Most of us have at one point or another been in a precarious financial situation that required us to scramble in an effort to obtain some quick cash. When faced with circumstances like these, one realistic alternative to explore is making an application for a short-term personal loan.
If you are considering going on this path in the near future, we will walk you through the most important things to take into consideration while asking for a personal loan for a short period of time. In this section, we will delve into the inner workings of how short-term loans work in Singapore and provide insights into the many different ways in which you can put these loans to use.
In addition, we will discuss the most important components of the interest rates that are linked with short-term loans, presenting a balanced perspective on the benefits and drawbacks of these types of loans. In the final part of this guide, we will discuss the several channels via which you might acquire such loans in the Singaporean setting.
What Is a Personal Loan With a Short Term, and What Are Some Possible Applications?
A personal loan with a short repayment term is an unsecured financial arrangement that often involves a quantity that is between a few hundred dollars and less than $35,000.
Because of the time-sensitive nature of these loans, licensed Singaporean moneylenders often decide whether or not to approve your request for a short-term loan on the same day that you submit your application.
Before approving a short-term personal loan, licensed money lenders and banks in Singapore will take a number of variables, such as your annual income and credit history, into consideration. The approval procedure is rather quick, but it is important to keep in mind that these considerations will be taken into account.
Short-term loans are typically returned in reasonable instalments, and as a result, they are seen as being relatively uncomplicated financial products.
Although the typical repayment time for short-term personal loans is one year, some creditors may offer an even more generous window of two years for making payments on the loan.
In Singapore, short-term loans are a crucial resource for resolving urgent financial demands, particularly during personal or medical emergencies where time is of the utmost. This is especially true in situations where a short loan period is required. When faced with such challenges, one solution that can prove to be the most viable option is to apply for a personal loan.
What Are Some Possible Applications for a Personal Loan with a Short-Term Duration?
Here are a few different applications for a personal loan with a short duration.
For the Purpose of Repaying Loans
Paying off debt with a high interest rate can necessitate taking a personal loan with a short repayment term. For instance, you might put that money toward paying off your credit card bills so that you could begin a new chapter in your financial life.
To keep from falling into a never-ending cycle of debt, though, you should limit your borrowing to an amount that you are certain you will be able to repay.
Various Other Costs to Consider
You can also use a short-term personal loan to pay for essentials that you use on a regular basis, such as the following:
- Provisioning of food and drink
- Bills for utilities and the rent
- Maintenance of oneself
- Repairs, whether to the house or the car
- Expenses Related to Medicine
The Interest Rates for Personal Loans with a Short Term
Keep in mind that the interest rates on personal loans with a short period have substantially higher APRs than loans with a longer term. The following elements will determine how much you will be charged in interest for your short-term loan:
The Choice of Lender
The interest rate on a personal loan is contingent upon the specific lender you select for your borrowing needs.
Licensed money lenders typically impose a monthly interest rate of 4% on personal loans. In contrast, banks generally offer lower annual interest rates, but they might necessitate a lengthier approval process. The crucial question here is whether you can afford to wait.
Processing Fees
There exists a concealed cost known as the processing fee, which is deducted from the loan principal. Consequently, it becomes part of the official interest rate, so it’s essential to take this into account.
For instance, if you were to secure a $10,000 loan with a 1% processing fee, you would receive $9,900, with $100 subtracted as the processing fee. As previously mentioned, this fee is encompassed within the Effective Interest Rate (EIR).
Effective Interest Rate (EIR)
The EIR encompasses the complete interest amount you are obligated to pay on your personal loan. It takes into consideration processing fees and factors in your repayment schedule.
When selecting a loan, it’s advisable to consider the EIR, as it provides a more accurate reflection of your actual interest rate.
Additionally, several other factors that influence the interest rate of your short-term personal loan include your income, credit score, loan tenure, and the loan amount you are seeking.
The Pros And Cons Of Getting A Personal Loan With A Short Term
The following is a discussion of the positive and negative aspects of applying for a short-term loan in Singapore.
Pros
Convenience at Your Fingertips
Short-term personal loans are generally hassle-free to obtain. Given that the loan amounts are typically modest, these loans come with fewer stringent requirements.
As previously mentioned, certain licensed money lenders may grant approval for your short-term personal loan within mere hours of receiving your application.
Accessible with Ease
The application process is straightforward and user-friendly. Nowadays, most licensed money lenders, banks, and financial institutions offer online application options. Alternatively, if you prefer a face-to-face approach, you can visit their physical locations.
More often than not, you’ll receive your loan on the same day you apply or visit a money lender, although banks may involve a lengthier process.
This digitisation trend has made accessing short-term loans exceptionally convenient, all from the comfort of your own home.
However, it’s worth noting that all licensed money lenders in Singapore require applicants to visit their physical outlets for verification purposes. This mandatory in-person interaction helps in reducing fraudulent cases. Additionally, this face-to-face engagement provides lenders with an opportunity to thoroughly explain the loan terms.
Flexibility Tailored to You
Short-term loans have versatile applications. You have the freedom to allocate the loan funds as per your needs. Moreover, you can select your preferred repayment method. In most instances, you’ll be presented with the choice to repay on a weekly, bi-weekly, or monthly basis.
No matter the repayment frequency you opt for, a short-term personal loan in Singapore affords you a degree of financial flexibility.
Lower Hurdles for Entry
Given the limited loan amounts and shorter repayment duration associated with short-term loans, licensed money lenders tend to place more emphasis on your annual income and repayment capability rather than fixating on your credit score. However, this might not hold true for traditional banks.
Cons
Elevated Interest Rates
Despite their convenience, short-term personal loans are often associated with high interest rates. Given their typically brief repayment periods (spanning from a few months to a year), lenders tend to impose higher interest rates to compensate for this accelerated turnaround.
Potential for Complacency
The accessibility of these loans, coupled with their relatively small amounts, flexible repayment schedules, and short duration, can lull borrowers into complacency. Some individuals may inadvertently overlook their existing loan obligations and proceed to apply for additional ones, under the mistaken belief that repayment will be effortless.
Vulnerability to Predatory Lending
Individuals urgently in need of funds may fall victim to loan sharks and fraudulent entities masquerading as licensed money lenders. These unscrupulous actors may offer swift loan approvals, often conducted remotely, to desperate borrowers. However, they subsequently inflate interest rates and levy concealed fees, rendering the debt nearly impossible to settle.
Peril of Debt Spiral
Those who underestimate the significance of timely monthly repayments for short-term personal loans may encounter late fees, which can cause the debt to spiral out of control. Even more concerning, some individuals may resort to acquiring new loans to settle existing debt, ultimately becoming ensnared in a relentless cycle of indebtedness.
How to Determine the Finest Repayment Strategy for Your Needs
Once your short-term personal loan is approved, it’s crucial to establish a clear understanding of when
Once your short-term personal loan is approved, it’s crucial to establish a clear understanding of when and how you’ll be managing your repayments.
As previously mentioned, you have the flexibility to opt for weekly, bi-weekly, or monthly instalment payments. Regardless of your chosen repayment frequency, it’s imperative to adhere to it consistently until you’ve successfully cleared your debt.
Your monthly income should serve as the primary factor influencing the timing and amount of your instalment payments.
It’s important to note that opting for a shorter loan tenure will necessitate larger monthly instalment payments, while a longer loan tenure will ultimately result in a higher overall interest cost. Therefore, careful consideration should precede your decision to apply for a short-term personal loan.
What Should The Length Of The Loan Tenure Be?
Typically, short-term personal loans in Singapore provide a one-year repayment period, although a lender might adjust the loan tenure to either shorter or longer.
Therefore, it’s essential to thoroughly review and agree to the terms and conditions of the short-term personal loan before submitting your application.
Where To Get A Short-Term Loan
The primary sources of short-term loans in Singapore are typically banks, licensed money lenders, and private funders.
- Banks: Banks are often the initial choice for borrowers seeking short-term personal loans. However, banks typically have stringent requirements and a more time-consuming application process.
- Licensed Money Lenders: Licensed money lenders are authorised to offer both secured and unsecured loans, including short-term loans, as long as they operate within the framework of the Moneylenders Act. Eligible borrowers include Singaporeans, permanent residents, and foreigners earning an annual income exceeding $20,000. They may borrow up to six times their monthly income.
- Private Funders: Private funders specialise in providing short-term loans to investors and businesses. They are not subject to the licensing requirements of the Moneylenders Act. To qualify for a loan as an individual, you typically need to meet these criteria:
- Possess net personal assets valued at $2 million, with the value of your primary residence not exceeding $1 million.
- Have net assets exceeding $1 million.
- Have earned at least $300,000 in the preceding 12 months.
To qualify for a loan as a business, you usually need to have net assets surpassing $10 million and may be required to provide collateral.
Think About Your Capacity To Repay A Personal Loan With A Short Term
If you have settled on the idea of obtaining a personal loan for a short period of time.
We are a reliable licensed money lender in Singapore that strives to provide our customers with rates of interest and fees that are among the most competitively priced.
The loan officers at our company will assist you in locating a short-term personal loan with an interest rate and repayment schedule that are both affordable, and they will also provide you with helpful advice and insights.
Get the best personal loan offer in Singapore today.
