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Should You Choose Payday or Principal Reducing Loans?

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When you find yourself in need of funds, it is likely you will go for a loan to support that necessity. May it be for sudden bills or emergencies, you will need money to fund them.

Fortunately, Singapore has a lot of financial avenues for Singaporeans and foreign residents to look into for their immediate money needs. For those hoping for a quick business capital and other business financing needs, Singapore has the financial services that will match it.

There are several loans Singaporean or foreign residents can avail of their sudden financial needs. Two of the most popular loans requested are payday loans and principal reducing loans. These loans can be requested quite easily and a lot of information about it is offered by legal moneylenders across the country. It is also easy to apply for and avail and lenders only request minimal documentation from the borrower to avail it.

Much like personal loans, you will need to determine if you need a payday loan or a principal reducing loan for your quick money needs since they are different from one another. You can also read our guide to know the difference between payday loans and personal loans.

So, what are their differences and when should you borrow it?

Payday loan

For employed people with regular salaries, this is the ideal loan for them to avail. The moneylender will be issuing the loan with the agreement with the borrower that they will repay the loan in full on the day they get their salaries paid.

A person who wishes to avail a payday loan must show to the moneylender that they are employed and show their proof of income from their employer. Once you submit these requirements, the moneylender will study your salary amount to determine if you can pay your payday loan well and without problems.

Usually, payday loans are issued within a 30-day cycle to match the payment cycle of all employees throughout the country. If your pay cycle is different, you may need to ask the moneylender if they have a payday loan cycle that matches your pay cycle. The interest rates consider the number of days of the loan, but it is usually stated in the contract that it is the stated monthly or yearly with the effective interest rate that will be applied.

When the borrower has successfully passed the requirements, many lenders will immediately release the loan to the borrower.

Principal Reducing Loan

If you have regular employment or you can earn money easily, you can also request for a principal reducing loan.

With this loan, the moneylender will look into your credit history before they give you a loan. If you have a slight problem with your credit history, you may have problems in getting the loan. However, there may be moneylenders that can let you off depending on how you can convince them regarding it.

Unlike payday loans where you have to pay it immediately when you get your salary in full, principal reducing loans enable you to pay it within a few months just like a regular personal loan. As a result, you can have an easier time to pay it and give yourself an extra budget for your regular expenses.

Moneylenders can also be quite stringent when it comes to those applying for this type of loan and their credit background. So long as the borrower is capable of paying during the months of repayment, they will be lending them money.

If a person has a bad credit, they may not request this type of loan since they are at risk of bankruptcy and repayments would also be jeopardized.

Moneylenders to the rescue

If you see the need to get either one of these loans, it is best you do your research about the moneylenders that offer payday loans or principal reducing loans and compared their rates. Each moneylender has different values when it comes to their loans so consider their prices before selecting one.

It is also ideal to determine what type of loan you actually need before you go off to one moneylender because you may find yourself overwhelmed in the end once it is time to pay it off. Once you identify the loan you need, it would help you determine how much you will need and how you can pay it without problems.

When you sit down with the moneylender, ask everything you need to know about the loans: from the interest rates to the payment methods. If you may have problems paying, ask them about their policies about it and if you can get a flexible payment method that matches your requirements or paying capacity.

Of course, before you borrow a personal loan, it is best you determine where you will use your loan. If you will just use it to pay your other loans, you will need to consider seeking financial advice from a debt manager so you can pay it without having to seek for other loans.


If you are employed or have means to earn money then you find yourself in a monetary bind, there are loans out there that you can get from a moneylender in Singapore.

Learn more about borrowing from licensed money lender here.

If you need a quick loan, you can get a payday loan. Unfortunately, payday loans are small in an amount so if you need a larger amount of money you can borrow, it is recommended to get a principal reducing loan. With such loan, you can get a longer repayment period and the interest rates are also lower.

But if you need a quick loan, payday loans are the best choice since you can get it immediately. The only bad thing about it is you have to pay everything back in full when you get your salary and the amount you can borrow is based on your salary.

Depending on what you need, you may need to consider which loan will fit the bill twice before you agree to one with your moneylender.

Remember, when you sign that contract, you are in it until you pay your bill. So, be careful and review your loan checklist and the moneylender’s terms and conditions before signing your agreement.

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