borrower’s NRIC or other government-issued IDs, employment letter, recent payslips, proof of billing, and among others.

Freelancers and those who are self-employed can also apply for a payday loan as long as they are eligible for the loan and can show proof of steady income. However, do take note that not all licensed moneylenders in Singapore can offer a payday loan to freelancers and self-employed clients.

5. You may not need to have a good credit for a payday loan.

This advantage can be debatable since it will depend on the financial institution you will choose to avail of a payday loan. Banks are stringent when it comes to approving loans, and may even conduct credit investigation on the borrower. Banks will deny the loan application of borrowers who have low credit scores. If you are interested in availing for a payday loan from a bank, then you might want to check the credit score requirement of the bank first.

On the other hand, licensed moneylenders are less stringent with the credit score of their borrowers. Licensed moneylenders can approve a borrower’s loan application as long as the borrower is eligible, has the required documents, and can have the capacity to repay the loan.

Cons of a Payday Loan

1. Payday loans may have high interest rates.

Interest rates will vary among licensed moneylenders and banks. A payday loan, being an unsecured loan, can have a high-interest rate. However, for licensed moneylenders, they can only charge an interest rate of not more than 4% per month. This cap applies regardless of whether the borrower applied for an unsecured loan or not, and the borrower’s income.

2. It may be difficult to manage a payday loan.

From the name itself, borrowers repay payday loans every time they receive their salary. For the next few payments, borrowers may have no problems in making the monthly repayments. However, what if unexpected expenses arise? Unexpected expenses like medical emergencies, house repairs, car repairs, and the like can spell troublesome for the borrower. Borrowers who are still paying for a payday loan may find it difficult to balance between repaying their loan and paying other expenses.

3. Payday loans may affect your credit score.

Missing payments or defaulting on your payday loan may affect your credit standing. If you are to avail of a loan next time, then having a low credit score may severely affect your chances.

4. The amount you can borrow will depend on your annual income.

Since payday loans are unsecured loans, the amount clients can borrow has a limit and will depend on their annual income. There is an income bracket that determines the amount you can borrow. If you want to know which bracket you are in, you can check the website of Singapore’s Ministry of Law for more information.

5. Payday loans may have stringent terms and conditions.

Before you sign the contract for a payday loan, make sure to read the terms and conditions of the contract. Licensed moneylenders must explain the terms and conditions of the contract to you in a language you understand. Make sure to listen and ask the necessary questions.

Avail a payday loan from one of the most recommended licensed moneylenders in Singapore.

If you want to avail for a payday loan, then avail it from one of the most recommended licensed moneylenders in Singapore. Click this link, https://www.fortunecredit.com.sg/payday-loan/, if you are interested. The licensed moneylender also offers different types of loans and a flexible repayment plan that can cater to your need.