Have you ever wondered why it seems that every time you are doing your best to save more money and grow your bank account, things come your way and cause you to spend what you have saved? You probably even feel as though your bank savings is almost like a shattering fortress, and it is always facing assault from tough financial crises that you encounter in life. In Singapore, people face a number of situations that can trigger financial concerns. There are the issues with CPF contributions and fare hikes that seem to be always causing us uncertainties with our finances. Then, loan regulations and MAS housing have become more challenging to deal with. Let us not forget the issue with inflation, which is another serious threat to the economy and to our own financial health, as well. With all of these things that are happening, what can we possibly do to get out of such a mess?
But you see, all we can do is to simply prepare for these things the best way we can. By living your life one day at a time, you do not have to get sucked in to these tough problems in life. And if it can help, there is always the option to consider a payday loan just to tide you over until you receive your next paycheck. The process you go through when you apply for this loan is quick, and without complicated paperwork to deal with. Other than banks, licensed moneylenders in Singapore offer great payday loan services as well.
Yet, you have to think about this – is it truly worth getting this type of loan? What are the pros and cons of affixing your signature to the loan contract? Let us look deeper on what this type of loan is all about, so you know what you are getting into in case you decide to apply for one.
Payday Loan – What It Is All About
A short-term and unsecured loan, a payday loan generally comes with a massive interest rate with a specific term for payment. This is the type of loan that some people use to pay for their urgent expenses such as rental payment, credit card bills, or similar issues with their finances. For people who have a stable job and paycheck, this loan type seems to be a practical way out of an immediate financial problem. You can even get a loan if you only need a small amount of money, and you have an active bank account where the loaned amount can be deposited.
But keep in mind that a payday loan is not at all just like your regular bank loan. You cannot expect to receive twice or thrice your monthly income. You are probably expecting to get over $6,000 for a payday loan because you are making $3,000 a month. But you will never be able to get this amount. All you can possibly receive is about $1,500, which is the common amount people receive from a payday loan.
Also, when you apply for this loan, you should secure a post-dated check that must be handed to the lender. The check must indicate the amount you have borrowed including the financing fees. This will serve as the payment for your loan at the end of the term.
Benefits of a Payday Loan
Now that we know the basics of a payday loan, let us look into the positive aspects of this loan type. The following are among the advantages that a payday loan offers.
Unlike a traditional bank loan, a payday loan does not take long to process. In a few days or even within 24 hours at some point, you can get the cash you have borrowed. This is why it is appealing to those who need the cash fast because there is no lengthy waiting period involved. Sure, you may borrow some cash from an unlicensed moneylender, but it is best to go for a MAS-licensed moneylender as you can expect the guidelines to be fair and just.
Another good thing about a moneylender licensed by the MAS, you do not run the risk of being threatened or assaulted whenever you miss a payment. Also, there is no such thing as a credit check that will disqualify you from taking out a loan. Thus, as long as you have a job, you have a regular income, and you own a personal bank account, there is no reason for them to deny you.
But at the same time, you should never think of this loan as something you can use for purchasing a car or a home. The amount of money you can get is not much, so it will never suffice for a major expense. So, if you only need extra cash for your utility bill or rental payment, a payday loan should be more than enough. For bigger purchases or emergency expenses, you will have to think of a different type of loan to address this type of need.
With fast processing and simple ways to receive the loaned amount, it is not surprising that a payday loan appeals to a number of people who are concerned about their finances. It is truly worth looking into if you have exhausted all your efforts in getting extra cash, yet without any success.
The Drawback of a Payday Loan
It is best to look at both sides of the coin before you come up with a decision. This applies when you are thinking about taking out a payday loan since it is good that you understand fully what you are getting into before you take a plunge and borrow money.
So what is the downside of a payday loan? For the most part, you need to really think first before you go for it since the interest rate can be very high. A typical credit card interest rate is at 24 percent per year. With a payday loan, it may be the same rate, yet the life span of your loan is only for a few weeks. If you think about it, the APR interest rate of a payday loan is at over 700 percent, which can be disastrous if you are already struggling financially.
Then, of course, if you find yourself stuck in the cycle of borrowing money every month, the sad reality will eventually kick in – that you are only working so hard just to pay off your debts. This can prevent you from growing your savings account, which means you barely have any emergency fund available. Just imagine how difficult life will be for you to live a life of debts.
Most importantly, if you fail to pay your debts on time, this can mean bad news to your credit score. It is quite the same with other loans where non-payment can give you a bad credit rating. So, you have to be cautious about making payments and be sure you do it on time.
Life is indeed full of surprises – both positive and negative. This is why the best way to handle these unexpected situations is by being prepared financially. While it may be inevitable for some people to borrow money, the smartest route to take is to assess the benefits and drawbacks involved before taking out a loan.
A payday loan may be easy to get, and there are no complications involved when applying for it. But at the same time, there are things to think about that may further impact your financial situation including the massive interest rates and the potential effect on your credit rating due to missed payments. So, unless you really have no other way to secure some funds for your immediate needs, a payday loan may just work for your situation. But be sure to slowly work on your spending habits and bank savings to avoid getting into a vicious cycle of accumulating debts that will never do any good to your financial health.