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Should You Risk Your Paycheck on a Payday Loan?

Saving remains a crumbling fortress that is constantly being assaulted. Whenever you try to save, there are always outside forces that try to take it away from you. Every pay day you need to settle CPF contributions, hikes, loans regulations and inflation is always up, and you are thinking what else you possibly go wrong. You may also be considering payday holidays, but
before making commitments make sure to weight the effects of your decisions.

What is Payday Loan?

Payday Loan:

What is payday loan? A payday loan is a secured loan given mostly to salaried people and comes with a very high interest rates. Most people use these types of loan to cover their living expenses that can not wait until the next payday. The payday loan Singapore is easy to access, but you have to submit a posted check to your loan provider so that he will cash the amount
plus the financing fees on payday.

Benefits of payday loan:

There is no big difference between a payday loan from licensed moneylenders Singapore and the other regular bank loans. The main difference is that the loan must be paid back within a short time and involve a little higher rate to cover for insurance. So long as you can pay on time, a payday loan is a great way of accessing quick cash. Also, licensed moneylenders are able to issue you within 2 days whereas for banks, the waiting time might take up to 2 weeks long and during the process, it might not work out.

Here are some of the advantages of payday loan:

– Fast: unlike most other backs loan that involves guarantors and takes a lot of days to process, payday loans are available as fast as 24 hours.

– Does not involve collaterals: although you can borrow money from alternative, payday loans are only available from MAS licensed lenders that follow strict lending rules. The loan does not involve collateral, and if you cannot make the payment in time, you will not have to worry about losing your property.

– Credit card history is not checked: the main reason why most banks take a long time to approve your loan is because of cavity search. MAS rules on unsecured loans that not involve cavity searches. So if your financial history is not a good one, you will still be able to get the payday loan.

Cons:

Unlike most other bank loans, payday loan requires a lot of caution as it has very little room for errors. If you borrow a very high amount that you cannot pay the full amount on time, you will have to pay higher financial prices. Here are some of the disadvantages of payday loans.

– High-interest rates: the credit interest rates can be as high as 24% per annum. Yes, the interest rate can be as high as 24% in two weeks. Unlike normal banks loans, payday loans are not calculated on an annual scale but remaining time to the end of the month.

– Can easily result in a financial vicious cycle: if you borrow more than what you can comfortably borrow, then you will have to receive a very little salary at the end of the month. Then as the mid-month of the following month rolls around, you will have to get another loan. In such a case, you may end up borrowing the loan at the end of each month.

– Can ruin your credit score: although payday loans providers do not run a credit check, any late payment and non-repayment will be reported. The more you fall behind on your payment, the more you wreck your credit card score.

Bottom Line

If used wisely, a payday loan is a great way of obtaining short-term reinforcement. However, if used poorly, the payday loan can lead you to a state of financial slavery.

Author: Carina.W

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