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Advantages and Disadvantages of Payday Loans in Singapore

payday loan
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As Singaporeans try to recover from the pandemic, the rising cost of living as well as food and fuel prices make it all the more challenging. Unfortunately, for some of us, tightening our belts as prices rise is not enough. When your wage growth can’t keep up with your monthly expenses, how do you make ends meet?

When facing a cash crunch, your first instinct might be to ask for a cash advance from your employee. But if this isn’t an option, you can consider taking out a payday loan with a licensed money lender in Singapore. A payday loan can help temporarily bridge the gap between now and your next paycheck.

You can use the funds to pay for unexpected emergencies or sudden interruptions of your income. Here we’ll talk about payday loans’ advantages and disadvantages. But first, here’s what you need to know about the eligibility and requirements for applying.

What Is a Payday Loan and How Does It Work?

Let’s say your car broke down unexpectedly which means you’ll need significant cash for repairs, but what if your emergency fund is not enough to cover the bills? This is when a payday loan proves to be helpful.

A payday loan is a short-term, unsecured loan that matches your monthly income. Unlike personal loans, this type of loan must be repaid on your next payday or within a month. And while payday loans are beneficial for funding immediate needs, their short loan term and low cap are not recommended for funding long-term financial needs.

If you borrow money from licensed money lenders, the payday loan application process is fast and simple. Plus, unlike other types of loans, legal lenders don’t perform a credit check with the credit bureaus.

Most licensed money lenders will only ask for proof of income to ensure that you will receive your pay soon. That said, to qualify, you only need a stable source of income and a bank account.


  • Loan amount: Up to 1 month of your monthly income
  • Tenure: Within the month or on the next payday
  • Interest: 1-4% per month
  • Credit score: A high score is usually not required

Payday borrowers typically must be eligible and provide the following documents:


  • Must be at least 21 years and above
  • Minimum income requirement:
    • Singaporeans: Min Monthly Income of SGD $2,000
    • Foreigners: Min Monthly Income of SGD $3,000

Requirements for citizens and permanent residents

  • NRIC or Passport
  • Work Permit / S-Pass / Employment Pass
  • Proof of residence (utility bill or tenancy agreement)
  • Proof of employment (certificate of employment or 3 months recent payslip)
  • Proof of income (bank or account statement)
  • SingPass (to log into CPF, HDB IRAS website)

Bank worker offering personal loan agreement

Advantages of Payday Loans in Singapore

A payday loan may not be too different from a personal loan with a traditional bank. However, payday loans are designed for short-term borrowings, such as under a month, and you’ll need to repay the loan in full. Consider taking out a payday loan if you can make repayments on or before the due date.

Here are the advantages of payday loans:

  • Quick access to funds: With a legal payday lender, you can get your loan approved within 30 minutes of application and receive cash within the same day.
  • Easy eligibility: Payday loans have lenient eligibility criteria and minimal documents required
  • No collateral required: Payday loans are unsecured loans so you don’t have to put your asset as collateral.
  • No credit check: Licensed moneylenders don’t usually check your credit history. They will take into account other factors, such as your income level and overall financial situation.
  • Flexible use of funds: You can use the loan for anything – whether it’s for a medical emergency, car repair, or bill payment.

Payday Loan Disadvantages

But just like any type of loan, payday loans also have their cons. So before you submit a payday loan application, consider these:

  • Short repayment period: You’ll need to repay the loan in full within a month or on your next paycheck.
  • Risk of a debt trap: If you keep borrowing for several months, your debt will snowball into a huge amount if you fail to pay it back. This can lead to more financial strain.
  • Penalties for late payment: When you fail to make loan repayments, you’ll incur late fees of up to S$60 and late interest rates of up to 4% per month.
  • Not recommended for long-term financial needs: Payday loans are beneficial when you need urgent cash for unexpected expenses. If you find yourself in need of long-term financing, consider other solutions, such as personal loans.

That said, make sure that you can repay the loan on your next payday. Additionally, avoid applying to multiple loans at a time to avoid over-borrowing.

Payday Lenders in Singapore: Where To Apply?

Licensed money lenders in Singapore offer payday loans that are safe and completely legal. Payday lenders are highly regulated by the Ministry of Law and they abide by the rules and regulations stipulated in the Moneylenders Act.

However, make sure that you are dealing with a legal money lender by verifying their credibility and license. The lender must be in the complete list of licensed moneylenders found on the Ministry of Law’s website.

But don’t immediately go for the first legal lender that caught your attention. There are online loan comparison platforms, such as Loan Advisor, where you can quickly and easily compare different payday loans from the top licensed moneylenders in Singapore. Lastly, do your due diligence by checking feedback and reviews of previous clients.

Can You Apply for a Payday Loan Online?

Yes, you can apply for a payday loan online. Licensed money lenders have official websites where you can submit your application from the comfort of your home. Once your application is received and evaluated, a loan officer will get in touch with you to schedule your appointment.

Legal money lenders are obligated to perform face-to-face verification. Plus, they are required to properly explain the terms and conditions of the loan. Once you agree on the terms, you’ll need to sign the loan contract and receive your payday loan in person.

Tips When Taking a Payday Loan

Before you consider approaching a money lender, consider other alternatives. For instance, you can borrow money from family or friends. Or you can seek financial assistance offered by Government agencies.

If you have exhausted these options, you can turn to a credible licensed money lender. Here are a few tips to help you find the best deals:

  • Borrow only what you need and what you can afford to pay on your next paycheck.
  • Don’t be afraid to ask questions. Legal lenders are obligated to explain the terms of a loan.
  • Understand the fees and charges, such as the processing fee and late fees. Legal lenders can only charge a processing fee of up to 10% of the principal loan amount when the loan is granted. Late fees must not exceed S$60.
  • Before engaging with any lender, verify their license with the Ministry of Law. Check the complete list of licensed money lenders and make sure that all their business information is correct.
  • Shop around different money lenders to find the most favorable terms.


Payday loans can help you address unexpected financial challenges. You can borrow an amount equivalent to your next paycheck. However, since it is a short-term loan, you’ll need to repay it in full next month.

Key Takeaways

  • If you need emergency cash within your pay, use payday loans.
  • Payday loan borrowers can use the funds for anything, such as a medical emergency, car repair, or bills payment.
  • Payday loans are not suitable for long-term financing or when you need higher amounts.
  • Most legal lenders don’t perform a credit check when evaluating a payday loan application.

Get out of a financial bind now with a payday loan. Loan Advisor connects you with the top licensed money lenders in Singapore for your financial needs in minutes. Request up to three loan quotes to find the most favorable terms; no obligation to apply is required.

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