A payday loan is one of the very common loans that you’ll encounter today. Singapore payday loans are common to personal loans, but they have shorter time periods and higher interest rates. According to financial advisors, relying on payday loans can be damaging over time because the rates and penalties are too high. There are stories of some people who became slaves to payday loans because they couldn’t pay at all. However, a payday loan shouldn’t be a bad thing once it’s properly managed. It’s an emergency fund that can save you whenever you have financial shortage. By knowing the pros and cons of a payday loan, you’ll realize if it’s useful for you or not.
Unlike other kinds of loans, a payday loan can be released quickly. The lender usually releases the loan at the end of the day. This is very important, especially if you need the cash as soon as possible. Due to its quick releasing period, the payday loan appealed to middle class and rank-and-file employees.
While payday loan lenders conduct background checks to some extent, it’s not very meticulous when compared to the process of banks. Usually, you just need to present your ID and billing statement. This appealed to lots of people as well, but you have to keep in mind that your identity is still on the line.
Interest Rates and Penalties
Perhaps the major downside of a payday loan is its exponential interest rate. Up to the next payday, you have to pay the principal along with the interest. This process is similar to other loans, but the window of time is shorter. If you cannot pay the interest, most lenders will have penalties, so you’ll have a hard time finishing the loan.
Payday loans are less volatile compared to mortgage loans and auto loans, but they are viewed in a negative light. This also doesn’t mean that payday loan lenders won’t change their rates according to the flow of the economy. Lenders will always attempt to read the market, and this may cause drastic interest rate spikes. If you really need a payday loan fast, go to a lender that offers standard interest rates and has a fair lending system.
Before going to a payday loan lender, make sure that you’ve exhausted all of your possible options. In this way, you don’t have to deal with a high-interest loan bearing on your shoulder. However, if you really need to apply for a payday loan, just do your best in paying it before penalties kick in.