When you’re in an unexpected cash crunch, a short term personal loan can be useful in getting you out of a bind.
Short-term personal loans are popular as they offer a fast way to address personal and household needs.
If you are facing a rough time in budgeting or unprecedented expenses, consider applying for a short term personal loan to bridge the gap.
Are you an entrepreneur who wants quick cash to cover several expenses? You can also take such a loan.
In this article, you’ll learn how to use a short term personal loan in Singapore.
A short term personal loan works like medium- and long-term loans, but the difference is that a short-term loan is meant to be repaid within a short time of less than a year. Loan amounts range between $100 to $35,000.
However, some lenders regard less than two years as a short term. Short-term personal loans are often borrowed to cater to personal needs or a new business venture.
They are usually unsecured, and do not require collateral. A licensed money lender can usually approve a short-term loan within a day, but only after it has checked that your annual income meets the criteria.
Not all money lenders or financial institutions use the same term for a short term personal loan.
Other terms that can be used to refer to a short term personal loan include a payday loan, payday advance, cash advance, fast cash loan, and payroll loan.
Short-term loans are useful for upfront costs that require urgent payment. For instance, start-up businesses may use such a loan for their payroll, inventory, and rent.
If you’re a business owner, you can opt for a short-term loan to cater to your financial needs without affecting your operational capital.
Hospitality businesses could also use this type of loan to invest in certain business inventories before the tourist season to take advantage of discounts.
On a personal note, you can use a short-term loan for:
The cost of a personal loan depends on various factors, such as loan duration, loan amount, and annual income.
The shorter the loan tenure, the more you save on interest. However, you’ll have to pay more every month owing to the short tenure.
Interest rates for short-term personal loans vary among different money lenders in Singapore.
In Singapore, most lenders charge about 5.6% per year on the principal amount. remember to look at the effective interest rate to see the actual loan cost. The EIR is the total interest you pay on your personal loan. It includes processing fees and factors in your repayment schedule.
When it comes to licensed money lenders, the Ministry of Law regulates the interest rates and other fees that they can charge.
A licensed money lender can only charge a maximum interest rate of 4% per month, regardless of your annual income, and whether the loan is secured or unsecured. The same interest rate is charged if you are late with your payment.
Ensure you choose a loan amount you can repay easily every month. You may face severe penalties if you don’t honour the month’s repayments.
That said, don’t choose a loan tenure that is too long because you will pay more interest in the long run.
Remember to read your money lender’s terms and regulations and ensure you understand the contract so you won’t get surprised with additional fees and other charges you may incur. This will enable you to pay your loan every month without struggling.
Remember to always plan on how you are going to pay for any loan as without a solid plan, your monthly payments can easily go awry.
Applying for a short term personal loan is not as easy as it sounds. The loan tenure may be short, but it is still a big decision that involves choosing the appropriate loan tenure for your finances.
In Singapore, loan tenures vary from one financial institution or licensed money lender to another. As mentioned, you can choose weekly, bi-weekly, monthly, or payday repayments.
Lenders determine the loan tenure after considering various factors such as your age, income, expenditure, loan amount, and loan purpose.
To choose the most suitable short-term tenure for yourself, ensure you review your financial situation, make a budget, and know the exact cost of the loan.
Bear in mind that the loan duration should be as short as you can make it.
With a shorter loan period, you won’t stay in debt for longer than you need to and can pay less interest overall. That said, ensure you can repay the amount easily.
Licensed money lenders in Singapore offer secured and unsecured loans. It’s safe to borrow from such lenders as the Ministry of Law regulates the moneylending industry in Singapore.
The Ministry stipulates laws and regulations about how much legal money lenders can charge borrowers regarding interest rates and other fees. Check the list of licensed money lenders in Singapore from the Ministry of Law’s website to avoid falling to loan sharks.
Many banks in Singapore offer short-term personal loans for personal and business uses.
Although they offer short-term financing at low interest rates, they generally have a longer approval process than licensed money lenders.
Apart from this, they will also examine your credit score closely, which may lower your chances of approval if you have a poor rating. Therefore, if you need cash urgently, a bank may not be the best option.
This is another option to get a short term personal loan in Singapore. Such lenders are excluded under the Moneylenders Act and exempted from holding a license.
As such, private lenders in Singapore can only offer financial services to recognised investors or corporations that have to meet at least one of the following conditions:
Note that private lenders or funders may ask you to back your loan with collateral.
Short-term personal loans are useful for emergencies.
Generally, comparing rates from different lenders is a smart move before you choose the best short term personal loan. This will help you find the best rates that suit your needs.
If you need a short term personal loan, consult CreditMaster. As a trusted licensed money lender in Singapore, we will ensure you get a loan you can comfortably repay without financial stress.
We have years of experience in helping our clients so you can be sure we will offer sound advice.