What Can You Use A Short Term Personal Loan For?
One of the best things about a short term personal loan is that you can use it to meet a wide range of your financial needs.
You can borrow a personal loan for almost any purpose as the eligibility is less strict. Some of the ways you can utilise this loan include starting a business, paying off debt, paying medical bills, or purchasing a property.
The concern most borrowers usually have is the amount of interest they will pay while repaying the loan. So that you don’t end up paying too much, you have to compare interest rates from various financial institutions and money lenders.
If you are thinking of taking a short term personal loan soon, we explain what you can use a short term personal loan Singapore for and the applicable interest rates.
What Is A Short-Term Loan?
Short-term loans in Singapore are available from banks or licensed money lenders for a short period, typically less than one year.
However, some lenders may consider a duration of fewer than two years to be a short-term loan, depending on the type of short-term loan given.
Other terminologies different lenders use include payday loans, merchant loans, and payroll loans. A short term personal loan is usually unsecured, which means the lender will not need collateral from you.
The loan tenure of a short term loan varies depending on a borrower’s capacity to make payments. Because the repayment is made in monthly installments or on payday, your monthly income is a key determinant.
What Can It Be Used For?
After examining your credit history and other factors such as your annual income, a short-term loan in Singapore from licensed lenders can be approved quickly within a day.
This means you will be able to receive the cash in your account in time to sort out your pressing needs.
There are many types of short-term loans available in Singapore such as payday loans, lines of credit, installment loans, bridging loans, etc, which all have their various uses.
Here are some ways you can use the loan.
Home Purchase Or Improvement
If you’re considering buying a new piece of property, getting a personal loan might be a good idea to help with the costs.
You can use the disbursed funds for a downpayment or make improvements after the purchase.
Purchase A Costly Ticket
If you need to make a high-cost purchase such as expensive furniture, you can consider getting a short-term loan.
This loan will assist you in paying for such items without complicating your budget and hindering your ability to meet other obligations.
You can also pay for your travel expenses with short-term financing. The loan will cover the costs of airfare, hotels, and any other items you may need while travelling.
You can also use the funds to pay off credit card bills or other expenses incurred during your extended stay.
A personal loan will help you finance the purchase of stock, licenses, or hire employees if you want to start a business.
You can also expand an existing business by adding stock or purchasing items in demand at particular seasons. Once the season is over, you can pay off the loan.
You can also apply for a personal loan to pay for medical expenses that are not covered by insurance or exceed your cover instead of sourcing help from family and friends. In doing so, you will have kept your private matters confidential.
This involves taking a personal loan with affordable repayment and paying off your multiple debts.
By paying a single payment to a single lender, you not only regain your financial stability but will get reprieve. The best thing about it is that you will safeguard and improve your credit score for future borrowing.
Interest Rates Of Personal Loans
Money lenders in Singapore are only allowed to charge an interest rate of no more than 4% per month for personal loans as of 1 Oct 2015. This is regardless of whether the loan is secured or unsecured, and your monthly income.
The interest amount is calculated monthly and based on the outstanding balance from the previous installment payment.
In addition, any late interest can only be applied to installment amounts due but not on the entire loan balance.
Pros And Cons Of A Short-Term Personal Loan
The best thing about getting a short term personal loan is that it can help you achieve the financial freedom you want. There are setbacks that might as well arise.
Here are the pros and cons to think about.
With technology, most money lenders are now engaging with borrowers through their web portals.
Hence, borrowers can now quickly and easily apply for short-term loans wherever they are. The process requires minimal paperwork and is hassle-free, translating into a quick turnaround.
Easier To Acquire
Short-term loans have less stringent requirements and credit checks, and don’t require collateral. Many lenders have quick and easy application processes that make the loan easier to access. More importantly, the approval process is much faster, enabling you to receive your loan as soon as the next day.
Short-term loans can be approved in a day, with money disbursed the following business day.
This is because they don’t require collateral processing, as they are perceived to be less risky. As a result, you can have the money more quickly to meet your needs as soon as possible.
Improves Credit Score
You can use short-term loans to improve your credit score by making timely monthly payments. That makes you eligible for bigger and longer-term loans from licensed money lenders and banks.
Compared to long-term loans, short-term loans have one of the highest interest rates, making them one of the most expensive loan types. This is due to their short loan tenures.
A bank loan comes at lower interest rates, depending on your credit score. However, you will have to wait for days before the bank grants you the loan.
Risk Of Loan Sharks
It is difficult to distinguish between a licensed money lender and a loan shark for instant loans.
Taking out a loan from a loan shark will land you in debt with extremely high interest and other hidden fees. Loan sharks are also taking advantage of digitisation and will seize any opportunity to lend money to unsuspecting borrowers.
Due to the ease of accessing the loan and the short tenure, you may end up becoming a perpetual debtor, who takes one loan after another.
Just because the loan is easy to get doesn’t mean it’s free. In the end, you may feel overburdened by the accumulated debt to be repaid.
A personal loan from a licensed money lender will attract late interest of up to 4% and a late fee of up to $60 for each month if you fail to honour an installment.
How To Choose The Right Repayment Plan
Compared to others, short-term loans have better repayment terms. Depending on your level of income, you can choose to repay your loan over a shorter or longer tenure.
Make sure the personal loan money lender gives you a package that enables you to make monthly payments affordably and conveniently.
Otherwise, if the terms don’t favour you and you default, you might incur additional fees.
How Long Should The Loan Tenure Be?
The loan tenure refers to how long you will take to repay a personal loan and interest. Selecting the shortest loan tenure is advisable.
It will enable you to make financial savings on interest as long as you can afford the higher installment.
Choosing an excessively long loan tenure may also subject you to an early repayment penalty when you decide to clear the loan earlier than expected.
However, such a tenure will result in smaller repayment amounts, giving you some allowance for additional loans if necessary.
Where To Get A Short-Term Loan
The easiest way to get a personal loan in Singapore is from accredited banks and licensed money lenders.
The good thing is that almost all of them have an online loan application portal for submitting your application. The application will be received immediately, and the appraisal process will begin.
Alternatively, you can apply directly to the lender by submitting a duly filled application form in person or via post to its branch.
By using a personal loan calculator on the web portal, you can determine the loan amount and the most convenient monthly repayment amount by adjusting the loan tenure.
Here are some banks in Singapore that offer personal loans online:
- DBS Bank
- HSBC Bank
- OCBC Bank
- United Overseas Bank
- Standard Chartered Bank
A Short Term Personal Loan Has Its Benefits
A short term personal loan is used for various personal expenses, and can be your lifeline during emergencies.
It can also be used to pay for home improvements or to pay off a high-interest credit card debt.
The application process is not tedious, and the approval is generally fast. However, it can be costly due to the high interest rates and short tenure. Yet it will also cost you more if repaid over a long period.
However, you don’t need collateral to secure the borrowed amounts.
When taking a personal loan, remember to compare different lenders in terms of interest and minimum loan tenure. By doing so, you will find the ideal loan that is affordable. Only work with a licensed money lender to avoid being scammed.
Do you need a lender to sort your financial needs?
BST Credit is an established licensed money lender that offers personal loans in Singapore. We offer some of the most affordable interest rates and fees.