Living in Singapore, having cash emergencies is not unusual. You forgot about budgeting for this month’s rent. Maybe you need to make small payments on your car. These issues came up suddenly, at a time when you didn’t have any money. And then you thought of a payday loan.

A payday loan, a payday advance or cash advance loan, is a short-term loan. The loan amount is usually small, and the loan is unsecured. Payday loans are popular with Singaporeans. This is because applying and the requirements are simple. Also, the loan approval time is quick, and so is disbursement.

As the name implies, a payday loan is one that you have to repay on your next payday. Your payday could be the week after you take the loan or in a month. For emergency cases, payday loans are a great option. Despite their usefulness, their interest rates are high. Their rates can even be higher than the interest on typical bank loans. This is because they are short-tenure loans. This makes payday loans dangerous for you, especially if you don’t plan and use them well.

How, then, do you know if a payday loan is a right thing for you? Here is an outline of what you should and shouldn’t do with a payday loan. Use this to guide your decision when considering applying for a payday loan.

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What You Can Use Payday Loans For

1. You Can Use A Payday Loan For Emergencies

You cannot plan and account for everything. Every once in a while, life throws something at you that you just weren’t expecting. As you were rushing to get to work, your car didn’t start. You don’t have the money to call the plumber, so you don’t have running water in your house. Extra curriculum costs requests from your child’s school. A medical situation has just come up that needs urgent attention. You can’t wait for your next paycheck to pay for all of this. Getting a payday loan is just the thing to set off these emergency costs.

2. You Can Use It As A Temporary Cash Flow

Sometimes you run out of cash before you have settled your monthly expenses. Sometimes, even the best budgets are overdrawn. For instance, you receive your salary. You have planned how much you will save and how much you will spend. Then other things come up. The money you kept for groceries has to go for paying the plumber. The money for utilities is converted to pay for an important subscription. When these things happen, you run out of cash. Or the cash you have just isn’t enough to do everything.

Getting a payday loan or a cash advance can tide you over to the next paycheck. A payday loan allows you to carry on as you would with your paycheck for the month. Since payday loans are small, you can get one and repay it with your next salary. Limited funds can’t keep you from living normally again.

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3. When You Need Funds Urgently

Payday loans may attract high-interest rates, but they are very convenient. Bank loans, or getting a new credit card, may be cheaper than payday loans. However, they take too long process. The application process is lengthy and rigorous. The approval process can take weeks before you can get your cash.

So what if you need the money for an emergency with a deadline? The best option is to get a payday loan. Also, moneylenders can be found online. They also stay open after banks have closed. Your loan application can be processed and approved in minutes. Cash disbursement can happen within the hour. This makes payday loans most suitable for urgent occasions.

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When You Shouldn’t Use Payday Loans

Payday loans are good for any number of purposes. However, there are instances where it would be wise NOT to use payday loans, such as:

1. Using A Payday Loan To Make Payments On Existing Loans
This is a very dangerous habit, and you would do well to stay away from this. Payday loans are notorious for their high interest rates. This is because the loan is unsecured and is a short-term loan. The lender is the one at risk, so that interest has to be high. Borrowing to pay off another debt will just put you in even more debt. Falling into a debt cycle like this will harm your opportunities of keeping a clean credit report. You will also get into the habit of defaulting on repayments. It wouldn’t be wise to default on a payday loan repayment. If this seems like it could happen, meet with your lender and discuss on a repayment plan that is suitable for you.

2. Using Payday Loans As A Supplement To Your Income 
The standard of living in Singapore is high. It is true that you may need a loan at some point in your life. However, if you keep getting payday loans to help where your income can’t cover, you are making a mistake. Payday loans are not meant to be a supplement to your income. They are just a short-term solution to an urgent financial need. If you constantly borrow payday loans to pay for rent or utilities, maybe you need to reconsider how you are living and make the necessary adjustments.

3. Using Payday Loans To Make Purchases That Aren’t Important
It is important for you to consider what a payday loan is costing you before applying for it. The interest on these loans is high, so you shouldn’t borrow one to spend frivolously. Always budget your expenditures and stick to them. A Payday loan should only be used for what you need, not what you want.

You must understand that a payday loan is a short-term loan, and is only good for emergencies. Be sure that you can repay it with your next salary without going broke. If you need a larger amount of money, a payday loan may not be right for you. If you think you won’t be able to repay with your next income, check out other short-term loans instead of applying for a payday loan. It may not be right for you in that situation.