By Arina Smith
Short-term cash loans are a very popular alternative to traditional loans. As the name suggests, the key characteristic of a short-term loan is its short repayment cycle. This may appeal to borrowers who need an immediate injection of cash but would prefer not to bog themselves down in long-term debt.
Loan Terms
A loan term is a period within which the loan principal amount and associated interest must be repaid to the lender. Loan terms are generally divided into three categories:
- Long term – From 5 years onwards, usually capped at 25 years
- Medium-term – Between 2 and 5 years
- Short term – May be capped at 18 to 24 months but usually less than 1 year; possibly as short as a month or even a week
Short-term loans can involve a principal sum as low as $100 but may also be as large as $100,000.
They are often referred to as payday loans. This is because borrowers pay them off when they receive their salary the following week or month.
Who Are Short-Term Cash Loans For?
Instant cash loans are very popular because they are such a versatile financial option, suited to a wide range of consumers’ needs. These loans are an ideal alternative for those who don’t usually borrow money but happen to find themselves in immediate need of cash.
Many small and medium enterprise (SME) business owners rely on such loans to bridge the gap and maintain operations if their income is disrupted. This has been a common reason for the spike in short-term loans during the Covid lockdowns.
A salaried borrower may rely on these loans to cover a mortgage payment after emergency expenses leave them temporarily short of funds. Others may need a short-term loan to cover such emergency expenses themselves.
Licensed money lenders in Singapore will rarely delve too deeply into your reasons for applying. The application process is more focused on your ability to repay the loan as scheduled.
Do I Qualify For A Short-Term Cash Loan?
The requirements to qualify for fast payday loans online are largely the same as those for other loans. Licensed money lenders consider your ability to repay the loan as their primary concern. You can demonstrate this capacity by providing evidence of your income at the loan application stage.
The documents you may provide generally include:
- Recent personal bank statements
- Recent bank statements for your business
- Statements of CPF contributions
However, money lenders will also take into consideration alternative sources of income. You may also want to share documents that show you receive income from:
- Dividends from stocks and shares
- Interest earned on fixed deposits
- A pension
- Alimony and child care payments
- Government payments, e.g., Covid-19 benefits
- Ongoing insurance payments
- Inheritance
Note that a Singapore cash loan is generally an unsecured loan. This means you will not have to put up collateral such as a home or car as security.
Why Apply For A Short-Term Cash Loan?
For novice borrowers, a short-term loan is a gentle introduction to debt. It exposes you to the financial system and its regulations without compelling you into long-term commitments.
It also works to improve your credit score. Repayment of a short-term loan demonstrates your ability to abide by your financial responsibilities, however small they may be. An improved credit rating will subsequently render you eligible for larger loan principals and lower interest rates, as well as loans from major financial institutions.
If you are struggling to pay your bills, keep your business afloat, or contend with unexpected expenses, a short-term cash loan may be the answer.
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