You might sometimes find yourself in a financial emergency due to medical issues or unplanned expenses. When you need extra cash to fulfil your needs, you could consider either a credit card cash advance or a personal loan. Though both of them lend money, the urgency of your requirement and the financial situation you are in will determine which one you choose. Banks in Singapore offer both these services to their customers under certain conditions. Let us look at both these credit products to understand them better.
Credit card cash advance is the money that credit card companies or banks allow you to withdraw from your card account. You can do this by inserting the card at an ATM machine and withdrawing money using the credit card PIN. This is considered as a regular transaction and is chargeable.
It is mainly a provision for emergency cash access. For example, in case of medical emergencies or in the event of non-acceptance of your credit card by a merchant, this facility will help you deal with short-term financial needs.
The hassle-free nature of credit card cash withdrawal may tempt you to use it again and again. This could form a bad financial habit. If you are unable to pay the entire amount back with interest, the amount will keep piling up, leading to a huge debt. Here’s how cash advances could hurt your finances:
All banks in Singapore allow you to withdraw money using your credit card. The prominent among these banks are:
A personal loan is an amount borrowed from financial institutions like banks. These banks may lend you money on a predetermined interest rate and tenor. You have to pay regular instalments to repay the principal amount plus interest rate.
There are two types of personal loans – Term Loan and Revolving Loan. Repayments towards term loan needs to be made every month where the loan amount and tenor are predetermined. Revolving loan does not have a predetermined amount and tenor, and is flexible in these aspects. However, you must pay the minimum requirement every month, which is usually 3% to 5% of the outstanding amount.
It is easier to apply and get approval for a personal loan especially if you have maintained a good credit score.
Many banks in Singapore offer personal loans up to 2 to 6 times your monthly income (some banks even offer up to 10 times your monthly income depending on your annual income), but it is capped at S$200,000. Banks could change interest rates from time to time. Here are some prominent banks offering personal loans in Singapore:
Let us compare the two options to see which is better:
|Feature||Credit card cash advance||Personal loans|
|Interest rate||28% to 29% p.a.||Starting from 8.5% p.a.|
|Convenience of applying||Insert your card in an ATM machine and withdraw money using your PIN.||You can apply online for most banks. The money will be disbursed to your account once approved.|
|Time taken for access to money||Immediate||One to five working days|
|Credit limit||Depends on your income – generally up to 4 times the monthly salary||Depends on your income – generally 2 to 10 times the monthly salary|
|Withdrawal charges||5% to 6% of the amount taken||None|
|Eligibility criteria||You must have a credit card already.||You must meet the income and age criteria set by the bank.|
|Credit score||Not applicable if you already own a credit card that you will use for cash advance||Easier to attain a loan if your credit score is good.|
Though cash advances are easier to get, they are more expensive to pay off. They have higher interest rates because these interest rates are compounded from the very day of the transaction. Cash advances could be your last resort in case of a financial emergency.