When considering a payday loan, it is important to recognise them for what they are: short term loans. A pay day loan is intended to be repaid within a very short period of time. In many cases, the due date will be set to the borrower’s very next pay check, which can be within a week or two. Other loans may have due dates a little further out, but they will be due within a month if they are a true payday loan in Singapore.
A short term loan is different from a long term loan in a few ways:
1. The amount of money borrowed is considerably less than what is borrowed for most long term loans.
2. Rather than making payments over time, the full amount of the loan is typically due on one day in the near future.
3. There is not as much paperwork required to take out a short term loan, since less money is being exchanged.
There is a bit of a mental dilemma that many new pay day loan borrowers fall into. They tend to borrow more money than they really need to borrow, simply because it does not feel like they are borrowing a lot. They are not borrowing $100,000 for a house. It is just a few hundred dollars to get them through to their next pay check.
While this seems harmless in the moment, many new payday loan borrowers do not think ahead to how much of their next pay check is being spent in advance. Since they are borrowing a small amount of money they don’t put as much thought into how they will pay it back, and that is always a mistake with a short term loan. There isn’t much time to pay the money back, so borrowers need to be completely sure that they will be able to live up to the terms of their agreement and pay the loan back on time.
Here are a few tips for all new borrowers considering a payday loan in Singapore:
1. Do not borrow more than you really need at the time. This will make it much easier to pay the loan back when it is due.
2. Make a concrete plan for repayment of the loan before you take it out. This is the only way to ensure you will be able to repay the loan without any problems.
3. Consider the amount of interest and add it into the amount you are borrowing. That is the amount you need to be able to repay at the end of the short term loan.
4. Make sure you understand how the money will be repaid. In many cases, it is automatically drafted back out of your bank account where the funds were received. You have to make sure the money is there to be drafted.
5. Always learn the terms of a payday loan before taking out the loan. The terms are not something to guess about later on.
New borrowers simply need to remember that payday loans are short term loans. They deal with smaller amounts of money, but you don’t have as long to pay them back.