What Can You Use A Short Term Personal Loan For?
Whether you are in need of some quick cash to tide you over until your next payday, or you need a little extra money to cover some unexpected expenses, a short term personal loan can be a great solution.
But what exactly can you use a short term personal loan for?
Read on to find out what the most common uses of short-term loans in Singapore are and how to choose the right loan for your needs.
What Is A Short Term Personal Loan?
A short term personal loan can be used for a variety of purposes. Unlike other types of loans such as home loans or car loans, which are typically taken out for a specific purpose, short-term loans can be used for anything you need.
The main advantage of short-term loans is that they are easy to get approved for. This is because short-term loans are typically much smaller in amount than other types of loans, and have shorter repayment terms. Short-term loan amounts typically range from $100 to $35,000.
Short-term loans Singapore money lenders offer are mostly unsecured. This means that you will not need to put up any collateral such as your home or car in order to get the loan.
Most lenders in Singapore disburse short-term loans within a day after considering your credit eligibility criteria such as your credit history and income status.
The short-term loans offered by licensed money lenders in Singapore are also referred to as payday loans, cash advance loans, fast loans, etc.
What Can It Be Used For?
Depending on your needs, a short term personal loan can be used for various purposes. Some of the most common uses of short-term loans include:
To Cover Unexpected Expenses
One of the most common reasons people take out short-term loans is to cover unexpected expenses. This could be anything from a medical emergency to a car repair.
If you find yourself in need of some extra cash to cover an unexpected bill, a short term personal loan can be a great solution.
To Consolidate Debt
If you have multiple debts that you are struggling to keep up with every month, consolidating your debt with a short term personal loan can be a great way to make things more manageable.
By consolidating various debts into one loan with one monthly payment, you can save money on interest and make it easier to stay on top of your payments.
To Make A Large Purchase
If you need to make a big-ticket purchase such as a new car or a piece of furniture but don’t have enough cash on hand, a short-term loan can be a great way to finance the purchase.
To Cover Expenses During A Financial Emergency
If you find yourself in the middle of a financial emergency such as job loss or an unexpected medical expense, a short term personal loan can be a great way to cover your expenses until you get back on your feet.
Interest Rates Of Personal Loans
Despite being one of the fastest and easiest types of loans to get, short-term personal loans often come with relatively high interest rates.
This is because they are unsecured loans, which means that there is no collateral to back up the loan. This means the lender has to take on more risk to grant you the loan.
When comparing personal loans in Singapore, here are two interest rate terms you must understand and consider.
Advertised Interest Rate
The advertised interest rate is the rate that is advertised by the lender. This is usually the base interest rate that you will qualify for, which does not include other costs such as admin or processing fees.
Effective Interest Rate (EIR)
The effective interest rate is the actual interest rate that you will pay on your loan.
It includes all fees and charges associated with the loan, as well as any discount or rebate that you may be eligible for. As a result, the EIR is typically higher than the advertised interest rate.
When taking out a short term personal loan, it is crucial to consider both the advertised interest rate and the effective interest rate. Be sure to compare both rates before deciding which loan is right for you.
Some banks or licensed money lenders offer 0% interest rates for a short promotional period. This means that you will not have to pay any interest on your loan for as long as the promotion lasts.
After the promotional period ends, the interest rate will revert back to the standard rate.
Promotional rates can be a great way to save money on interest, but make sure you read the fine print before signing up for a loan as some loans may come with a hefty processing fee.
Benefits And Disadvantages Of Short-Term Loans Singapore
As short-term personal loans have lower amounts and shorter term periods, lenders are more likely to approve your application faster, making it an accessible loan to get in Singapore.
Most lenders such as banks and licensed money lenders also offer an online application process. This convenience allows you to apply for these loans easily from the comfort of your own home.
No Collateral Required
Since short-term personal loans are generally unsecured, you do not need to put up any collateral in order to qualify for the loan.
So they are a great option for those who do not have any assets to offer as collateral or those who would prefer not to put their assets at risk.
Flexible Repayment Terms
Most short-term personal loans come with flexible repayment terms that can be tailored to your individual needs and budget.
Consequently, you can choose a repayment plan that best suits your financial situation and make weekly, bi-weekly, monthly, or payday repayments.
Soft Credit Check
A short term personal loan will usually only require a soft credit check from licensed money lenders.
This means they are likely to determine your creditworthiness through your income status rather than your credit score. In contrast, banks are strict about only giving loans to those with decent credit scores.
If you pay the short-term loan on time every month, it can help you to improve your credit score over time.
High Interest Rates
While a short term personal loan can be a great way to access quick cash, such loans often come with high interest rates. This is because they are unsecured loans, which means that there is no collateral to back up the loan.
As a result, lenders view short-term personal loans as higher-risk loans and charge higher interest rates to offset this risk.
Short Repayment Period
Short-term loans typically have shorter repayment periods than other types of loans, which can be a downside in some cases.
You are obliged to repay the loan within a short amount of time, which can be difficult if you are unable to make the payments on time.
Eventually, this may result in late fees, penalties, and additional interest charges, which can further increase the cost of the loan.
How To Choose The Right Repayment Plan For Short-Term Loans
There are many different repayment plans available for short-term personal loans. When choosing a repayment plan, it is important to consider your financial situation and needs.
Here are some things to keep in mind when choosing a repayment plan:
Your Monthly Income
Your monthly income will affect how much you can afford to pay each month towards your loan. Be sure to choose a repayment plan that you can comfortably afford without straining your finances.
Consider The Effective Interest Rate
Be sure to consider the EIR of the short term personal loan you apply for as this will be the true interest rate. Compare the EIRs of different short-term loans to find the best option for your needs.
Ensure you can manage the monthly installments of the loan. You don’t want to fall behind on payments and end up with late fees or penalties.
Total Cost Of Loan
Consider the total cost of the loan before choosing a repayment plan. The longer the loan tenure, the higher the total cost of the loan will be.
Choose a repayment plan that will allow you to pay off the loan as quickly as possible to save on interest costs. However, ensure you can afford the monthly installments.
How Long Should The Loan Tenure Be?
If you can, opt for loan tenure that is quite short. When you take a loan with a long loan tenure, you may end up paying a lot more in interest than the actual amount you borrowed.
This is because the longer you take to repay a loan, the more interest you will accrue over time. Therefore, it is best to choose a short loan tenure if you can afford it.
Where To Get A Short-Term Loan
There are many places where you can get a short term personal loan in Singapore. Here are some options:
Licensed Money Lenders
Licensed money lenders in Singapore like Horison Credit can provide you with short-term loans with competitive interest rates and fees. Legal money lenders are regulated by the Ministry of Law.
The amount you can borrow from licensed money lenders depends on your annual income and citizenship status.
Licensed money lenders in Singapore can be a great option if you need a small loan amount and can manage to pay it back within a week or month.
These lenders offer short-term personal loans with easy approval and disbursement for accredited investors as well as corporations.
If you have an investment property to secure the loan with, do not need the money instantly, and need a lower interest rate, then private lenders can be good options.
However, you may need to provide collateral for the loan.
Banks in Singapore offer short-term personal loans for individuals as well as businesses with affordable interest rates.
If you have a good credit history and don’t mind waiting for the approval process to be completed, then a bank loan can be a safe and sound option.
Find A Best Short Term Personal Loan That Suits Your Needs
To sum it up, a short term personal loan can be a great option when you need money for emergency expenses or to make a large purchase.
Be sure to compare the rates of different lenders to find the best loan for your needs. Consider the interest rates, repayment terms, and fees before making your decision.
Want a short-term loan in Singapore instantly at competitive rates?
As a top licensed money lender in Singapore, Horison Credit can give you the best offer.
Contact us now or apply for a loan with us today. We will be more than happy to hear from you and answer any questions that you may have.