There are times in everyone’s life when you find yourself in need of money to make it out till the next paycheck. Your monthly budget might have been altered by certain unexpected expenses and that left you short on cash. If you need too much money, just some extra something to get you back on track until the following month. Faced with this scenario, many people in Singapore turn to payday loans to bridge the gap. Best payday loans can be great financial choices when you need small amounts of cash fast, but they’re not recommended for long periods of time. Not many people know this and they end up making some costly mistakes.
In today’s article we’re going to look over some of the most common mistakes people make when taking out a payday loan in Singapore. Read more to see what to look out for, what not to do and how to correctly apply for this loan.
Mistake No. 1: Not Checking if the Moneylender is Licensed
When considering borrowing money from moneylenders, the first thing you have to do before calling any agency, is check if they are approved by the National Government.
On the website of the Ministry of Law you can find a list presenting all of the moneylenders who are recognized by the National Government. If the agency you’re considering is not part of that list, you should immediately cease any borrowing processes with them.
Only a licensed moneylender will be able to offer you the protection you’re granted under the Moneylenders Act, such as an interest of a maximum of 4% and a maximum of $60 in late fees/month. If an agency is not registered, they’re most likely part of a loan shark scheme or some sort of scammer and there’s not much the Singapore government can do to protect you in that case.
Mistake No. 2: Borrowing More Than You Can Afford
In comparison to other types of loans, payday loans are easier to obtain and that might make one feel like access to money is easy. However, borrowing beyond what one can afford can quickly turn into a damaging habit that can spiral down at an extremely high speed.
Always consider the need you’re borrowing for. Is it really necessary for you to take this loan, or should you look into other options? These types of loans often have increased high rates and, if you need large amounts of money, then a personal loan might be a smarter choice. A payday loan in Singapore is the perfect choice if all you need is some extra money until you get paid – this is what this credit was designed for and you should keep it in mind.
Mistake No. 3: Using the Credit for Non-Emergencies
Just as stated above, this loan was created to meet the urgent need for money to bridge a gap in your budget. They were not designed so you can get your dream vacation, they were not created to cover education expenses, they were not made to finance a wedding – for all of these, the best choice would be a personal loan.
The best payday loan is the one used for urgent expenses that require immediate attention which cannot wait for your next payment. If your purchase can wait for the next payment, then it would be best to simply wait till next month to get it. However, if it can’t and all you need is a little bit of extra cash, then you should consider it.
Mistake No. 4: Not Having a Repayment Plan
It is advisable that, before getting any loan, you’re familiar with the repayment plan and set for yourself some guidelines to help you navigate that period. When it comes to these credits used to bridge some gaps, most of them have somewhere between 30 to 60 days for repayment. That means that you should have, right from the start, a repayment structure or plan in mind, so that you can pay off the loan when the time comes.
Most people who take these loans rest assured thinking that they’re simply going to pay them off when the next paycheck comes in and that’s true, you can absolutely do that, but you should also be aware of your expenses and make sure that your next paycheck allows you to dispose of such a large amount of money at once. To make sure there’ll be no unpleasant surprises, you should set for yourself a repayment plan right from the very start.
Mistake No. 5: Not Getting the Best Payday Loan They Can Get
There are many ways in which you can make sure that you’re getting the best payday loan and the number one way is by comparing your options. Every moneylender will have a different offer for you and, although the national government imposes the same limits for all of them (a maximum of 4% interest and a maximum of $60 per month in late fee penalties) it doesn’t mean that all offers are the same.
You should look for moneylenders who prioritize flexibility and consultancy, for moneylenders who explain to you all of the clauses in the contract and for people who are transparent in their processes.
Let’s do a recap:
- Always check if your moneylender is licensed – do not work with unlicensed ones
- Do not borrow more than you can afford – it might be tempting, but it will cause you to spiral down
- Don’t take them if you’re not facing an emergency that requires immediate money – look into personal loans and consider your other options if your need for money can wait
- Always have a repayment plan for yourself. A licensed moneylender will also present you with a repayment plan for the amount you’re borrowing, but you should have an internal management mechanism as well to ensure you’re not accumulating bad credit
- Remember there are many options to choose from and, if you want to get the best payday loan, then you should look into at least three licensed moneylenders and compare their offers.