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Payday Loan vs. Personal Loan: What Are The Differences? - #1 Loan Directory in Singapore | Loan Singapore
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Payday Loan vs. Personal Loan: What Are The Differences?

Singapore is one of the most expensive cities in the world. The thriving economy, high standards of living, political stability and a perfect investment atmosphere are factors that contribute to the continuous growth in the high cost of living in Singapore. Life in Singapore is rather expensive for any individual who has a limited budget. Living in a city that bleeds you dry financially, can be complex and challenging for you if you have a low income to sustain your livelihood in Singapore. This is made worse by an individual who is not in a position to come up with money for unforeseeable emergencies.

Having access to a loan from banks can particularly be difficult if you do not have proof of your ability to reimburse the loan taken plus interest. This is so since the requirements are strict and the loan application process and approval is very systematic. The application process takes a long time since your credit history needs to be reviewed. There are many loan-types available from a different type of financial institutions in Singapore. These are meant to meet different needs for the borrower.

Today, we are discussing the differences between Payday Loan and Personal Loan offer by moneylenders.

What Is Payday Loan

The payday loan is an intended advance on your up coming take-home pay. For you to qualify, you need to be above 18 years old. You also need to hold a steady job and a bank account. Being self-employed does not make you eligible for the payday loan.

Payday moneylenders do not rely on your credit history, credit report or the absence of it to extend this service to you. Instead, a fee ranging between $10 and $30 is charged for every $100 borrowed. This makes the payday loan more costly than normal loans. The positive side they offer quick cash for individuals when they need it. Payday loans are mostly approved in 24 hours after the application has been submitted.

What Is Personal Loan

Personal loans work much like normal loans. During your application, you will be required to hand in your information concerning your income. The moneylender will then appraise your credit report to establish whether you qualify to receive the loan.

Since personal loans are mostly issued as unsecured loans, the approval of your application will mean you get a monthly repayment plan and an interest rate as stipulated in your application. Once your loan has been approved, the moneylender will determine the amount you need to be contributing monthly based on your existing earnings and debt.

Key Differences Between The Two Of Them

Who To Borrow Loan From

A government certified moneylender is the one entity that has both personal and payday loans. The other financial entities in the market only offer personal loans.

The Purpose And Repayment Period

Payday loans have a short-term repayment period of about 2 to 4 weeks. This type of loan is often for paying off bills and emergencies before getting your next take-home payday.

Personal loans run for a longer period of 4 weeks to a few years and are intended for big purchases, investments and for business requirements.

Who Qualifies For The Loan

A payday loan is easy to get because it depends on your status of employment as well as your income level.

The personal loan requires more strict checks. But it offers you the chance to borrow a larger amount of money, normally 2-4 times your earnings. This, however, varies from one financial institution to the other.

Loan Processing Period

The payday loan is processed much faster time owing to the effortless verification procedure of income and status of employment.

Personal loan, on the other hand, takes more than one day for processing before you get the money. This is so since the institution has to do thorough checks to ensure that your credit history is impeccable.

Loan Percentage Rates

Payday loan charges a higher interest rate compared to personal loans, thus the shorter settlement period. This is partially due to the nature of the loan and your eligibility.

Payday Loan Vs. Personal Loan: Which Is Best?

People who require quick cash or emergency funds that are to be reimbursed within a short time need to consider taking a payday loan. Even though this loan comes with higher percentage rates compared to those of a Personal loan. The payday loan has higher interest rate and the short repayment period, meaning that you pay less interest, as opposed to a personal loan that has lower interest rate and is to be reimbursed over a longer time.

However, when you intend to make a big ticket purchase, a Personal loan is a better option available to you. This type of loan is payable in instalments over an agreed upon period of the loan tenure. Additionally, these kinds of loan furthermore offer flexible reimbursement terms and you can choose either a monthly or a bi-weekly repayment plan.

Singapore is one of the expensive cities in the world. Singapore’s thriving economy, high standards of living, political stability and a perfect investment atmosphere are factors that have contributed to the continuous growth of the high cost of living on the island.

In order to sustain the high costs of living in Singapore, a borrower can access the various types of loans to be able to supplement their funds. Both payday loan and personal loan can contribute greatly to the meeting of your daily needs.

Payday loan is the easiest to obtain as with a confirmed employment status and a bank account, you can have your loan approved fast. This loan is usually repaid once you get your take-home pay.

Personal loans, on the other hand, allow you access to a larger amount of money that you can then pay in monthly instalments for a longer period of time. Each type of loan is best suited depending on the purpose of the loan; for fast cash to be repaid in shortest time a payday loan is the best choice while for a larger amount of money to be repaid over a longer time period and lower interest rate, the personal loan works best.