There are endless reasons why you might need to source quick cash, and some of these reasons might spring out of nowhere. Taking out a loan is usually a good option in the case of emergencies, but with so many different types on offer in Singapore, it can be hard to choose the best one to apply for. Personal loans and payday loans are two financial options that might be suitable for tackling unexpected expenses; however, it is important to be wary of any consequences that come along with either type of loan.
In this article, we will take a closer look at the pros and cons, as well as the range of options available in Singapore for these types of loans, so you can solve your financial challenges with peace of mind.
Definition of personal loan
Personal loans are one of the most popular types of loans available in Singapore. They are favoured for their flexibility in terms of loan amount and loan tenure, and can be repaid in fixed monthly instalments over the duration of the loan.
They require no collateral and can offer reasonable interest rates depending on certain factors, such as the bank or financial institution's requirements, your credit history, annual income, and ability to make repayments on time. They are usually better for larger expenses.
However, it is important to note that the fixed nature of these loans might be detrimental to your financial state if you are unsure of your future stability, and you should be aware of any hidden fees or charges when applying for a personal loan.
Definition of a payday loan
Payday loans are short-term loans that, by nature, need to be paid back on your next payday. The loan amount will be limited to your monthly income, as the bank or financial institution will ask for proof of income to verify whether you can pay back the loan on time. A payday loan application requires no collateral and is approved relatively quickly which guarantees almost immediate credit. However, you should be aware that the interest rates can be extremely high if you take out a payday loan in Singapore.
Personal loan vs payday loan: comparison of pros & cons
As outlined above, you may notice there are pros and cons to both personal loans and payday loans. Check out the table below to see how these types of loans differ in terms of flexibility, interest rates, repayment terms, eligibility requirements, and other factors.
Personal Loan | Payday Loan | |
Loan Purpose | Best suited for larger unexpected expenses | Best suited for smaller, more urgent expenses |
Loan Amount | Up to 4-6x monthly salary | Up to 2x monthly salary |
Interest Rates | 4% to 10% | 15% to 20% |
Repayment Terms | 1 to 7 years | Due on next payday |
Loan Approval Time | Longer approval process within 2 working days or more | Quick approval process within hours |
Eligibility |
|
|
Annual Income | More than $20,000 | Less than $20,000 |
Choosing the right option for you
Once you've assessed the pros and cons of personal loans and payday loans, you now have a better idea of which type is better for your needs. Generally speaking, personal loans will be the most suitable option as they offer several advantages over payday loans, including lower interest rates, longer repayment terms, and larger loan amounts. You can also make more realistic monthly payments and have a better way to manage the repayment schedule by planning for your finances and expenses ahead of time.
There are also many different types of personal loans available which can suit a variety of individual needs. Lendela can help you narrow down the best possible personal loan options in Singapore according to your requirements and capabilities.
Discover personal loan options with Lendela's services
With Lendela, you can easily apply for personal loans online to unlock customised loan options in minutes. After filling out an application, your details and loan preferences are connected to an extensive list of trusted banks and financial institutions in Singapore to find you the most suitable offers. You can also learn more about how this comparison platform works here.
Key Takeaways
- Applying for a personal loan or a payday loan might be a good way to tackle unexpected financial challenges. However, it is important to understand the advantages and disadvantages of each type of loan.
- Personal loans offer a flexible, fixed solution for quick cash that can be paid back in monthly instalments.
- Payday loans offer a short-term solution for money issues which need to be paid back by an individual's next paycheck.
- In comparison, personal loans have much lower interest rates and risks than payday loans, which generally have very high interest rates. Personal loans also have longer loan tenures whereas payday loans need to be paid back quicker.
- Lendela's online comparison platform can help individuals find the best loan solutions for their specific requirements and repayment abilities.
