The differences between Payday Loan and Personal Loan in Singapore

the-differences-between-payday-loan-and-personal-loan-in-Singapore

Personal loan and Payday loan are two entirely different type of loan with exception to one thing they have in common – both of them are unsecured loans. In the post that follows, we are going to help you to distinguish between the two loan’s features and benefits as well as explain the main differences.

Payday Loan vs. Personal Loan

Typically, a Payday loan is a short-term loan. This loan requires the borrower to pay off the entire loan amount on the next payday. It does not require extensive documentation for approval, so long you have a job and a bank account, you can easily apply for a payday loan. Banks do not issue payday loans, only licensed money lender in Singapore does. The maximum loan amount depends on the income level of the borrower. This amount is usually lesser than what you can obtain if you take up a Personal loan.

In contrast to Payday loans, a Personal loan is a conventional loan product offered by both the banks and the licensed money lender in Singapore. It requires the submission of extensive documentation for approval. These documents include pay slips for consecutive months, tax assessments of several years, employment proof as well as evidence of residence. Instead of repaying the entire loan amount on payday, the borrower will have the option to repay the loan in installments over the chosen loan tenure.

Payday Loan vs. Personal Loan: Which is best?

People who need quick or emergency money that can be repaid within a short period of time should apply for a payday loan although it comes with escalated interest rate as compared to Personal loan. Taking a higher interest rate loan that’s repaid within a short period of time effectively means that borrower pays lesser interest compared to lower interest rate loan that’s repaid over a longer period of time.

On the other hand, if you are looking at purchasing a big ticket item, a Personal loan would be the better choice. It does not require you to fully pay off the loan, it allows the borrower to spread the loan repayment into installment payable over a chosen tenure. In addition, this type of loan also offer flexible repayment terms and borrowers can choose monthly or bi-weekly repayment.

Conclusion

It is essential to recognize the several differences between a Personal loan and a Payday loan. It allows you to make a better decision when deciding between the two.

Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *