Cash woes? A personal loan to the rescue!

Have Your Own Trusted Guide for Payday Loans in Singapore

When faced with a financial emergency, the fact that you have a stable job, a good credit utilisation ratio, and a strong credit profile may not account for much. All you can think about during such a time is how to make monetary arrangements for that emergency.

Let us give you an example. Let’s assume that you had expected a salary hike at your workplace based on your appraisal of your own work. Or maybe your boss had mentioned something related to a hike of at least 10% to your salary this year. However, during the appraisal process, you found out that you were not eligible for the expected hike.

Unfortunately, you had factored in the hike and had overspent on clothes, food, holiday packages, and everything else. All of a sudden, you find that all 3 of your credit cards are maxed out, you have to pay your home mortgage, and your telephone bill for the month is still due. What do you do? Payday loans can offer you a way out. But, before you apply for one, read this guide. You’ll know what to do and what not to do.

Get Your Payday Loan Application Approved by Doing the Following

Certain things can improve your chances of a loan approval. There could be others which can get your application rejected. And there could be still others that might make life miserable for you later on. Hence, it is important that you get the basics right when you apply.

Provide Accurate Information

There’s a misconception among certain borrowers that some moneylenders don’t really care about the accuracy of information provided in an application. Well, that’s definitely not true. While the rules may be a little more relaxed when compared to banks, registered moneylenders will expect accurate information for processing an application.

Make sure that you also have the supporting documents ready for submission when you’re applying. An incomplete application could lead to delays in getting your loan. For example, if you’re a foreigner and you want a payday loan, make sure that you have a valid work pass along with your passport. Your application could be rejected if you provide only proof of your ability to repay the loan.

Misinformation, whether intentional or not, can also lead to problems. Also, don’t forget that every loan application rejected, impacts your credit score negatively. Be as transparent in your application as possible.

Select the Loan Tenure and Amount With Caution

As the eligibility criteria for payday loans aren’t too stringent, getting carried is quite possible. Just because you can borrow up to S$15,000 and choose a tenure of 6 months, does it mean you have to do it? Absolutely not.

This is where a fixed budget and a clear idea of your cash flow can help you. It is important to first identify your possible routes of income. You’ll have to deduct your basic living expenses and other known liabilities from your income. The balance is what you should use to pay your loan dues.

If you’re confident that the loan can be repaid on time, proceed then and only then. In fact, if possible, try to borrow an amount lesser than what you need. Try to look for other financing sources, if you have a choice.

Also, don’t forget that longer the tenure, the more interest you will end up paying. Having said that, don’t choose very short loan tenures if you feel that the monthly loan burden (monthly repayments will be larger) can destabilise your cash flow.

Don’t Ignore Your Credit Score Altogether

Have you been told that moneylenders don’t care about your credit profile? Well, this thought doesn’t quite capture the truth. True enough, moneylenders are less fussy about your credit profile than traditional banks. However, will they completely ignore your credit score and risk profile? Probably not. They are lending you their money after all.

If you think that your credit score is less than desirable, you should try to provide sufficient proof of your financial solvency and stability. Provide your payslips and tax return documents voluntarily, if needed. Also, if you’re currently facing bankruptcy proceedings in a court in Singapore, ask your lender beforehand if you’re eligible for this loan or not.

Make Sure That You Satisfy the Loan Requirements

Not all payday lenders may accept applications from foreigners. CashMart is a case in point. Hence, before you submit your application, make sure to fully acquaint yourself with the loan prerequisites.

Carefully consider the minimum age criterion, too. For example, if you’re a 20-year intern in a transnational company or someone who does blogging for pocket money, you may not be eligible for a payday loan because most lenders have set the minimum age criterion at 21 years. Also, the minimum income requirement for a payday loan could vary from one lender to another.

Tell the Lender Why You Need the Loan, If Asked

While not all lenders may inquire about the purpose of your borrowing, some may. Don’t hide the reason from them. So, if you need a loan to pay for flight tickets to Jakarta, tell the lender. If you need a payday loan to avoid payment default on your credit card, tell the lender.

It’s possible that some lenders may set preconditions for what you can use your loan for. That may de-bar you in some cases. However, it’s best to be honest to avoid any future harassment. Better safe than sorry - that’s what we would advise.

Avoid Loan Sharks At All Costs

Getting a payday loan from a loan shark should be the last thing on your mind. Unlike licenced moneylenders, loan sharks don’t operate under the purview of the Ministry of Law. Therefore, their activities tend to be unregulated and in many cases, unfair. They can arbitrarily impose high interest rates and change terms of offer without your consent. If you’re wondering how you can differentiate between registered lenders and loan sharks, simply check this page out. Also, visit the Ministry of Law website for the full list of registered moneylenders.

Shop Around Before Making Your Final Selection

Interest rates, fees, and benefits offered can vary considerably from lender to lender. Hence, it goes without saying that doing a bit of research might help you choose the right loan. While a lender can’t impose interest rates higher than 4% per month, you may get lower rates, if you’re lucky.

The same applies for late fee charges, processing fees, and legal expenses, if any. According to the Ministry of Law directives, the total charges on your loan can’t, under any circumstance, exceed the principal amount of your loan.

Now, let us see if payday loans are beneficial or detrimental.

Payday Loan: A Saviour or a Devastator?

Payday loans can offer you immediate respite from financial crises. However, you shouldn’t forget that most lenders charge a high interest rate on these loans. Also, lenders will report late payments and defaults. This can have a debilitating effect on your credit score.

If you’re planning to get a car loan or a mortgage loan, having a better-than-decent credit score is an absolute necessity. Payday loans may not help you in that respect. It will also be counted towards your total debt servicing ratio.

Also, if you close the account immediately after paying your dues, it can have a negative impact on your credit score because the length of a loan account matters. On the other hand, if you stretch your payments too long, it could definitely make the loan pricey. It can only increase chances of default. You can easily get trapped in a never-ending debt cycle. And before you know it, almost every penny you earn will be going towards servicing your payday loan debt.

So, there’s no easy answer whether payday loans good debt options. If used properly, a payday loan might help you avoid a financial crisis. Used poorly, it can make your life miserable. Hence, try not to use it too frequently. Use it only as a last resort.

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