Do you have a sudden expense or a financial shortfall and have been wondering about the best way to address it? If your answer is yes, one of the best options might be going for a cash loan. This is a type of unsecured loan, which usually ranges from S$1,000 and S$5,000, and most people in Singapore use it to cover unexpected costs.
The need for fast cash loans has been growing steadily in Singapore following the outbreak of the coronavirus pandemic in 2020. Like other lines of credit, it is crucial to ensure you understand how cash loans work before signing for it. What is the interest rate? What about the repayment period? Here is a comprehensive guide about cash loans in Singapore.
Cash Loan in Singapore: A Closer Look
A cash loan is a short-term personal instalment type of credit that comes with a fixed interest rate and predetermined tenure, largely from a few months to a few years (all about cash loan interest rate in Singapore). When the loan is approved by the selected lenders and you sign the agreement, the money is credited into your account in one lump sum, and you are required to repay in scheduled payments.
Because cash loans are unsecured, the associated high risk is compensated with higher interest rates compared to secured loans. This is why you should put more focus on the interest rates of the selected loan before appending your signature. When it comes to the period of repayment, cash loans take a shorter period compared to bigger auto or personal loans.
Cash loans can also take the following forms:
These are loans designed to cushion a person financially until the next payday. When you take a payday loan, it is credited into your account, and the repayment is made in full with interest and any other related charges at the end of the month. Notably, it is also possible to borrow payday loans and repay in instalments over a longer period, usually no more than three months.
In Singapore, some people prefer small loans for things such as fixing their cars, home renovation (check our article about in house renovation loan in Singapore), or urgent top-up to their emergency funds. If you are in business, a small loan can be a good option to cover expenses during slow months. You might also opt to go for a micro loan to meet the cost of hiring an additional workforce during the high-peak season.
Micro loans are similar to small loans but differ in the sense that they are far much smaller. Their repayment period is also shorter, implying that the interest rates are also lower.
The Benefits of Using Cash Loan
Every day, you are faced with important decisions, and most of them come with financial implications. Whether it is buying additional supplies for your business or topping up your emergency fund, a cash loan would come in handy. Here is a closer look at the main advantages of using a cash loan.
Cash Loans have Relaxed Eligibility
Cash loan lenders come with more relaxed eligibility requirements for Singaporeans compared to conventional loans. This implies that even if your credit score is poor, it might be possible to access the loan. For example, you might be able to secure a payday loan even with a poor credit score. However, you need to note that the interest rate for such a loan is likely to be a lot higher.
Your Cash Loan Singapore is Approved Fast
If you have an emergency, a standard personal loan will be less desirable because it takes longer to process. In contrast, cash loans are processed faster, allowing you to conveniently address emergencies that could not wait. For example, if you have a medical emergency and want to access urgent funds, cash loans can be processed within hours or days.
You might want to do some research to identify the lenders who are able to clear a cash loan faster. Then, work with them as opposed to those who take a longer period.
Short Repayment Period
Once you take a cash loan, the requirement is that you have to repay within the agreed timeframe. Therefore, it is important to rethink personal budgeting to ensure you can comfortably repay all the monthly instalments without negatively affecting your finances. If your income is limited, consider foregoing some of the unnecessary expenses to repay the loan. For example, you might consider cutting the holidays from three to two and use the money to repay the loan. You might also want to consider cycling instead of driving for a few days of the week. Indeed, this might be a great option for your health.
Requires Less Paperwork
The documentation requirements for a cash loan approval are pretty loose compared to what is needed when pursuing a major loan. This is very important, especially if you have a very busy schedule, and preparing loads of documents might be challenging. To approve a cash loan, most lenders only require a few documents, such as bank statements, to determine your repayment capability and residency. However, you should be ready to provide additional documents that might be needed to get the loan approved fast.
Spend Money on what You Want
Most lenders in Singapore are willing to approve cash loans for a wide range of purposes because it is unsecured. This means that unlike a mortgage or a car loan, which is specific, cash loans allow you to spend them on whatever you prefer. However, we strongly advise you to stick to the main purpose for which you borrowed the money for.
Cash Loans Offer a Reliable Method of Improving Your Credit Score
Because cash loans have a short tenure, they present a reliable opportunity to help you improve your credit score. To calculate the credit score, credit reference agencies check a number of factors, including your ability to repay the loans on time and credit mix. When you complete the loan repayment without defaulting, your credit score will improve significantly.
Things to Consider when Taking a Cash Loan in Singapore
With emergency savings for most people in Singapore shrinking fast, especially after the coronavirus pandemic outbreak, some are turning to cash loans to pay for medical bills, cover emergencies costs, and consolidate their credit card debts.
Taking a loan is an important financial decision, so it is prudent to ensure it is a smart one. Therefore, it is crucial to ensure you understand every cash loan detail that can help you draw the best decision. Here are five crucial things that you need to know when taking a short loan in Singapore.
Why Do You Need the Money?
Knowing the actual reason for borrowing money, to begin with, is one of the most important factors to consider before taking out a loan in Singapore. When you take a loan, it can help or hurt you, depending on the way you manage it and your preparedness to repay.
Most people in Singapore go for cash loans to meet unexpected costs, such as emergencies, or cover financial shortfalls in their businesses. Even with these shortfalls, it is advisable to consider using your emergency fund or savings and only borrow money if the amount will not be enough.
If the reason for taking a cash loan is not an emergency, it is advisable to consider waiting for a few more months. For example, if you want to buy a new car but the current one is still running smoothly, it might be a good idea to budget for it in the coming months.
The Amount of Money You can Afford to Borrow and Repay
After determining that you actually need the cash, take the consideration a notch higher, and establish how much you can afford and repay. At this point, the term afford can be tricky. Most people consider being able to meet monthly instalments to mean that they can afford it, but it is not always true.
To know if you can afford a loan, the trick is in checking it beyond the annual percentage rate (APR). Look at the whole picture by checking the total amount payable (TAP), which is the entire amount that you borrow plus the interest at the end of the loan’s life. It also includes additional fees that might be associated with the loan, such as processing fee.
Even as you factor in the monthly payments, knowing the total amount payable (TAP) makes it easy to explore more loan options. For example, repaying your cash loan in a shorter period, such as six months instead of 18 months, can significantly cut down TAP. If you take a smaller amount and repay fast, TAP will be even lower.
Your Credit Score
Because cash loans are unsecured, lenders largely rely on credit scores of the borrowers to determine their creditworthiness. If a borrower has a high credit score, about 1850 and above, he/she gets to enjoy lower interest rates. Therefore, it is important to get your credit report to confirm your score. If you notice the credit report has errors that are harming the score, ask the credit reference agency to correct them. This is the surest way to enjoy lower interest rates.
The Terms and Conditions of the Loan
Like other forms of credit, cash loans such as the best payday loan Singapore, come with their terms and conditions, depending on the lending institution. Before signing the loan, it is crucial to ensure you understand these terms and conditions, and how they will impact your financial health. Here are some of them:
1. Annual Percentage Rate (APR)
The annual percentage rate (APR) is the cost that you pay every year for the borrowed cash, including the fees, expressed as a percentage. The APR is preferred when evaluating the cost of the loan because it factors in all the fees included in repaying the loan. Try as much as possible to go for the cash loan with a lower APR.
2. Loan Processing Fee
This is the fee charged for processing your loan. Although it is common with mortgages, some lenders might still attach it, and it is important to be on the lookout. If you can, try to avoid lenders with a loan processing fee or negotiate for it to be waived.
3. Pre-payment Penalty
This is a fee that is charged when you pay your fast cash loan earlier than indicated on the loan agreement. Like the loan processing fee, this condition increases the cost of the loan. Shop around to see if you can identify a cash loan that does not come with a pre-payment penalty.
4. Late Payment Charges
When you take a cash loan, be it the best payday loan Singapore or a micro loan, try to avoid late payments as much as possible because they attract penalties. Furthermore, paying late is likely to hurt your credit score, a fact that can compromise your ability to borrow money in Singapore in the future. If you know that a monthly payment will be late, maybe because of a salary delay, it is important to talk to the lender and agree on the way forward. For example, you can provide the documents from your employer indicating that the salary will delay with a week to demonstrate personal commitment to follow adhere to the agreement.
How to Apply for a Cash Loan in Singapore
Now that you know the different types of cash loans and the factors to consider, are you ready to apply? Here are the main steps to follow when applying for a cash loan in Singapore.
1. Identify the Preferred Cash Loan Lender
In Singapore, you can borrow cash loans from financial institutions such as banks, moneylenders, virtual banks, and online-based moneylenders. With lendela.com, you are able to carefully review different lenders by comparing the conditions for their loan offers before selecting the one that suits you the best.
2. Fill out the Application Form
Get access to multiple cash loan offers by filling out Lendela’s online application form – you should be able to complete the application within minutes. Your application will be sent to various lenders that are suitable for you, for free. To receive offers, you will need to fill out the required information in the application form and upload the required documents on your Lendela account (we will inform you about the documents that are required after your application is submitted). The main eligibility requirements for a cash loan include:
- Your age should be 21-61 years.
- Have a minimum monthly income of $1,600.
- Be a salaried Singaporean or a permanent resident.
3. Wait for Loan Approval and Disbursement
If you are qualified for a cash loan and provide all the required documents, the funds will be released into your account as soon as you sign the final agreement with the lender (at the lender’s office). Remember that the disbursement is subject to final processing and credit checks by the lender. When the money is disbursed, you can go ahead and use the cash as you want, but do not forget to start repaying the loan.
Cash loans have become the go-to option for most people when faced with financial challenges. Their numerous benefits, such as ease of application and short repayment period, make the loans easy to get whenever faced with a financial shortage. So, you should also not be left behind in taking advantage of this awesome financing option.