Short term loans in Singapore are becoming more popular and handy, regardless of whether it’s for a personal emergency or easing your cash flow for business operations. If short term lending is the answer to solving your financial woes, it’s high time you know all about it.
Learn exactly how short term loan lending works, what you can expect from a short term loan lender, and the various types of short term loans out there.
What is a short term loan in Singapore?
A short term loan in Singapore is an unsecured loan that is repaid within a short duration, and is generally of a lower loan amount (around $500 to $50,000). Short term loan lending is basically taking up a short term loan with legalised money lenders in Singapore who provide fast loan approval usually within a day’s time.
What is the usual short term loan period?
Most instant short term loans in Singapore have a repayment period of around 1-6 months, with some even being 12 month loans depending on your agreement with the money lender. Do remember to consider your loan tenure carefully based on your monthly budget, interest rate charged, your existing liabilities and more before deciding on a short term loan lender.
What are the differences between short term loans and long term loans?
| Long term loans | Short term loans | |
| Where do you usually take the loan from | Banks | Legal money lenders |
| What is the maximum loan sum you’re permitted to borrow? | Maximum 10 times your monthly income | Maximum 6 times your monthly income |
| What is the loan tenure? (Personal loan) | 1-5 years, with some even as long as 7 years | Up to 12 months, at times 24 |
| How quick can loan approval be? | A few business days up to weeks | Same-day approval, usually in 10-30 minutes |
| How easy is it to get loan approval? | Tough to get loan approval if you have:
|
|
| What are the general interest rates? | From 1.99% – 5.54% a year | 1-4% a month (up to 48% a year) |
What are the benefits of taking unsecured short term loans?
1. You can get a short term loan with bad credit
Credit checks are usually more lenient for easy short term loans with licensed lenders, and even if you have bad credit history, most of the time, you will still be able to get your loan approved as long as you meet the eligibility criteria (unless you have defaulted on multiple loans with other money lenders).
2. Easy application process
The application process is simple. Most of the time, you just need to complete and submit a loan application form online on the short term money lender’s website with your details.
The short term lender will just need to submit your details to the Money Lenders Credit Bureau (MLCB) to check your borrowing limit, your existing outstanding loan amount with other money lenders, repayment records, etc.
If your records have no issues, your loan application should be approved within a day.
3. Fast approval
Loan approval from short term loan lenders usually takes less than a day. The loan officer from the lender will call you up if your loan can be confirmed, and you just need to go down to the office for a face-to-face verification with your required documents. This is important as it prevents identity fraud. Once this is done, your loan is typically approved quite quickly.
This would be a good time to negotiate the terms of your short term loan, such as the interest rate, repayment terms, etc, before you sign the loan contract. Once that is signed, the cash will be disbursed to you within minutes.
4. Flexibility of payment
Authorised short term loan lenders will usually allow you flexibility in repayment period. Before you sign the loan contract, you can request weekly, bi-weekly, monthly or payday repayment frequencies.
What are the disadvantages of unsecured short term loans?
1. Short term loans tend to have high interest rates
Due to the short period of repayment, the interest rates of short term loans in Singapore tend to be higher than long term bank loans. Interest rates usually range between 1-4% per month.
However, for personal loans, the interest rates are computed on a reducing rate, based on the principal amount outstanding at the end of a specific period. For instance, if your loan amount is $12,000 and you have already repaid $2,000 (not including interest), the interest for your next payment will be calculated based on the remaining $10,000.
2. Higher chance of accumulating late repayment fees and late interest easily
As short term loans and advances are usually of a lower loan principal amount as compared to long term loans (eg. taking a $1,000 loan over a short term instead of a $10,000 loan over a longer term), it’s easier to get complacent about the repayment as some borrowers might feel they can be paid off easily.
If borrowers miss the repayment deadline, it’s easy to accumulate late fees (not exceeding $60 for each month of late repayment) and late interest (up to 4% per month for each month the loan is repaid late) from the late repayments.
3. Short term loans tend to have higher repayment amount
Due to the shorter repayment period, short term loans will have a higher repayment amount for every instalment. For example, if you are repaying $1,000 over 12 months, you will be paying a higher amount per month as compared to repaying $1,000 over 24 months.
Why do short term loans have higher interest rates?
As short term loans in Singapore can be paid off within a shorter period of time (in contrast to longer term loans for which more interest is accumulated and spread out over a longer period), the interest rates tend to be higher per month.
Also, due to the less stringent checks on loan applications and rapid approval processes, short term money lenders are taking on a higher risk of borrowers defaulting on their loans. This risk comes at a cost, and hence they charge a higher interest rate.
What are the types of short term loans in Singapore?
1. Short term payday loans
A common type of instant short term loan is the 1 hour payday loan, which is usually a one-month loan. This usually helps people with cash flow problems — for example, you might need cash urgently for an emergency but you’re unable to receive your salary till the end of the month.
Payday loans then act as a salary advance to help ease your cash flow, and you have to repay the loan once you receive your salary.
2. Fast cash loans
If you require urgent cash instantly, a fast cash loan might be suitable for you — these are short term loans with instant approval in less than a day and cash in your hands (or in your bank account) minutes after your loan contract is signed.
3. Debt consolidation loans
Do you have multiple debts from different money lenders? It can be very stressful to manage multiple loans and repayment deadlines — once you miss some, the late repayment charges can add up swiftly.
If you are experiencing this, consider taking a debt consolidation loan where you consolidate all your loans with one money lender, so you only need to manage a single loan and a single repayment schedule — much more convenient!
4. Short term loans for startup businesses and SMEs
For start-up and SME business owners, short term SME loans can help you ease your cash flow if you are short of cash for the month for your business operations. For example, you might need to pay your employees and suppliers for the month but payment from your clients can only come in the next month. This is when short term lending can come in handy as there are all kinds of short term business loans that provide quick funding.
Short term commercial loans can also provide good and quick temporary relief for businesses that are in need of urgent cash, as they might not be able to qualify for a bank loan nor wait out the longer bank loan approval period.
However, do note that there are various differences between business loans and personal loans not just in the purpose of the loan but also in borrower eligibility, loan process and documentation, collateral required, upper and lower loan limits and more.
How to get a short term loan in Singapore?
1. Make sure you meet the eligibility criteria
Licensed lenders are regulated by the Ministry of Law, and they have a set of eligibility criteria for not just the lenders but borrowers as well.
For personal short term loans, most employed Singapore residents are eligible, including self-employed individuals such as cab drivers, financial advisors, etc, as well as part-timers and foreigners (as long as you can show proof of residence and consistent income in Singapore).
2. Understand how much you can borrow
As short term loans tend to be unsecured, there’s a maximum limit on the amount of money you can borrow. This limit varies depending on your income and citizenship status. Here’s the maximum amount borrowers can borrow from money lenders at any one point in time:
| Borrower’s annual income | Singapore Citizens and Permanent Residents | Foreigners residing in Singapore |
| Less than $10,000 | $3,000 | $500 |
| At least $10,000 and less than $20,000 | $3,000 | $3,000 |
| At least $20,000 | 6 times monthly income | 6 times monthly income |
3. Compare short term loans with different money lenders
Before you select a short term money lender, it’s important to do your loan comparisons between different short term lenders so you can find your ideal low-interest short term loan most suitable for your needs.
4. Apply for your short term loan online
Once you have done all your comparisons and narrowed down your options to the short term loan lender providing the best short term loan that you are looking for, you can apply for your loan online anytime – the application form is usually on the lender’s website.
If you would like to submit a loan application with MM Credit, it can be done in a few minutes!
5. Bring the required documents to the short term lender’s office
Once your loan application is approved, make sure you bring the necessary documents to the short term loan lender’s office for verification purposes.
Required Documents for Personal Loans:
For Employed Singapore Citizens:
- NRIC
- CPF contribution statements (can be retrieved with Singpass)
- Latest 3 months’ payslips (if monthly wage exceeds $6,000)
For Self-Employed Singapore Citizens:
- NRIC
- IRAS Notice of Assessment (NOA) (can be retrieved using Singpass) or
- Proof of income (bank statements, commission statements or any official income statements)
For Foreigners:
- Work pass
- Proof of home address (proof of tenancy agreement or billing address)
- Latest payslips for the past 3 months
Required Documents for Business Loans:
- Past 6 months’ bank statements
- Company Constitution (which defines the rules by which a company should operate)
- The company’s major shareholders’ as well as directors’ NRICs
- Tenancy agreement
- Bizfile
- IRAS’ Notice of Assessment (NOA) of company’s major shareholders
- Credit report with Credit Bureau Singapore (CBS)
Best places to get short term loans in Singapore
Now that you’ve understood how short term lending works and why it can benefit you, it’s time to search for a suitable short term loan lender that can meet your financial needs. You can get some of the best short term loans from licensed lenders all over Singapore, such as from money lenders in Jurong, Toa Payoh, Orchard, Tampines, Bedok (that’s where we are located!) and in various other neighbourhoods on the island.
MM Credit offers some of the best rates for short term loans, so if you need one, apply with us today!
About the Author
As a premier professional lender that is focused on assisting customers with their unique loan needs since 2010, MM Credit regularly dishes out well-crafted content on loans and personal finance.
