Short-Term Loans in Singapore: What You Need to Know Before Borrowing

Short-term loans provide quick financial relief for urgent expenses. Whether it’s a payday loan or another type of short-term borrowing, finding the right option is crucial. A licensed moneylender in Singapore can offer loans with regulated terms, but understanding the benefits, risks, and alternatives is essential before making a decision.

 

What Is a Short-Term Loan?

A short-term loan is an unsecured form of borrowing designed for immediate financial needs. It helps individuals or businesses bridge gaps in cash flow or manage emergencies.

Key Features

• Unsecured: No collateral is required.
• Fast Disbursement: Approvals and fund transfers happen quickly.
• Loan Amounts: Typically capped at S$35,000.
• Short Repayment Period: Usually within a few weeks to a year.
• Higher Interest Rates: Due to the lack of security, lenders charge higher interest to compensate for the risk.

 

Advantages and Disadvantages of Short-Term Loans

Advantages

• Quick approval and disbursement
• Shorter repayment periods mean lower total interest paid
• Suitable for those with lower credit scores

Disadvantages

• Higher interest rates
• Short repayment terms can strain finances
• Repeated borrowing may lead to a debt cycle

 

Types of Short-Term Loans in Singapore

1. Payday Loans

A payday loan is designed for emergencies, these loans are repaid in full on the next payday.

• Amount: Based on monthly income.
• Repayment: Full payment on the next payday.
• Risk: High-interest rates if not repaid promptly.
• Advantage: Apply online and receive the funds on the same day

2. Personal Loans 

These loans are usually for extra funds, bills, and other living expenses.

• Amount: Up to six times the monthly income.
• Interest Rate: Capped at 4% per month.
• Repayment Period: Flexible up to 12 months.

3. Bridging Loans

Used in property transactions while waiting for funds from a sale.

• Purpose: Used when awaiting other funds (e.g., property transactions).
• Short Term: Usually repaid in 3-6 months.
• Collateral May Be Required: If obtained from banks.

4. Merchant Cash Advances

Suitable for businesses, repayments are deducted from daily sales.

• Target Audience: Businesses with steady sales.
• Repayment: Deducted from daily credit card transactions.
• Advantage: No fixed monthly repayment.

5. Line of Credit

Borrowers can withdraw as needed and pay interest only on the amount used.

• Flexible Borrowing: Withdraw as needed, pay interest only on the used amount.
• Use Case: Ideal for business or personal financial flexibility.

 

Alternatives to Short-Term Loans

If a short-term loan isn’t the best option, consider alternatives:

• Credit Cards: Manageable with timely repayments.
• Borrowing from Family or Friends: Interest-free but carries personal risks.
• Bank Loans: Lower interest rates but longer approval times.
• Government Assistance: Grants and subsidies for eligible applicants.
• Pawning Valuables: A non-credit-impacting option for quick cash.

 

Where to Apply for Short-Term Loans in Singapore

• Licensed Money Lenders

Regulated by the Ministry of Law, these lenders offer quick access to funds.

• Banks

While interest rates are lower, banks have stricter eligibility requirements and longer approval times.

• Credit Unions

Member-based organisations offer moderate interest rates and faster approvals than banks.

 

Key Considerations Before Taking a Short-Term Loan

Before applying, assess the following:

• Can you repay on time? Avoid penalties and additional interest.
• Have you explored alternatives? Loans should be a last resort.
• Are you borrowing from a licensed lender? Check the Ministry of Law’s list of approved money lenders.

 

Conclusion

Short-term loans can be a quick solution for urgent financial needs, but they come with risks. A licensed moneylender in Singapore provides a regulated option, but borrowers must assess their financial situation carefully. Exploring alternatives can prevent unnecessary debt and ensure a healthier financial future. Understanding the pros and cons of short-term loans ensures responsible borrowing. Make informed financial choices and explore regulated options to avoid financial distress.

 

If you like this article, you may want to read this article about How Interest Rates Are Set in Singapore.

 

If you are looking for a payday loan, licensed money lender in Singapore or personal loan, contact us today and we will recommend your best options.