When you want to take out a loan for your business and you need it immediately, you can get a short term loan. They have characteristically shorter maturities when compared to regular ones, as they need to be repaid to the lender within 12 months or less.
These are for urgent financial emergencies that either do not call for the owner to commit for long-term or are those situations that cannot be put in waiting for long. We give you a rundown of the information you have to consider in getting your short term loan Singapore.
What is a Short Term Loan?
To put it simply, these are personal loans in Singapore that work the same as other term loans (medium and long), but with a short repayment period. They are often used to cover utility bills and other types of payments that need urgent attention. It is a simple product of investment that offers a fixed loan amount with a certain repayment period that the company foresees they can easily beat. Aside from paying bills, the personal loan Singapore can also be used to seize temporary financial opportunities for the company.
The loan amount can be as small as $S100 which can go up to $S2,000 depending on the money lender or bank, with repayment periods scheduled for at least 12 months. These personal loans Singapore has a higher interest rate and you can process them within a day through established moneylenders. They only require the lender to look at the cash flow of the borrower rather than their credit history, hence the quick turnover.
How Can Short Term Loans Help You?
Singapore is home to a bustling economy, and short terms loans are useful here when there are upfront costs that need urgent pay back but the cash is not yet available. Take for example start-up businesses that need to pay back their utilities such as rent, payrolls, and inventories despite being relatively new to the market.
The owner can decide to take out a short-term loan to cover the amount for financial expenses without compromising the set capital for operations. When the firm has projected that they can earn enough to cover repayment of the loan as well as still gain profit, getting a short-term loan will be most favorable.
Another scenario would be for hospitality businesses that need to invest in certain financial inventories before the tourist season for them to secure their edge over other similar operations. The company can opt to get a short-term loan to boost its sales, making this loan a necessary financial investment of some sort.
Also, for those who allow the use of a credit card and other credit types, short-term loans can compensate for the current expenses that need urgent attention when their customers have not yet repaid their bills. This is commonly observed in cyclical businesses wherein the company still has to purchase its stocks despite not getting repaid yet, for them to continue their operations.
In general, short-term loans are risky options that the company can consider when they are in a pinch in terms of liquid financial assets. These loans have a shorter period of maturity and the company will have to exhaust their efforts to repay the loan as interests could easily pile up if they are not careful.
On the other hand, some opportunities may not come again if the risk of taking out a loan is not made. At the end of the day, if the business is guaranteed to lose significant financial revenue from not availing a short-term loan, then the owners will have to consider contacting a licensed moneylender here in Singapore.
What are the Benefits of Short Term Loans?
As stated above, short-term loans have major significance in terms of addressing urgent needs within a short period. If you are hesitant about getting one due to a lack of understanding of its clear benefits, we have outlined some very important points that you can ponder on as you make your decision.
1. Quick Processing of an Application
It is not only the maturity that is short in these loans, but the processing itself is quick as well. These usually require lesser paperwork, which implies that they have lesser hassles, and thus creating a faster turnaround time.
With technology dominating the business landscape here in Singapore, owners can even apply for a short-term loan online or through their mobile devices.
2. High Chances of Acceptance with Low Credit Rating
Perhaps the biggest challenge in getting loan approval is the credit rating of the borrower. With regular loans, the credit history of the applicant is scrutinized extensively, and chances are if one has a bad credit rating, your loan might not get approved by authorized lenders here in Singapore.
As mentioned previously, lenders look at the cash flows of the borrower rather than their credit history in the short-term loans. When the client can show that their net amount of liquid assets can cover for the costs of the repayment within the specified period, their application will most likely be approved.
3. Limited Paperwork is Required for the Application Process
As already mentioned above, getting a short-term loan here in Singapore requires less paperwork during the application process. Since the lender only has to look at the cash flow of the borrower, the documents that the applicant will have to prepare before availing are reduced significantly.
4. Less Interest is Paid as the Duration of the Loan is Short
The loan repayment period is shorter, hence the lesser amount of interest rate in total that the borrower will pay at the end of the loan. Although every repayment has a higher interest rate when compared to regular loans, the shorter time that the borrower spends paying off these interests compensate.
5. Do Not Require Collateral
Unlike regular loans, when you get short-term loans, you need not have collateral. Again, only the cash flow of the borrower is considered by moneylenders here in Singapore, hence the lack of need for collaterals. This is favorable for those who do not have their rights reserved for these agreements due primarily to their lack of assets in the first place.
6. Help Improve Your Credit Score/Rating
When you as a borrower can pay your loan on time, getting a short-term loan can prove beneficial to your credit score. This is later important when you want to avail of a long-term loan from a traditional moneylender. An on-time payment gives you a better chance of increasing your credit limit and paving your credit score in the future.
What Are the Disadvantages of Short Term Loans?
As with any other type of opportunity, getting a short-term loan comes with significant risks that one has to consider. We want to give you an inclusive picture of what availing this loan entails, so we have listed some of its drawbacks.
1. High-interest Rate
Due to their nature of having a short maturity period, short-term loans come with high-interest rates. This should come as no surprise as lenders also have to ensure that clients are motivated to repay their loans especially since they can avail it upfront. Higher interest rates also give the lenders their revenue for the loan.
2. The Repayment Cost is High and Frequent
As already mentioned, repayments for short-term loans are more expensive and more frequent. Again, these loans have a short maturity period, hence the need for the lender to collect the processing fee frequently to cover the cost of the loan.
3. Penalties for Late Payment is Expensive
A severe late payment processing fee may also be applicable for short-term loans, which gives the lenders heightened security in getting back their investments. It is therefore crucial for an applicant to strictly consider their ability to meet repayments so as not to fall into a debt trap later on.
4. It is One of the Risky Types of Loans
As evident in the above-mentioned factors, these loans do belong to the risky side. They may offer a quick pay-out with an easy process, but the repayment scheme should be carefully considered. There is a high chance of falling into a huge pile of debt when the borrower is not careful in considering the consequences of not being able to repay this loan.
Types of Short-term Loans
Short-term loans in Singapore also have a variety of different options that the borrower can choose from. Listed below are four types that can help you in deciding which meet your needs and preferences.
1. Invoice Financing
Unpaid invoices that are extended to customers of a lending agency are called invoice financing types of short-term loans. The borrower is charged with interest based on the number of days or weeks that their invoice remains outstanding. After repayment of the entire loan, the lender takes the interest as their processing fee before returning to the borrower what is due.
2. Payday Loans
After the lender gives a lump sum of money to the borrower like how a credit card with a certain credit limit works, they will have to repay the whole amount plus the interest charged when their salary arrives. This is usually done through the continuous payment authority, rights reserved, wherein the lender has the right to take the amount out of the borrower’s bank account.
3. Line of Credit
Similar to using a business credit card, line of credits work by setting a credit limit that the firm can use when needed. Whatever amount of money borrowed will be paid through monthly installments. These types of loans have lesser annual percentage interest rates than the credit card.
4. Merchant Cash Advance
A cash advance, merchant cash advance are short-term loans that give the lenders certain percentages of a sale made by the borrower. This is because after loaning a certain amount to the borrower, the lender is given access to their credit facility.
Where Can You Get Short Term Loans in Singapore?
The next question to answer will be where these loans are availed from here in Singapore. We have listed three options that you can choose from.
These are registered institutions that are regulated by the Singaporean government in terms of their fees and services available. They can charge only a maximum of 4% monthly interest rates which are computed from the principal remaining after total repayments have been deducted. Late fees are charged an additional 4% maximum but are only charged on the amount repaid late.
Some banks also offer short-term loans aside from the usual credit card options for both individuals and businesses, but they need to have good credit scores to get approved. Processing time is also significantly longer, however, low-interest rates of 3 to 6% are offered.
3. Private Funders
Under the Moneylenders Act, only accredited investors or corporations can borrow short-term loans from private funders. Interest rates range from 10 to 17% per annum, lesser than offers of moneylenders, but they require some type of collateral.
How to Choose the Best Short Term Loan in Singapore
If you want to get a payday loan in Singapore, consider applying at the most trusted licensed moneylender. You can get approval within 30 minutes of application, and the terms for repayment are easy to oblige to.
The process can be done online or through phone-call, and after getting confirmation, you can visit the office for an in-person consultation, after which you can already receive your loan money. Raffles Credit offers a quick and secure short-term loan policy that is guaranteed to take the burden of pressing bills off in no time.