A short-term loan can help you achieve different goals. You may need cash to face a personal emergency, pay your business expenses, or do a medical intervention for your pet.
You must choose the right type of short term loan depending on your goals.
Choosing the best lending institutions also entails factors such as your current income, personal credit history, nationality, and even your age.
This guide teaches where to get a short term loan that fits you like a glove. We will discuss several options below, but first, let’s get to the basics.
What Is A Short Term Loan?
A short-term loan is like a cup of fresh coffee in the morning. It gives you the financial energy to jump over your daily hoops.
You can use this money to start your business, cover a personal emergency, or go on a trip to Hawaii.
The terms and conditions include monthly installments to reimburse your original sum. These installments include fixed interest rates calculated from the outstanding balance.
The only difference is that a short-term loan is taken for a shorter period.
Depending on the type of short-term loan you opt for, this repayment period varies between one and 12 months. Having less time to pay back the loan has several other consequences:
- The amount you can borrow is likely smaller than that of a longer-term loan.
- Your interest rate may be higher.
- But you will be debt-free faster.
We will review more pros and cons in the section below.
Pros And Cons Of A Short Term Loan
There is no perfect financial solution, so these loans have their drawbacks, too. Let’s start with them and see if they have bright sides (spoiler alert; they do).
1. You Can Only Borrow Smaller Amounts
The Ministry of Law (MinLaw) has decided specific limits for loans according to your earnings and net assets. One of these limits is called Total Debt Servicing Ratio (TDSR).
The TDSR is currently set at 55%. That means your total loan installments cannot take up more than 55% of your monthly income.
And since your tenure is shorter, the corresponding loan amounts for short-term loans in Singapore must be lower.
2. This Solution Opens You Up To Loan Sharks
But only if you are not careful. You must review all of your options before choosing your lender. The first step is to vet the money lender on MinLaw’s list of licensed money lenders.
3. Interest Rates Are Higher
Because the loan term is shorter, your interest rate might skyrocket. This interest rate also depends on the types of short-term loans you’re taking. For example, a payday loan might have higher interest than your employer’s cash advance.
1. You Have Higher Approval Chances
Borrowing a smaller sum for less time and with a steeper interest rate is less risky for your lender. So, financial institutions are likely to have more relaxed conditions.
For example, your credit score or nationality are less important than long-term personal loans.
2. You Will Pay Lower Overall Interest
Although the interest rates are higher, the original sum and tenure are lower. That decreases the accumulated interest, so your total loan cost will be reduced compared to longer-term financial solutions.
3. It’s Convenient
Short loans are convenient and accessible compared to other packages. Besides, you can have more repayment flexibility, as you can choose weekly, bi-weekly or payday installments.
Picking the right installment for your needs helps you stick to your payments.
Types Of Short Term Loans In Singapore
Not all loans for the short-term are created equal. You must get your loan according to your needs to ensure you can handle the payments and get enough money.
1. Merchant Cash Advances
A merchant cash advance is financing you can take for your small business based on your credit card sales. The money is wired directly into your account, and you can use it immediately.
Cash advances for individual borrowers mean your money lender will credit your borrowed sum.
You must allow the lender to access your credit facility in both cases. Part of your credit card receipts go to your money lender or bank daily – this sum is called holdback. The process continues until your cash advance is paid completely.
2. Lines Of Credit
A line of credit is like a credit card for businesses, but it has a lower interest rate. You can spend money from it within the credit limit and have a flexible tenure.
3. Payday Loans
A payday loan is the easiest short-term loan to get. Payday loans give you quick cash you repay in a lump sum on your pay day (hence the name).
However, the interest is higher than other loans for the short term, and the money is wired directly to the lender from your account on your salary day.
Pro tip: Ensure you have enough money left in your account after reimbursing your payday loan. Otherwise, you may fall into a spiral of constant payday loans each month.
4. Bridging Loans
These loans help you close the gap between selling your current home and buying a new one.
A bridging loan is usually signed for six months and has a pretty high interest rate. You will guarantee it with your current home’s sales proceeds, repaying it when that sale goes through.
Unlike the above options, bridging loans are secured loans.
5. Invoice Financing
This is a short-term loan for businesses. Basically, you will secure your loan with the invoices sent to your clients. Using your invoices as collateral decreases the risk for your bank or licensed money lender, so you will get up to 80% of your invoice sum with a low interest rate.
After you receive the payment for those sent invoices, you will reimburse your money lender, and they will wire you the remaining 20%. Minus interest, of course.
6. Emergency Cash Loans
These loans are intended for urgent expenses, such as pipe repairs or a medical emergency. Licensed money lenders offer this type of loan faster and with less bureaucracy than banks, albeit with higher interest charges.
That brings us to the following point.
Where To Get A Short Term Loan In Singapore
Loans for the short-term are not created equal, and loan providers are not either. Let’s see where to get a short term loan and analyse your options.
1. Licensed Money Lenders
Licensed money lenders must operate according to MinLaw rules. Therefore, the maximum amount you can borrow is:
- Secured loans: Any amount
- Unsecured loans: Dependent on your yearly income
|Annual Income Of Borrower||Citizens And Permanent Residents Of Singapore||Foreigners Residing In Singapore|
|Not up to $10,000||$3,000||$500|
|At least $10,000, but not up to $20,000||$3,000||$3,000|
|At least $20,000||Up to 6x of borrower’s monthly income||Up to 6x of borrower’s monthly income|
MinLaw also establishes specific caps for interest rates and other fees:
- Maximum 4% interest rate monthly, calculated from your outstanding balance
- Maximum 10% admin fee from the principal loan amount, paid upon loan approval
- Maximum 4% late interest rate based on the installment you have missed
- Maximum $60 late payment penalty regardless of the installment quantum
They are best for:
- Personalised short-tenure loans of different kinds
- Very flexible loan repayment terms
- Fast approval
- Less bureaucracy
Banks have a slew of short-tenure loans too, but they are less flexible and impose more eligibility requirements.
For example, some banks offer loans only to people aged 21 to 65 years old and impose a minimum salary of $20,000 per year. Your credit rating will also undergo more scrutiny.
As a result, the overall approval process is longer.
- Low interest rates
- Multiple short-term loan options
3. Private Funders
Private funders are not on MinLaw’s list of licensed money lenders. You will find them on the exempted list. Besides, private funders can only work with corporations or accredited investors, with very specific requirements.
For individual investors:
- Net personal assets must be over $2 million
- Their primary residence value must be below $1 million
- Your preceding 12 months’ earnings are below $300,000
- Net financial assets should be over $1 million
- Net assets should be over $10 million
Warning: Short-term loans offered by private funders are likely secured.
- Higher amounts
4. Your Employer
Your employer can offer you a payday loan until your next paycheck. Although your loan options are more limited, your employer knows you personally.
As such, their conditions can be laxer, and your credit history will not be scrutinised as rigidly.
- Quick payday loans
- Lower interest rates
- Convenient loan terms
A pawnshop can lend money in turn for your assets like jewellery. Basically, you are securing your loan with these valuables.
The interest rates are lower than credit cards or licensed money lenders if you repay your loan within six months.
The longer you prolong that repayment term, the more interest you will accrue. Besides, you may lose your assets if you cannot reimburse the loan.
- Urgent cash needs
- No credit or income checks
Choose Where To Get A Short Term Loan Wisely
Now that you are here, you know where to get a short term loan according to your needs.
Remember to assess different providers, comparing their terms and conditions. Focus on the interest rate, penalty fees, approval rate and speed, plus credit score checks.
Lending Bee is one of your best options. Accredited by MinLaw, we have years of experience in the market.
Our loan officers can advise you on the best short-term loan option for your needs by considering your earnings and expenses. We will also tailor the repayment plan to ensure you can pay your installments easily.
Besides, our loan application process is seamless, and you can get pre-approved within one hour.
Contact us today or apply for a loan now.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.